Intel Slows Down The PC Sales

The world's largest chip maker, Intel, is expected to post a new list of price cuts in a few days that will mainly be aimed at the low and middle end desktop PC market. An Intel spokesman cited by the news Web site InfoWorld said that his company regularly updates processor prices, but doesn't disclose when or how much the prices will change for fear of destabilizing the hardware market. Even now global PC sales have slowed over the past few weeks as both system vendors and customers wait for Intel to announce the price reductions.

The expected-to-happen processors price cut from Intel made AMD slash its own pricing list earlier this month on top of the line desktop PC processors by a wide margin and now AMD delivers six Athlon dual core based CPUs for below $100 each. According to market and investing specialists, AMD's move was aimed at preempting Intel's anticipated price reductions and at gaining a market advantage.

As the processor is usually the most expensive hardware part of a desktop PC, these price cuts from both chip producers mean in fact better deals for users, either as lower final prices or as more add-ons like large hard disk drives for increased storage capabilities, more memory and better DVD drives. The battle for market share has prompted both Intel and AMD to push their technologies to the limits and to come up with newer and better processors.

"We believe the worse than expected gross margin, higher than expected R&D [research and development] spending and low quality earnings leverage (tax rate changes, sold depreciation, etc.) will cast a shadow over [Intel's] stock," wrote Michael Masdea, chip analyst at Credit Suisse Securities (USA), in a recent report. He predicted that Intel gained market share on AMD in the second quarter, based on its earnings report. Market researcher can not say for now how badly affected the PC market is by the price war, but already weaker than expected sales have shown up in various segments of the market, like the DRAM one for example.