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Intel quietly cuts Celeron prices

The chip giant fires another salvo in its ongoing price war with Advanced Micro Devices by cutting prices on its Celeron chips by roughly 30 percent.

Intel ratcheted up its ongoing price war with Advanced Micro Devices by quietly cutting prices on its Celeron chips by roughly 30 percent this month and releasing a new, even cheaper version of the chip earlier than expected.

The unscheduled, unannounced price cuts, which took place on December 6, mean that the fastest Celeron chips can be bought for between $85 and $105 in retail outlets today, or about $40 less than in November, according to dealers. And, while AMD did not officially respond with a price cut of its own, chip dealers note that the market has effectively lowered the price of K6-2 chips to close to the same level.

The December price cuts will be followed by further cuts across Intel's Pentium II line as well as the rollout of new, faster Celeron chips in the first week of January, sources said.

The circumstances surrounding the stealth price cuts further indicate that a deeper battle is shaping up in the low-end computing segment. Despite the December discounts, retailers are selling Celeron processors for less than the official Intel wholesale price. Dealers have also said Celerons are in fairly ample supply, especially in comparison to hard-to-get Pentium IIs.

Typically, wholesale-retail price imbalances, healthy supply, and soon-to-come chip releases mean more chip price cuts. More Celeron cuts could come next week with the other price drops. In turn, this would likely mean a wider variety of Celeron-based computers for $1,000 and less.

Intel lowered the price on the Celeron line on December 6

Celeron price cuts
Chip October 25 price December 6 prices* Actual retail price
333-MHz Celeron $159 $107 and $115 $94 to $105
300A-MHz Celeron $138 $90 and $94 $85 to $95
Sources: Intel, chip dealers
* On Dec. 6, Intel began to sell the Celeron in two types of packages, the standard SEPP package and a less expensive PPGA version. Oct. 25 and Dec. 6 prices are wholesale for 1,000-lot quantities.
with the introduction of the new PPGA "370 Pin Socket" version of the chip, according to an Intel spokesman. 370 Pin Socket refers to the packaging that surrounds the microprocessor itself. Until recently, Celeron chips have come in a "Slot 1"-type package that is cheaper than the packaging that comes with the Pentium II but is more expensive than the packaging that comes with AMD processors.

The Socket package, announced earlier in the year, cuts the manufacturing cost of the chip but otherwise does not change how it operates, the Intel spokesman said. Celeron chips in the Slot 1 package, however, are also still available.

The company shipped the Socket chip in December to allow computer makers to build systems around the chip for the new year, said the Intel spokesman. Earlier in the year, sources inside and close to Intel said the Socket version of the chip would not come out until 1999.

Under the December price cuts, the 333-MHz Celeron in the Slot package dropped 28 percent, from $159 to $115. The Socket version of the chip, which sells for $107, represents a 33 percent discount.

The price of the 300A-MHz Celeron in the Slot package dropped 32 percent from $138 to $94. The Socket version, which sells for $90, represents a 35 percent discount. The prices above are wholesale and are offered to computer manufacturers and distributors that buy chips in 1,000-lot quantities. Both the 333-MHz and 300A-MHz versions contain 128KB of secondary cache memory.

Despite these discounts, more cuts are likely, according to retailers, because they are selling the chips in retail for even less than Intel's wholesale prices. A survey of retailers conducted by CNET News.com found that the 333-MHz Celeron in the Slot package sells for between $95 and $105 with a 30-day warranty, less than even the wholesale price for the Socket version. With a three-year warranty, the chip goes for $123. The 300A-MHz in a Slot package goes for $85 and up. Most dealers have yet to pick up the Socket-style chips, but they expected these to be cheaper.

Healthy inventory of Celerons
The lower-than-wholesale prices are largely attributed to fairly healthy inventories of the chip. Celeron chips are selling fairly well, but they are also easy to get. By contrast, Pentium II chips are selling for $225 and up and are more difficult to find.

"A lot of our resellers are building systems around the 300-MHz Celeron. Even Intel is surprised, I think, about how they are selling," said one chip dealer. Still, despite demand, Celerons are fairly easy to get.

The timing of the price cuts also seems to portend more competition. The slightly early release of the cheaper Socket 370 package would also seem to indicate that Intel is trying to put more pressure on competitors.

Intel lost market share to AMD and others in 1997 because of the rise of cheap computers, according to Nathan Brookwood, an analyst with Insight 64. The company is still catching up.

"Intel clearly has its work cut out for it at the low end," he said.

Intel is an investor in CNET: The Computer Network, publisher of News.com.