AMD's Athlon X2 Price Cuts Go Into Effect As Planned

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Amidst a bloody price war with Intel that is wreaking havoc on its revenues, AMD's price cuts on mainstream Athlon X2 dual core processors took effect Monday as planned.

Observers say it's ironic that the price cuts went into effect on the same day that the Sunnyvale, Calif., chipmaker issued a warning to Wall Street that it would once again miss its revenue target, due in part to lowered average selling prices and lower unit sales in the channel.

But partners say the roughly $20 price cut on three mainstream dual core Athlon X2s and steeper price cuts on higher performing Athlon X2s will clean out inventory and make AMD more competitive as Intel prepares price cuts due to take effect on April 22.

Source say the Athlon 64 X2 3600 price dropped to $69, the Athlon 64 X2 3800 dropped to $79, the X2 4000 price fell to $99, and the X2 4200 was effectively discontinued. Meanwhile, the higher end Athlon X2 6000 dual core price plummeted more than 50 percent to $229, while the Athlon X2 5600 dropped $50 to $179.

The price list for OEMs is on AMD's web site. Pricing for system builders is in the same ballpark but not the same as OEMs, partners say.

"There's a $20 price cut for most, but more significant on bigger parts, where they had bigger price drops," said one source who cited the new price list that went into effect April 9. "The bulk of the dual core parts are now below $100. It makes dual core mainstream as single core.

The price cuts went into effect on Monday as AMD announced it would not meet its first quarter forecast due to lowered PC demand and lower average selling prices. AMD said it would reduce expenditures, head count and discretionary spending by $500 million in 2007.

But partners and analysts say market conditions and subsequent price cuts by Intel dictate how AMD must prices its dual core products and upcoming quad core processors.

Cheap Guys Computers of Orlando, Fla., started taking purchase orders on the discounted AMD processors Monday morning.

"They have more parts then they know what to do with. With the increased production and no demand, there's no choice. They have to move more units and they can't do it without price cuts with Intel price cuts coming," said Glen Coffield, president of Cheap Guys. "We all held up on buying because we knew there was a move coming."

"Price cuts will help us to move more AMD processors in the distribution channel," said James Huang, marketing manager at Amax Information Technologies, a Fremont, Calif.-based system builder and contract manufacturer. "For OEM projects we are working on, the impact may not be that great since OEM customers tend to ask us to build systems based on their own product schedule, not based on any vendor's pricing schedule. On the other hand, we as a contract manufacturer will pass the updated processor pricing information to our OEM customers."

In-Stat analyst Jim McGregor said the current price war between AMD and Intel is the bloodiest in the processor market since the 386 battle more than a decade ago.

He said price wars benefit system builders and customers but will impact distributors' pricing. He predicts pricing will continue to slide as market growth shifts to mobile PCs and emerging markets.

"They can have the best intentions [not to cut prices] but AMD has to do price cuts to remain competitive. No matter what, it has to react to market conditions," McGregor said.

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