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Intel cuts Pentium II prices

Intel drops prices on Pentium II processors between 15 to 20 percent to make way for the new chips on the block and to match AMD.

Is the shoe on the other foot?

Intel, apparently feeling the heat from rival chipmaker Advanced Micro Devices, cut the prices on Pentium II processors between 15 to 20 percent to make way for the new Pentium IIIs and match AMD.

Interestingly, it appears this time as if Intel has moved in response to AMD in the bruising price war between the two.

Intel has been steadily losing ground to AMD in the retail computer market over the past 10 months. AMD has also been winning contracts with major PC manufacturers, which are also using AMD more in notebooks. In January, AMD computers accounted for more retail sales in the U.S. than Intel computers for the first time, according to research firm PC Data.

In response, Intel has been drastically cutting prices on its low-end Celeron chips, where it is feeling the most pressure from AMD, and introducing new processors such as the Pentium III at relatively low prices, historically speaking.

AMD, of course, is not standing still. The company has matched Intel on each price cut, typically on the same day. K6-2 processors are now priced within one to two dollars of Celeron chips running at the same speed. The K6-III chip, meanwhile, is priced to be around 25 percent less than the Pentium III or equal to the Pentium II. AMD officials said they were looking at the Intel actions right now.

The 450-MHz Pentium II dropped 15 percent from $562 to $476 for volume purchases, the same price of the upcoming 450-MHz K6-III, while the 400-MHz Pentium II dropped 20 percent from $353 to $284, the same price as the 400-MHz K6-III. The 350-MHz Pentium II dropped 16 percent from $202 to $170.

The 500-MHz Pentium III, meanwhile, sells for $696 while the 450-MHz version sells for $496.

The price list released by Intel today further reflects the product segmentation Intel is trying to achieve. Intel did not list prices on the Pentium IIs running at 333 MHz or lower, which generally means the chips are being phased out of production. Most of the Celeron chips produced today run at this speed or lower.

One of the company's goals has been to differentiate the Celeron line from the Pentium line. Creating a speed gap is one method for creating a distinction, several observers have said.

As part of this effort, Intel will phase out the Pentium II line as more versions of the Pentium III come to the fore. The company has already said that no new versions of the Pentium II for desktops will be released.