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5/28/2002
03:01 PM
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Intel Cuts Prices As Analyst Downgrades Earnings Forecast

Intel cuts desktop and laptop chip prices by up to 50% in an effort to spur demand.

Intel has slashed prices on its chips for desktops and laptops by more than 50 percent in some cases as it tries to spur demand for its high-end products among PC makers and, ultimately, consumers and businesses. For laptops, the company cut the price of its 1.7 GHz mobile Pentium 4 processor by 53%, from $508 to $241. On the desktop side, it dropped the price of its 2.26 GHz Pentium 4 chip by 43%, from $423 to $241. The company made similarly aggressive cuts throughout much of its desktop and laptop chip lines.

In a research report released Tuesday, Merrill Lynch analyst Joe Osha calls the cuts a "positive" move that could boost sales for the company. Nonetheless, Osha reduced his full-year earnings estimate for the company from 77 cents to 75 cents. Osha also reduced his revenue estimate for the company's second quarter ending May 31 from $6.96 billion to $6.76 billion, noting that sales for the period have been soft. Merrill Lynch continues to rate Intel's stock, which in trading today fell $0.31 to $28.35, as a strong buy. Intel says it plans to release a mid-year business update on June 6.

In some slightly positive news for the chip industry, an industry group predicted that overall sales would increase this year after falling 32% last year. This year, chip sales will increase 2.3% to $142 billion, according to World Semiconductor Trade Statistics.

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