"They have completely leveled-out the pricing model," said one executive who works in the distribution industry.

The move was confirmed by sources in the manufacturing, distribution and system builder industries, but all asked that their names be withheld, since Intel has not publicly disclosed the change. The new pricing is expected to start toward the end of July, one source said.

An Intel spokeswoman declined to comment, and said Intel does not divulge communication about pricing with customers.

A vendor source familiar with Intel's pricing structure said Intel was not getting mileage out of negotiating extra discounts for large volume buys from top-tier OEMs and direct marketers. This source said pricing for OEMs that purchase direct would be "very close" to what systems builders can buy through distribution under the new pricing system.

System builders contacted for this article viewed the change as good news. It appears to indicate that their key challenger, Dell, will not be getting special volume discounts from Intel. Many believe cut-throat pricing advertised by Dell and other direct marketers were supplemented by large volume discounts those companies were negotiating with Intel. They are hoping that changes will eliminate some of the pricing advantage those companies were enjoying.

"I think this will be positive for the channel," said one system builder. "It looks like everyone will be treated equally."

Several system builders said they had little insight into the kind of volume negotiations that go on between Intel and its top-tier partners. But one system builder believed those deals are negotiated on a contract basis and that some top-tier buyers were purchasing more CPUs than they could sell to get a better discount and then dumping the surplus on the gray market.

"Say they are negotiating for a-half million processors for $50 each, they will say, 'what if we take one million,' even though they know up front they won't use those chips," he said.

This source said there has been an unusual amount of activity in the gray market, particularly in the past few weeks, and he has been able to pick up retail boxed processors well below distribution cost.

The system builder also believes Intel's recent price moves play into the changes. "They have already cut prices 50 percent, how much lower can they go for Dell or anyone else?" he asked. "At the end of the day, they still have to answer to their shareholders."

By: DocMemory
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