Intel fuels the fire with Celeron cuts
Intel is slated to cut prices on its line of low-cost Celeron chips on Monday, causing some
analysts to wonder whether this aggressive low-end chip strategy might ultimately do more
harm than good. In a move that will likely rattle the PC and chip markets, Intel will cut
prices on its increasingly popular Celeron line of chips. But some analysts think if Intel
continues to sell more of these low-priced chips, revenues could suffer. In short, as Intel
boosts Celeron shipments, the overall average selling price of Intel chips dips. Prices will
fall about $10 on the cheapest Celeron chips and more on higher end versions, according to
industry sources familiar with the price cuts on Monday. Pentium II prices are slated to be
cut on February 28 when the Pentium III arrives, Intel has said.
Linely Gwennap, editor director of the Microprocessor Report, believes that Intel could be
setting itself up for a revenue shortfall if buying trends don't pan out as Intel is
forecasting. "If only 10 percent of its sales shift from [the high end] Pentium II to
Celeron, Intel will lose more than $1 billion in 1999 revenue due to the lower prices of the
Celeron," according to Gwennap, writing in the most recent addition of the newsletter.
Gwennap adds that this would happen only if buyers of Pentium II-based systems, mostly in the
corporate market, start snapping up Celeron-based systems instead.
"There is no doubt that Intel has ignited a price war [with the Celeron] " he added. Intel
doesn't agree. "I'm somewhat confounded by this," said Intel spokesperson Manny Vera. "Yes,
we are getting aggressive with Celeron...then people assume there is a price war. But that
[the Celeron chip line] is just a small chunk of our business." Intel also takes issue with
the potential revenue shortfall. Intel CFO Andy Bryant gave some "guidance" recently in a
meeting for financial analysts where he asserted that profit margins for 1999 are expected to
be 57 percent, up 3 percent from In 1998.
Intel is counting on strong revenue from high-end processors such as the upcoming Pentium III
processor and its Xeon line of workstation and server chips. Intel's chips for notebook PCs,
in some cases, also sell at a premium. Intel also says that it is cheaper to make Celeron
chips and therefore it doesn't take that big of a hit on profit margins. Despite what Intel
says though, the low end of the market has all the hallmarks of a price war with Advanced
Micro Devices (AMD) chips, which are expected to go for as little as $40 in March--almost
unprecedented in the Intel-compatible chip market. AMD sells most of its chip to makers of
low-end consumer PCs.
Ashok Kumar, an analyst at Piper Jaffray, predicted that the price of K6-2s sold to PC makers
in March will be $40 for the 333-MHz version and range up to $60 for 400-MHz processor.
Currently, Intel's lowest priced Celeron lists for $71. The popular 333-MHz version is priced
at $90. The 400-MHz version, which is expected to be a hit, is priced at $158. A 433-MHz
Celeron chip is due in March, said sources, while a 466-MHz version will come out in May with
a 500-MHz chip to follow. Kumar expects that Celeron chips will comprise about 25 percent of
the Intel "product mix" in the first quarter of 1999. "If there was a sudden shift in this
mix, it would impact the bottom line," he said. Though he doesn't expect the scenerio that
Gwennap postulates.
Meanwhile, resellers and chip dealers report that Intel has been more tight-lipped about
processor pricing this year than in the past. Before, dealers would get price lists weeks or
even months in advance. Now, most get the new price lists right before, or on the day of, the
price cuts. "We're more confused than ever. They keep changing things on us," said one
source. "They are not being very up front on pricing for the faster chips." Competition seems
to be at the heart of the shift, said one source. In the past, Intel could dictate the price
of chips and therefore could map out pricing. Now, with a smaller market share in the low
end, Intel finds it has to adjust prices according to circumstances, which makes the price
less predictable. And, although the company still does not have a lot of competition in the
performance arena, price cuts in the low end of the market effect the high end. High end
Pentium IIs, for example, can't be much more expensive than Celeron processors because the
performance gap between the two lines has shrunk.
Well, there is no longer any doubt that the Slot One Celeron 300A is out of production.
