Intel seeks profits from Coppermine

Summary:Intel execs said delays in shipping its high-end Coppermine chips hurt results, but it's about to fix that.

Intel Corp., which has suffered recent delays on new high-end chipsets and processors, expects to have its house in order by the end of the year.

"We will refresh our high-performance processor line in October," Paul Otellini, executive vice president and general manager of Intel's (Nasdaq:INTC) Architecture Business Group, told financial analysts on Tuesday's earnings call.

That's good news for Intel's finances, since Intel executives blamed Tuesday's subpar results in part on the delays in shipping its high-end Pentium III chips, code-named Coppermine.

The lack of high-end chips depressed profit margins, down slightly to 58.7 percent, and average selling prices.

Intel said it will ship Coppermine processors at 700MHz and faster later this month. The chips were originally expected in September, but were pushed back due to design issues.

Those chips, he said, will be based on Intel's 0.18-micron process, whose benefits are higher clock speeds compared to the current 0.25-micron process. Those chips will be available for desktops, notebooks and servers at speeds of 700MHz and faster, he said. Speeds up to 733MHz are expected at the chips' launch on Oct 25.

Here comes the 820
Company officials also told analysts Intel expects to ship its 820 chip set before the end of the year. The 820 chip set was delayed just a few days before it was slated to be introduced on Sept. 27.

"The status is that we are continuing to do validation activity. At this point we don't think we have to step or modify the silicon in order to ship," Otellini said. "We believe we will be able to complete that validation in order to ship in the fourth quarter."

The 820 is a significant chip set because it adds a number of performance enhancing technologies, such as a 133MHz system bus. The system bus is the data pipeline between the processor and other system components. It is also expected to replace the 440BX chip set, which tops out at support for a 100MHz system bus, as the standard chip set for Pentium III-based desktop PCs.

The 820 chip set was delayed Sept. 23, due to memory errors that were discovered when it was used with a motherboard configured with three memory slots. Intel went back to the drawing board and is now working to validate a motherboard with two slots instead. Intel thinks this move will solve the chipset's problems, though it may limit the amount of memory a PC can support.

Random error or symptom?
The Coppermine and 820 chip set delays have financial analysts wondering if the delays are random or a symptom of internal problems at the company.

When asked if the two delays were symptoms of broader internal issues, Otellini responded, "I would like to say that they're random. On the chip sets, the problems are fundamentally tied up in our ability to debut a new technology between a number of players (including Rambus, Intel and PC makers). As I said, (Rambus and 820 are) very complicated technology," he said. "Moving to the next generation is a little more difficult than people give us credit for."

Otellini noted that due a variety of reasons, including competition, "We're moving forward more rapidly than ever before on road maps."

Intel has put in place new policies in its product design processes that should help eliminate such delays in the future, Otellini said. He did not explain how they work.

Margins up
With Coppermine Pentium IIIs out the door, Intel expects its margins to rise "a couple of points," said Andy Bryant, an Intel senior vice president and its chief financial officer.

Intel's third-quarter average selling prices were also lower than predicted, due to a gain in market share on the low-end PC and underestimating the delay of some performance processors based on 0.18-micron, Bryant said.

"We underestimated the impact of some of the higher performing processors begin pushed out from Q3 to Q4," Bryant said.

While the 820 is delayed, "None of our 0.18-micron processor shipments are going to be withheld or curtailed by the 820 chip set shipping or not shipping," Otellini said. Instead, the chips will work with its current 440BX and new 810E chip sets. Both are in volume production.

Topics: Intel, Hardware, PCs, Processors

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