Intel Inventory Windfall Good For Channel

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After six months of too much product in the pipeline, Intel executives say an unexpectedly quick bounce-back by the IT market has helped it return to an even footing and they anticipate the fourth quarter to close with record numbers.

Included in the rebound, Intel CFO Andy Bryant told Wall Street analysts earlier this month, were system builders and solution providers.

"The channel is on track for another record," Bryant said. "The channel is doing very well."

The Santa Clara, Calif.-based chip giant reported during its midquarter update that it expects overall sales to be much higher than previously expected. Along the way, the company will cut its excess inventory down by "several hundred million dollars" worth in the three-month period. Previously, it expected a drop of only $43 million.

Inventory was a key issue for the company and its channel.

"A lot of good things are happening," Bryant said. Overall, he said the company now expects fourth-quarter sales of between $9.3 billion and $9.5 billion—a marked increase from the $8.6 billion to $9.2 billion it had forecast in October.

The good news preceded the company's annual fall meeting with analysts in New York. Asked then what was driving the quicker-than-forecast rebound in sales, Intel CEO Craig Barrett said it was hard to single out any particular factor. He said the market had been acting unpredictably all year.

Robert Schaffer, president of Source Micro, a Randolf, N.J.-based system builder and solution provider, said he has noticed brisk activity surrounding the older, less-expensive Intel motherboards that were in the pipeline—boards that integrate with older, less-expensive chips. "People are buying whatever they can" of the older products in the inventory, he said. "As far as Intel, I think some of their old inventory is getting sucked up because of their move to the new platform."

A newer, entry-level Intel motherboard with a Socket 775 design lists for $100, while older boards can go for $50, he said. Many simply like the better price and are vying for older inventory. Overall, though, Schaffer described the market as "steady."

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