It is. Besides Intel's Product Change notification that I shared with you last week, we find that
this version of the processor is not even included on the list of price cuts announced
for February 7th.
http://206.132.42.114/html/review_display.cfm?document=887
Quoted text (61 lines)
>>JM > Intel fuels the fire with Celeron cuts > Intel is slated to cut prices on its line of low-cost Celeron chips on Monday, causing some > analysts to wonder whether this aggressive low-end chip strategy might ultimately do more > harm than good. In a move that will likely rattle the PC and chip markets, Intel will cut > prices on its increasingly popular Celeron line of chips. But some analysts think if Intel > continues to sell more of these low-priced chips, revenues could suffer. In short, as Intel > boosts Celeron shipments, the overall average selling price of Intel chips dips. Prices will > fall about $10 on the cheapest Celeron chips and more on higher end versions, according to > industry sources familiar with the price cuts on Monday. Pentium II prices are slated to be > cut on February 28 when the Pentium III arrives, Intel has said. > Linely Gwennap, editor director of the Microprocessor Report, believes that Intel could be > setting itself up for a revenue shortfall if buying trends don't pan out as Intel is > forecasting. "If only 10 percent of its sales shift from [the high end] Pentium II to > Celeron, Intel will lose more than $1 billion in 1999 revenue due to the lower prices of the > Celeron," according to Gwennap, writing in the most recent addition of the newsletter. > Gwennap adds that this would happen only if buyers of Pentium II-based systems, mostly in the > corporate market, start snapping up Celeron-based systems instead. > "There is no doubt that Intel has ignited a price war [with the Celeron] " he added. Intel > doesn't agree. "I'm somewhat confounded by this," said Intel spokesperson Manny Vera. "Yes, > we are getting aggressive with Celeron...then people assume there is a price war. But that > [the Celeron chip line] is just a small chunk of our business." Intel also takes issue with > the potential revenue shortfall. Intel CFO Andy Bryant gave some "guidance" recently in a > meeting for financial analysts where he asserted that profit margins for 1999 are expected to > be 57 percent, up 3 percent from In 1998. > Intel is counting on strong revenue from high-end processors such as the upcoming Pentium III > processor and its Xeon line of workstation and server chips. Intel's chips for notebook PCs, > in some cases, also sell at a premium. Intel also says that it is cheaper to make Celeron > chips and therefore it doesn't take that big of a hit on profit margins. Despite what Intel > says though, the low end of the market has all the hallmarks of a price war with Advanced > Micro Devices (AMD) chips, which are expected to go for as little as $40 in March--almost > unprecedented in the Intel-compatible chip market. AMD sells most of its chip to makers of > low-end consumer PCs. > Ashok Kumar, an analyst at Piper Jaffray, predicted that the price of K6-2s sold to PC makers > in March will be $40 for the 333-MHz version and range up to $60 for 400-MHz processor. > Currently, Intel's lowest priced Celeron lists for $71. The popular 333-MHz version is priced > at $90. The 400-MHz version, which is expected to be a hit, is priced at $158. A 433-MHz > Celeron chip is due in March, said sources, while a 466-MHz version will come out in May with > a 500-MHz chip to follow. Kumar expects that Celeron chips will comprise about 25 percent of > the Intel "product mix" in the first quarter of 1999. "If there was a sudden shift in this > mix, it would impact the bottom line," he said. Though he doesn't expect the scenerio that > Gwennap postulates. > Meanwhile, resellers and chip dealers report that Intel has been more tight-lipped about > processor pricing this year than in the past. Before, dealers would get price lists weeks or > even months in advance. Now, most get the new price lists right before, or on the day of, the > price cuts. "We're more confused than ever. They keep changing things on us," said one > source. "They are not being very up front on pricing for the faster chips." Competition seems > to be at the heart of the shift, said one source. In the past, Intel could dictate the price > of chips and therefore could map out pricing. Now, with a smaller market share in the low > end, Intel finds it has to adjust prices according to circumstances, which makes the price > less predictable. And, although the company still does not have a lot of competition in the > performance arena, price cuts in the low end of the market effect the high end. High end > Pentium IIs, for example, can't be much more expensive than Celeron processors because the > performance gap between the two lines has shrunk.You have to wonder why, I would think it had to be one of their best selling
Celeron chips.
--
Don Burnette
Palmetto Racing
Dburn on Ten
>>>hmmm,
>Well, there is no longer any doubt that the Slot One Celeron 300A is out of
production.
>It is. Besides Intel's Product Change notification that I shared with you
last week, we find that
snip
the reason why the slot one celeron was dropped was becuase big brother
intel wants you to buy the "newest and therefor always better" CPU....why
else would Intel have four different model names for essentially the same
CPU...Celeron,Pentium II, Pentuim III and Xeon
all use the same basic core....and as its been proven over and over again
that a celeron running at 450 benchmarks right up with the P2 450 in almost
all the things a normal PC user does...how many of use really use Adobe
Photoshop 4 or 5 and are doing extremely large TIFF files anyways....???
less than 1%
Lightwave or 3D Studio Max2 as a "true" P2 450....but the difference is
hardly worth the extra 300+ dollars...
