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Intel unveils Pentium 4 chips, trims prices

The new processors--with speeds up to 2.8GHz--come amid a desperate race between Intel and longtime rival Advanced Micro Devices for revenue and market share.

Intel came out with four new Pentium 4 processors on Monday and at the same time enacted the first phase of a major price cut.

The Santa Clara, Calif.-based chipmaker released desktop Pentium 4 chips running at 2.8GHz, 2.66GHz, 2.6GHz and 2.5GHz, and those chips will be incorporated into new PCs from Dell Computer, IBM and others. Gateway, for example, is using the 2.8GHz and 2.6GHz processors in its new Profile 4 line of computers with a built-in flat-panel monitor, which debuted Monday.

The new chips also kicked off stage one of a price reduction, something Intel hasn't done for its desktop line since June. The 2.8GHz chip will sell for $508 in 1,000-unit quantities, while the 2.66GHz and 2.6GHz will sell for $401 in volume quantities. The 2.5GHz chip will sell for $243.

With the release, the existing 2.53GHz Pentium 4 will drop from $637 to $253. Intel is expected to cut prices for the rest of the Pentium 4 line as well as the Celeron line on Sept. 1, according to sources. The discounting has already been implemented in part--dealers and distributors have been selling Intel chips at a discount recently to get rid of excess inventories during the summer sales doldrums.

The new chips come amid a desperate race between Intel and longtime rival Advanced Micro Devices. With the downturn in the PC market, the two companies are cutting prices and raising the speed of their microprocessors to gain as much market share as possible and curtail revenue declines. Last quarter, Intel regained six points of market share, on a year-to-year basis, partly through price cuts.

Last week, Sunnyvale, Calif.-based AMD cut prices and announced that two new chips, the Athlon XP 2400+ and the 2600+, would hit store shelves in September. In recent months, AMD has fallen behind Intel in terms of overall performance, according to several analysts. The 2400+ processor had also been delayed from its original release time in the second quarter.

AMD, however, redesigned elements of the Athlon, and the upcoming chips will substantially eradicate any performance differences.

"(AMD) had fallen behind, but they have closed the gap to a certain degree," said Nathan Brookwood, an analyst at Insight 64.

The 2.8GHz and 2.66 chips come with a 533MHz bus, a data path that connects the processor to main memory, a feature also found on the 2.53GHz chip released in June. The 2.6GHz and 2.5GHz chips, meanwhile, come with a 400MHz bus. Typically, a faster bus boosts performance.

A 3GHz Pentium 4 will arrive in the fourth quarter, while AMD will begin to ship its much-anticipated "Hammer" chip to manufacturers at the same time.