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Pentium III discounts yield deals on PCs

Computer makers are expected to follow HP's price cuts on performance PCs and workstations over the next few weeks, a chain reaction set off by processor price cuts this from weekend and a sizzling PC market.

Computer makers are expected to follow HP's price cuts on performance PCs and workstations over the next few weeks, a chain reaction set off by processor price cuts this from weekend and a sizzling PC market. .

Traditionally, when Intel cuts chip prices, PC makers follow suit. Adding fuel to the fire, rival AMD chipmaker last week introduced Athlon, its entry into the high-end processor market. Running at speeds up to 650 MHz, Athlon is currently the fastest desktop processor on the market.

When first introduced last February, PCs based on Intel's Pentium III ran at 450 MHz and were typically priced starting around $2,000. Today, Pentium III-based computers start at just above the $1,000 mark and come with more memory and hard drive space than in previous years, a reflection of the seemingly unstoppable pricing trends in the industry.

HP, for example, slashed prices between 10 to 17 percent on some of its fancier computers today. A Brio PC with a 450-MHz Pentium III , 64MB of memory, and a 9.1GB hard drive now sell for $1,198.

Dell Computer will also discount systems this week, a spokesman said.

The discounts on Pentium III computers are essentially geared toward shifting these machines deeper into consumer territory. A number of analysts and Intel officials have said that one of the company's goals has been to price the 500-MHz Pentium III so that computers based around it sit in the "sweet spot," or the best volume sales price, for the holiday season.

Not surprisingly, the 500-MHz Pentium III got the biggest discount over the weekend, a 41 percent drop to $251. (See related story.)

The Pentium III, of course, is not the only chip in town for performance computing, now that AMD has released the much-touted Athlon processor, which has beat the Pentium III in several published performance benchmarks. Systems using the chip are due from IBM by the first of September. With the price cuts, the Pentium III is now approximately the same price as the Athlon.

HP slashed prices on its Vectra VL computer, featuring a 500-MHz Pentium III, 64MB of memory, and 6.4GB hard drive, bringing the corporate system to $1,301. The PC maker also discounted its Brio BAX computer for small businesses by 10 percent, to $1,198. The Brio includes a 450-MHz Pentium III processor, 64MB of memory, and a 13GB hard drive.

HP also discounted its Kayak Workstations with Pentium III processors by 15 percent, bringing the HP Kayak XA PC workstation to $2,053.

Other major manufacturers are expected to join in, discounting their higher-end PCs, sources say.

The excitement won't end with desktops, however. A flurry of notebook discounts will likely take place in the first few weeks of September as a result of new chips. Before the end of the month, Advanced Micro Devices is slated to release new notebook chips, which have gained significant popularity in the retail portable market. Currently, the fastest AMD notebook processor runs at 380-MHz. Typically, new, faster chips lead to price cuts on existing lines.

In addition, Intel is slated to release new Celeron processors for notebooks and discount accordingly. Intel will release a 433-MHz Celeron for notebooks that will sell for $160 in volume in the third quarter, said sources, while a 466-MHz version will come out toward the end of the year for $209 in volume.

No more Pentium IIs are expected, but Pentium III will come to notebooks in November at 500-MHz, Intel officials have said.

How steep these discounts might be, however, remains a matter of conjecture. Processor cuts lower the manufacturing cost of notebooks, which invariably leads to lower retail prices. However, the industry is still suffering through a shortage of LCD screens, which so far has stumped the development of a substantially large market for budget notebooks.

In other news, Gateway today announced a new computer targeted at large organizations and corporations, featuring a new smaller design. The Gateway E-1400, featuring tool-free access to motherboard for easy servicing, can be installed as a desktop or tower.

The E-1400 includes the Intel Celeron processor, 64MB of memory, a 6.8GB hard drive, and 15-inch monitor, starting at $899.