Intel Looks to Make P4 a Bargain

Electronic News, Sept 11, 2000 by Steve Fyffe

1.4GHz version could be $695, 1.5GHz $795

Intel Corp. will be turning its price list upside down in an effort to make the Pentium 4 (P4) look like a bargain, according to Bert McComas, founder and principal analyst of InQuest market research firm.

When the P4 debuts in October, it will come with a price tag substantially lower than the $1,000 previously expected, according to McComas, who said he has internal documents from Intel to prove his case.

The 1.4GHz version of the P4 will cost $695 and the 1.5GHz will debut at $795.

The overly aggressive pricing strategy by Intel indicates the company is either confident of its yields or is clearly establishing a speed-and-cost advantage to be competitive, according to Dan Scovel, semiconductor analyst at Needham & Co. "The low price of 1.4GHz could be a ploy by Intel to introduce higher-speed Pentium4s at more realistic prices," Scovel said. As a result, Scovel believes Intel will maintain a higher-margin pricing structure once the P4 is introduced at greater speeds, where the chip would sell around the $1,000 range.

Meanwhile, the 1.13GHz Pentium III will maintain a higher price tag of $990 until after the P4 launch. Intel's pricing strategy is designed to camouflage the price differential between the P4 and its real competitor, Advanced Micro Devices Inc.'s Athlon.

"They are artificially holding the price of the PIII high in order to make the P4 look like a smoking deal," McComas said. Once the pricing strategy has been established, the 1.13GHz PIII, which Intel recalled last month, will be reintroduced at $637, McComas said.

Intel does not comment on unreleased products like the P4, a spokesman said. He did a confirm that the 1.13GHz PIII costs $990.

Most analysts, however, believe that Intel will retire the Pentium III sooner than expected because of the 1.13GHz recall.

Intel is also running a $70 Rambus rebate scheme with P4 OEM customers, McComas said. The rebate applies to Willamette 850 systems manufactured during the fourth quarter in 2000, and will drop to $60 each in 2001.

"It's a line-item on the invoice against the total number of processors purchased," he said.