Intel cuts processor prices

Intel appears to be cutting stock levels rather than reacting to fears over demand

Intel has cut the prices of some of its desktop and server chips ahead of the official launch of its Nehalem server line.

On the server side two of Intel's Xeon line, the X3220 (2.4GHz) and the X3210 (2.13GHz), have been cut from $198 to $188 per thousand, a reduction of five per cent.

Meanwhile the Core 2 Quad Q8200 (2.33GHz) has fallen 14 per cent from $224 to $193 and the Core 2 Quad Q6600 chip (2.4GHz) has been cut five per cent from $193 to $183. The Core 2 Duo E7300 processor (2.66GH) is down 15 per cent from $133 to $113.

On the desktop front older dual-core Pentiums have also been reduced. The E2200 (2.4GHz) chip is down 12 per cent from $84 to $74, and the E2200 chip (2.2GHz) has been reduced by 14 per cent from $74 to $64.

Intel said in its earnings statement last week that it was confident of weathering any economic downturn, and these price cuts seem to have more to do with cutting stock levels rather than fears over demand.

Nevertheless, investment house Goldman Sachs has cut its rating of Intel shares from 'buy' to 'neutral', saying that the company will face increasing competition on margins.

"Given the high historical correlation between margins and share price for deep cyclicals like Intel, we believe that now is the time to get incrementally cautious on the stock, ahead of the margin headwinds we see in the first half of 2009," said Goldman Sachs analyst James Covello.

Nevertheless, Covello reiterated that Intel's core fundamentals are sound.