Intel Scraps Plans for Chip
Intel Corp. on Thursday canceled plans for a 4-gigahertz version of its Pentium computer chip, the sixth time this year the company has delayed or scrapped new products.
Intel, whose microprocessors power more than 80% of the world’s personal computers, instead will sell a Pentium version with more built-in memory, spokesman Robert Manetta said.
Intel had delayed the 4-gigahertz product’s debut in July. Adding memory is a simpler change to make than increasing the chip’s speed, analysts said.
The decision raises concerns that Intel’s prices will be hurt because the company is not boosting chip performance enough, said Mike McConnell, an analyst at Pacific Crest Securities.
Intel, which plans to spend $4.7 billion on research and development in 2004, has used chip speed to woo buyers of higher-priced processors.
“It will be tougher for them now going forward to justify higher pricing,” McConnell said. “At the core of all innovation for Intel has been their ability to increase speed -- it has been the mantra for them for years.”
Computer processors account for 85% of Intel’s sales. The semiconductors are the engines that run PCs, and gigahertz is a measure of how fast electronic signals pulse through a chip and how many instructions it can carry out per second.
Intel shares fell 48 cents to $20.51 on Nasdaq. They have dropped 36% this year.
Intel this week said third-quarter profit rose at the slowest pace in five quarters. Chief Executive Craig Barrett has cut prices at least 30% four times this year, and the company wrote down some inventory in the quarter.
Operating income in the company’s microprocessor business fell to $2.79 billion from $2.9 billion a year earlier.
The Santa Clara, Calif.-based company historically has won higher prices than competitors. The highest-priced desktop PC chip at Intel sells for $999 each in batches of 1,000, compared with $827 each for the most expensive desktop chip at Advanced Micro Devices Inc., according to the companies’ websites.
Intel had previously pushed back the 4-gigahertz chip’s release until the first quarter of 2005 from the fourth quarter of this year.
