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Intel price cuts due

As it introduces the low-cost Celeron and two high-end Pentium II versions, the chip giant will cut prices on existing Pentium II processors.

As it introduces the low-cost Celeron and two high-end versions of the Pentium II, Intel (INTC) will cut prices tomorrow on existing Pentium II processors.

A scheduled price action will accompany the unveiling of Celeron and the 350-MHz and 400-MHz Pentium IIs, according to an Intel spokesman.

The round of discounts will be Intel's third in the first four months of 1998, and it certainly won't be the last. The company cut the cost of its 333-MHz Pentium II late last month and all processor prices at the end of January.

While Intel has Intel stumbles historically cut prices just once every quarter to make way for newer, faster processors, the company has started to stagger its actions throughout the year, said sources inside the chipmaker. Notebook processor prices, for instance, will be cut independently of desktop or server prices. The new pricing strategy is designed to fit with the company's increasing focus on market segmentation.

Even under a staggered price cut calendar, desktop processor prices will likely be the segment that's reduced the most in 1998. Plummeting PC prices are forcing Intel to develop cheaper chips for the desktop arena. At the same time, the desktop is the only segment where Advanced Micro Devices and Cyrix pose a substantial competitive challenge to Intel.

After tomorrow's price cuts, the most expensive Intel desktop chip will cost under $500. Upcoming server chips are expected to start at around $2,000. Intel's priciest notebook chip currently sells for $696.

The 333-MHz Pentium will be reduced from

Upcoming Intel chip pricing
MHz Feb/Mar April
Pentium II
450 upcoming $750 (July)
400 upcoming $800
350 upcoming $609
333 $722-$583 $483
300 $530 $368
266 $375 $242
233 $268 $194
upcoming $152-$104
Pentium MMX
233 $135 $100
200 $100 $100
166 $95 below $100
$583 to $483 in quantities of 1,000, according to sources, a steep decline from its January debut price of $722. Meanwhile, the 300-MHz version will fall to $368 from $530, while the low-end 233-MHz version will drop to $194 from $268.

All of the older Pentium MMX chips will be priced at or below $100, according to sources.

Meanwhile, Intel's Celeron, which targets the sub-$1,000 level, will cost $152, although some computer vendors are expected to get discounts. The 266-MHz chip, Intel's first for this segment, has been panned in early reviews by analysts, who say the chip will not perform as well as earlier top-performance Pentium MMX chips. Vendors are not expected the push systems incorporating the chip.

The newest Pentium IIs constitute a speed upgrade from today's top-line 333-MHz chip. Each will also contain technology which boosts the speed at which the Pentium II talks to other components in the system.

Sources have said that the 400-MHz Pentium II will cost approximately $800 in volume while the 350-MHz version will sell for $609.

Intel is an investor in CNET: The Computer Network.

Associate editor Kurt Oeler contributed to this report.