For many companies, a product rollout such as the Pentium III would be enough to get Wall Street excited. But in the case of Intel, it's just another ho-hum launch.
"I don't look at the PIII as a significant financial event for Intel," said Dan Scovel, an analyst at Fahnestock & Co., who rates Intel a "hold."
"It's the next step in the evolution of the Pentium, it's more evolutionary than revolutionary."
Why doesn't the Pentium III merit more attention on Wall Street?
Analysts view it as merely a placeholder for the Pentium II's market share.
"It's Intel's attempt to maintain [average selling price] and margins," Scovel said. "The PIII delivers on Moore's law, while maintaining price."
Intel has indicated that the PIII will ultimately be about the same price as its predecessor.
Long-term play
"Long-term, the PIII will replace the PII," said Ashok Kumar, an analyst at Piper Jaffray. "By the fourth quarter, they'll have the PIII from top to bottom."
Kumar, who rates Intel a "strong buy," expects the PIII to give a slight boost to selling prices in the first quarter.
Although the PIII won't boost average selling prices or increase profit margins, the new chip should keep both stable -- and in the chip sector, that's quite a feat.
If Intel can hold the pricing line on the PIII, cut prices on the Celeron and sell high-margin Xeon chips, it can deliver a knockout blow to Advanced Micro Devices, which is already wobbly because of price competition.
Strategically important
Hurting AMD makes the PIII strategically important, despite its lack of financial impact in Intel's first quarter.
AMD has repeatedly had problems getting better yields at higher speeds on its chips, so analysts said Intel's plan is simple: Hurt AMD on price and raise the performance bar.
At 450MHz and 500MHz, the PIII ups the speed ante for at least some applications. It also offers enhanced multimedia realism, faster 3-D, video and audio processing and an ID tag that has some privacy groups fuming.
Despite these features, since Pentium III is more a next-step chip rather than a revolutionary new launch, Intel can't boost prices.
"There aren't many applications that can take advantage of the [Pentium III], so why should people pay more for it?" asked Kumar, who expects Intel to earn US$4.45 a share for 1999.
Numbers hold steady
Intel officials maintain that first-quarter sales are expected to be down slightly compared with the fourth quarter, but still remain strong.
Stability in pricing for the Pentium III is vital, since Intel is slicing prices on the Celeron, having recently announced price cuts of up to 24 percent on the low-end chip.
A First Call consensus estimate of 33 analysts predicts Intel will earn US$1.10 per share in its March quarter.
