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Summer Processor Prices Take A Dive

According to industry analysts, Intel and Advanced Micro Devices will enter into a price war beginning in July, and consumers stand to emerge as the victors. Prices of high-end processors will drop dramatically in coming weeks as both companies cut chip prices by 15 percent to 20 percent in a new battle for market share. But because prices are already low due to a surplus of certain processors, consumers don't have to wait until July to get an exceptional deal on an upgrade. Retailers are dumping even the newest processors from both companies at below-wholesale prices. Intel's Pentium II 300-MHz processor, which originally was sold to resellers in quantity at $375, is being sold at some retailers for as low as $247. AMD's 300-MHz K6-2, which has closely matched its Intel counterpart on various bench tests, is going for as low as $225. The same is true for 266-MHz processors. AMD's new 266-MHz K6-2 is selling for a little as $136, though that processor was listed at wholesale for $187 in large quantities. Intel's 266-MHz is selling for $223. And short of a run on the market, prices only are going to drop further. The July price reductions, which will affect mainstream processors from both manufacturers, are expected to spark a whole new breed of sub-$1,000. Problems Delay Merced Chip According to Intel, production of Merced, the company's new 64-bit processor, will be delayed for at least six months, meaning consumers now won't see it until sometime in the year 2000. The delay, attributed to problems with the manufacturing process and not with the design itself, could have a significant impact on computer manufacturers planning to use the chip. Merced is Intel's answer to high-end servers like those made by Sun Microsystems and Digital Equipment Corp. The chip has garnered support from all sides. Hewlett-Packard, which helped design the chip, has based its entire strategy on the new processor, and manufacturers like Sun and SGI have hinted they may adopt the technology as well. Analysts say that because manufactures like Digital and Hewlett-Packard are heavily committed to Merced, they will be most seriously affected, but the delay also could prolong an anticipated slump in high-end server sales by all manufacturers for several months. Such slumps are commonplace when a new processor is about to be released. Of course, Merced supporters aren't the only companies affected by the announcement. The news dragged Intel's stock down nearly 5 percent to 68.13 in early trading Monday, prompting analysts to revise their expectation for Intel's projected earnings.

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