The chipmaker will slash Pentium 4 prices by as much as 50 percent this month in two cuts coming Sunday and April 29, industry sources said. As reported earlier, the company also will introduce a 1.7GHz Pentium 4 on April 23.
The cuts will potentially fill a number of strategic goals. The company has already said it wants the Pentium 4 to displace the Pentium III on desktops by the end of the year. Demand is also slow, and rival Advanced Micro Devices continues to gain ground.
The depth of the cuts, however, poses huge problems, according to some analysts. The Pentium 4 is a fairly large chip and expensive to make. Intel also continues to give PC makers rebates for each computer that includes Rambus memory and, for now, Pentium 4 systems work only with Rambus memory.
All of these factors combined with discounts will have a major effect on the company's bottom line.
"It is going to have a catastrophic impact on gross margins," said Ashok Kumar, an analyst at US Bancorp Piper Jaffray. "You're not going to see any seasonal pickup in demand," he added
Intel is scheduled to report first-quarter earnings Tuesday, and analysts expect glum news of slowing sales and canceled orders.
