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New Pentium 4 coming amid price cuts

Intel is to release a 1.7GHz Pentium 4 processor in a little over two weeks into a market that is awash in price cuts and discounts.

Intel will release a 1.7GHz Pentium 4 processor in a little over two weeks into a market that is awash in price cuts and discounts.

The 1.7GHz Pentium 4, which will officially debut April 23, will appear in PCs from Dell Computer, among others, said sources. Additionally, the Santa Clara, Calif.-based chipmaker will release Monday an 850MHz version of its budget Celeron processor.

The new Pentium 4 will likely invigorate the debate between processor aficionados over which company--Intel or Advanced Micro Devices--rules the performance roost.

AMD's fastest Athlon chip tops out at 1.3GHz, giving Intel a substantial margin in speed, a gap that will continue in the third quarter when Intel comes out with a 2GHz Pentium 4 and AMD releases 1.5GHz and higher Athlons.

While more speed boosts sales, it is only one measure of performance, and on many standard applications, Athlon outpaces the Pentium 4. The Pentium 4, however, does better on video compression and many multimedia applications.

"On certain things like streaming media, the Pentium 4 does extremely well. On the standard benchmarks, the Athlon does extremely well," said MicroDesign Resources analyst Kevin Krewell.

"I'm leaning more toward the Intel model as time goes on," Krewell added. With applications such as Microsoft's PowerPoint presentation program, "we're getting to the point where the (1GHz) processor can do it all."

But, just as important, consumers are also seeing benefits at the cash register. A slowdown in the PC industry has led to a constant stream of price cuts and new bargains.

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Pentium 4 takes the lead in speed wars
Kevin Krewell, senior analyst, MicroDesign Resources
Intel and AMD are slated to officially cut prices by 20 percent or more April 15 and 16, respectively, according to several sources. Those coming price cuts, however, are already in effect at many retailers.

The 1.5GHz Pentium 4, for instance, sells for $637 each in wholesale quantities of 1,000, while the 1.4GHz version goes for $423. Usually, Intel's wholesale prices are lower than retail prices, but that's not always the case.

Dallas Memory International sells the 1.5GHz for $500, while the same chip with a fan, a heat sink and 128MB of Rambus memory sells for $657. A 1.4GHz Pentium 4 goes for $370 while the fancy bundle goes for $450. All chips are in stock, according to a sales representative.

On the AMD side, the 1.3GHz Athlon "officially" sells for $318 while the 1.2GHz version sells for $268 in wholesale quantities of 1,000. Distributors, though, are selling the 1.3GHz chip for $223 and the 1.2GHz for $201.

The early discounts come partly as a way to clear inventory. Distributors and dealers are cutting prices in anticipation of the mid-month discounts. Additionally, the "gray market," or unauthorized dealer network, has been increasingly active.

When computer makers and distributors find themselves holding excess inventories of components, these companies will sell the parts to overseas wholesalers and other parties at a discount. Subsequently, these parts return to North America and sell for less than the parts coming out of the factory. Authorized dealers then have to cut prices further.

In slow periods, however, gray market activity increases. The result is that unauthorized dealers now are selling the 1.3GHz Athlons in the $180 range. Authorized retailer Lynn Computer Products, by comparison, sells the chip for $249.

"The gray market is a much larger problem these days," said Rob Guella, president of RB Computing, an authorized AMD dealer in Nepean, Ontario. "When there are a lot of CPUs on the market, that concerns AMD. Price cuts will depend on how much gray market activity they find."

Added Doug Lynn of Lynn Computer: "It's been hard to compete lately against the gray market."

AMD, in fact, is already offering its April 16 price through select distributors in an effort to combat gray marketing. The Sunnyvale, Calif.-based manufacturer also often sells its chips at a negotiated discount.

The megahertz gap is also hurting AMD, added Krewell. Although its 1.3GHz chips rival the 1.5GHz Pentium 4 in many respects, it has to price them against the 1.3GHz Pentium 4.

"AMD is being forced into a frequency match-up, which is beneficial to Intel," he said. "AMD is stuck with pricing based on megahertz."

Intel declined to comment on upcoming products or price cuts, while AMD representatives could not be reached for comment.