Big Price Cuts to Intel Chips

Intel is slashing prices on a number of its processors, including cuts of up to 40 percent on some of its higher-powered, faster quad-core chips, as the world’s largest chip maker copes with weakening demand.

The company, which called the changes part of regularly scheduled price moves, is confronting slumping demand brought on by the global economic slowdown, along with new, cheaper chips from Advanced Micro Devices (NYSE: AMD) .

Intel (NASDAQ: INTC) reduced the price of its Core 2 Quad Q9650 chip, which is used in desktop computers, to $316 from a $530 list-price in December. It lowered prices on other Core 2 Quad chips by 16 to 20 percent. Quad-core chips have four processors on one piece of silicon.

AMD recently launched its Phenom II quad-core chips, which have a top list price of $275.

American Technology Research analyst Doug Freedman acknowledged that AMD has a “much more viable product portfolio than they did last year,” but said Intel’s move was also an acknowledgment of the tough economic times.

“I would put it as a standard move with the caveat … that the marketplace is far from in a standard condition and there’s a more viable product out of their competitors,” Freedman said. “To think that there is some impact there, yes, but I wouldn’t be ready to call it the start of round two of a price war.”

Intel also cut prices on a number of other chips used in desktops, notebooks and servers. Prices on Pentium dual-core chips used in desktops were lowered by as much as 24 percent, while prices on its Celeron mobile processor were cut by as much as 48 percent. Prices on Intel’s Xeon server chips were slashed by as much as 40 percent.

Intel also introduced three new, more energy-efficient Core 2 Quad processors for use in desktops.

Last week, the Santa Clara, California-based company reported a 23 percent drop in fourth-quarter revenue. Intel said it expects margins to bounce back to “healthy” levels by the second half of 2009, but held back on giving detailed quarterly forecasts when it issued earnings, citing economic uncertainty.

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