Channel happier without rebates

The channel has reacted positively to Intel’s move last month to stop back-end channel rebates on sales of boxed CPUs. Channel insiders say the move has helped to lessen undercutting of CPU prices and improved margins.

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By  Alex Malouf Published  September 17, 2004

Resellers and distributors have generally welcomed Intel’s move to stop back-end channel rebates on the sale of boxed CPUs. The decision to discontinue the Channel Rebate programme was introduced last August to help channel program members account for the net price of boxed Intel products at time of purchase, according to a statement from the processor giant. “Intel is discontinuing the Intel Channel Rebate programme so that Intel members can account for the net price of boxed Intel products at the time of purchase from Intel authorized distributors rather than waiting for a rebate payment from Intel,” commented one official at Intel. Intel’s back-end rebates have been a sore point for some time with distributors and resellers with allegations that certain resellers were discounting the rebates from front-end prices, thereby undercutting other resellers as well as official distributors. “Intel realized that everybody was discounting the rebates from the cost of the goods,” noted Mohammad Yaghi, general manager at Dubai-based reseller HMP. “Traders would get the CPU for US$100, and a US$3 rebate. So they would sell at US$97 and not US$100. That rebate was not extra profit as it used to be. It was only money frozen with Intel and so we are very happy that Intel stopped its rebates because our money is no longer tied up with Intel.” While Intel did confirm it had been discussing the move with partners, it did not confirm the suggestion that it made the decision after being pressured by distributors, a few of whom have complained that rebates were being abused by resellers. “Individuals out in the market used the rebates in a different manner than they were intended for and abused them,” explained Armagan Demir, VP sales and marketing at authorized Intel distributor Empa. “We conveyed what was happening to Intel and they are putting in place regulations that will minimize this kind of abuse of programmes in this region.” Despite Intel ending its Channel Rebate programme almost a month ago, some resellers allege that they still have not been paid their rebates in full. Intel has gone some way to ease the pressure on channels involved in the low-margin world of CPUs, but already some resellers have gone over to selling product from rival processor vendor AMD and claim margins are much healthier without rebates. It remains to be seen whether those who have started selling AMD product will now switch back to Intel.

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