Intel Slashes Pricing on Some CPUs

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Advanced Micro Devices is having a tough time catching a break, and this week won't exactly be a picnic for it either.

A new list of Intel processor prices just moved across the transom, and for AMD, Intel's struggling rival, it's not pretty.

In particular, Intel cut the price of its Core 2 Quad Processor Q6700 (8M cache, 2.66 GHz, 1066 MHz FSB) by about 50 percent, from $530 in 1,000-unit quantities to $266; it slashed the price of its Quad-Core Intel Xeon Processor X3230 (8M cache, 2.66 GHz, 1066 MHz FSB), in 1,000-unit quantities, from $530 to $266; its Dual-Core Xeon Processor 3085 (4M cache, 3.00 GHz, 1333 MHz FSB) in 1,000-unit quantities from $266 to $188, or 29 percent; and its Core 2 Duo Processor E6850 (4M cache, 3.00 GHz, 1333 MHz FSB), in 1,000-unit quantities, from $266 to $183, or 31 percent.

There are additional, cuts, too, up and down the lineup.

The implications are potentially huge. At a time when some buyers in the U.S. market may be pushing off some IT purchases into the future, price cuts like Intel's could bring them back on schedule. (A hundred bucks less per PC for an enterprise that wants to upgrade 10,000 PCs might certainly make a difference in some cases.) But for AMD, the question becomes: How does it keep up?

A financial analyst asked Derrick Meyer, AMD's COO, about its pricing plans just last week when AMD conducted a conference call to discuss its quarterly earnings. Meyer's response:

Overall, the pricing strategy of (AMD) hasn't changed and that is to deliver good value to our customers into the market on the strength of good technology, and do so in a way that is responsible financially to the company and generates appropriate margins.

We've got some things going for us from Q1 looking forward and that is the introduction of quad-core to both our server and desktop lineups, which clearly gives us an opportunity to play across a wider breadth of the marketplace, get back in ahead of the game on the server side and have a richer mix on the desktop side, which are both positive factors on ASP.

With Intel offering such significant pricing cuts - - particularly in its quad-core lineup - - AMD may be forced to reconfigure what its "appropriate margins" may be.

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