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Intel cuts prices to pave way for Pentium 4

The company drops prices on Pentium III and Celeron processors between 5 percent and 36 percent, a move that will pave the way for the introduction of the Pentium 4.

Intel has dropped prices on Pentium III and Celeron processors between 5 percent and 36 percent, a move that will pave the way for the introduction of the Pentium 4.

The discounts, which went into effect Sunday, cover desktop Pentium III processors, two Pentium III Xeon chips for servers, desktop Celeron chips and notebook versions of Celeron.

The cuts are part of a continuing pricing contest between Intel and rival Advanced Micro Devices. Earlier in the year, microprocessors were in short supply, and the companies slowed the pace of their discounts.

Now, supplies have improved while demand has slowed, a combination that typically results in serial price cuts. AMD executives, in fact, indicated in the company's recent conference call that the company will hold back on sales of its inexpensive Duron processors to avoid a price war.

"There is going to be a dampening effect because we don't want to precipitate a price war," said AMD CEO Jerry Sanders. AMD, however, did not cut prices Monday, according to a company spokesman.

With the price cuts, consumers can expect to see discounts on PCs and laptops. The 1-GHz Pentium III dropped 31 percent, from $669 to $465, when purchased in quantities of 1,000, while the 933-MHz version sank 32 percent, from $508 to $348. Because of the low margins under which PC makers operate, a substantial portion of the savings will end up in the hands of consumers.

The price cuts will also pave the way for the Pentium 4. That processor is slated for release Nov. 20, according to several sources.

As reported earlier, the 1.5-GHz version of the chip will sell for $795 in quantities of 1,000, while the 1.4-GHz version will sell for $625. Both prices are relatively low by historical standards. Consumer desktops containing the chips will sell for around $2,000, not including monitor, sources at PC manufacturers have said.

Consumer computers will also see relief. With the price cuts, none of Intel's Celeron processors for budget computers sells for more than $100--a new low-water mark for the processor family. The 700-MHz Celeron saw the biggest cut, dropping 36 percent from $138 to $88, while the 650-MHz version of the chip went from $112 to $83, a 26 percent drop.

Among other cuts, the 866-MHz and 850-MHz versions of the chip went down 32 percent, from $358 to $241, while the 800-MHz version went down 33 percent, from $251 to $193.

As for mobile processors, the 650-MHz mobile Celeron was discounted 26 percent, dropping from $181 to $134. More mobile and Celeron processor are also due in the near future. The 1-GHz Xeon chip for servers dropped from $719 to $515.

The prices above refer to official wholesale prices. Actual prices at retail will vary.