> Lightwave or 3D Studio Max2 as a "true" P2 450....but the difference
> is hardly worth the extra 300+ dollars...
And THAT is why Intel killed the 300A Slot 1 CPU....
> > Lightwave or 3D Studio Max2 as a "true" P2 450....but the difference
> > is hardly worth the extra 300+ dollars...
> And THAT is why Intel killed the 300A Slot 1 CPU....
They are still making them, but this is try, they are headed out the
door in favor of the incompatible 370. Unfortunately for them, adaptors
it the market before the CPU did.
--
__________________________________
Please remove "X" from email address to reply.
Fine.
Now, when will they drop the price of the Pentium II 450 to a reasonable
price?
It's still over $500 in most places.
And, they brought out the Pentium III 500 at $800-$900 !!!
That's incredibly outrageous. Hell, the fastest PowerPC chip is under
$500!
I've got my machine upgraded to an ASUS P2B, PC-100 SDRAM, and
everything else needed to go to 100Mhz. Just a jumper change away.
However, until Intel gets off their high horse with Pentium II and III
prices, I will have to stick with the current configuration with a
300Mhz PII running at 66Mhz.
AMD? Thanks, but no thanks :) The floating point performance isn't
there for me.
-Larry
> Intel fuels the fire with Celeron cuts
That's the one that everyone pushed to 450Mhz, right?
I have no doubt they discontinued it :(
-Larry
> Well, there is no longer any doubt that the Slot One Celeron 300A is out
> of production. It is.
Just about everyone was pushing it up ot 450Mhz, and they were losing
money on high-end sales.
-Larry
> You have to wonder why, I would think it had to be one of their best selling
> Celeron chips.
No, only an insignificant minority of hobbyists are overclocking their
separately purchased chips. The majority of CPU sales are to OEMs, and in
this venue overclocking is a non-issue.
--Robin Payne
Yep, and it's a sweet chip too.
Glad I got mine about a week ago.
--
Don Burnette
Palmetto Racing
Dburn on Ten
>That's the one that everyone pushed to 450Mhz, right?
>I have no doubt they discontinued it :(
>-Larry
>> Well, there is no longer any doubt that the Slot One Celeron 300A is out
>> of production. It is.
Quoted text (10 lines)
>>Just about everyone was pushing it up ot 450Mhz, and they were losing >>money on high-end sales. >>-Larry >No, only an insignificant minority of hobbyists are overclocking their >separately purchased chips. The majority of CPU sales are to OEMs, and in >this venue overclocking is a non-issue. >--Robin PayneQuoted text (15 lines)
>>>Just about everyone was pushing it up ot 450Mhz, and they were losing >>>money on high-end sales. >>>-Larry >>No, only an insignificant minority of hobbyists are overclocking their >>separately purchased chips. The majority of CPU sales are to OEMs, and in >>this venue overclocking is a non-issue. >>--Robin Payne >Absolutely true... >When you install internet connections for customers, you'll often find >that most people have never heard of newsgroups and are only sticking >to http browsing and email (okok, ICQ too)Quoted text (7 lines)
>>Just about everyone was pushing it up ot 450Mhz, and they were losing >>money on high-end sales. >>-Larry > No, only an insignificant minority of hobbyists are overclocking their > separately purchased chips. The majority of CPU sales are to OEMs, and in > this venue overclocking is a non-issue.As soon as AMD and Cyrix get out of the
market, Intel will crank the prices back up.
Server CPUs will start at $2k, and PC
CPUs will probably start at $500 for the
slowest one. :)
God I hope I'm wrong.
Quoted text (12 lines)
> The celeron processors have but one purpose...to force AMD > and Cyrix out of the sub-$1000 PC market and ultimately > out of the PC microprocessor market. Intel is willing (and > able) to withstand a price war for an extended period of > time to consolidate its hold on the industry. Eventually > AMD and Cyrix are going to run out of money since they have > no high margin products to subsidize the bath they're taking > on their current chip designs. By the time the K7 gets here, > AMD will effectively be finished as a serious competitor. > Do I like this? Hell no. However, that is the reality we're > dealing with.ic who?
in
