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Key feature in notebooks: low cost

The most notable aspect of the chip's debut isn't its increased performance but the low price of so many new portables based on it.

One of the most notable features of the Pentium II notebooks announced today has less to do with the chip's improved performance and more to do with cost.

Many new, top-of-the-line notebooks using the new Intel processor are being introduced at unprecedented price levels, portending a new world of low-cost portables.

Top-flight systems from major vendors were unveiled at prices as low as $2,700, about $1,500 less than the typical new, high-end notebook of the past. New Pentium II systems from IBM, Dell Computer, Hitachi, and Gateway 2000 are all priced at or below $3,000.

The upshot: When high-end system prices come in at this level, midrange and low-end notebooks feel the squeeze and ultimately dive in price, establishing a whole new pricing structure.

Intel appears to be leading the charge. Today's debut of the mobile 233- and 266-MHz Pentium II marks the beginning of a new generation of high-performance, low-cost laptops, said Stephen Nachtsheim, corporate vice president and general manager of the mobile and handheld group at Intel. (Intel is an investor in CNET: The Computer Network.)

A year ago, new notebooks introduced with Pentium MMX chips running at 166 MHz cost between $4,500 and $7,000, he pointed out.

"You are going to see a lot of systems at or below $3,000," Nachtsheim said, adding that performance has nearly tripled in a three-year time frame. "The Pentium II is entering at the mainstream of the mobile market."

By the end of the year, the Pentium II will likely be incorporated in about 50 percent of notebooks shipping, he added. A 300-MHz Pentium II for notebooks will come out in the second half. Notebook vendors will also begin to experiment with form factors, giving users a wider variety of devices, Nachtsheim predicted.

Mirroring the price dynamics which drove down the cost of desktop computers, price erosion is striking a wide range of notebook component markets, said Stephan Godevais, vice president of portables at Dell. Declining prices for LCDs (liquid crystal displays), hard drives, and memory are all conspiring to lower the cost of notebooks.

For example, large LCD screens, which can comprise as much as one-third the cost of a notebook, have plummeted to only a few hundred dollars for 12.1-inch active-matrix versions, he said. The price for even larger displays, such as the 13.3-inch variety, have fallen well below $1,000, he added.

A year ago, these displays were at levels two or three times today's prices. Memory prices also continue to dive, as do prices for large-capacity hard drives, Godevais said.

This could help boost sales. So too could the fact that corporations are due to begin another buying round. Large corporations generally follow a three-year upgrade cycle on notebooks, said Anthony Bonadero, product marketing manager for Dell's Latitude notebooks. The last major upgrade occurred in 1995.

Today's rollout at Intel's headquarters in Santa Clara, California, brought a variety of other issues to the fore, including power consumption, performance, and new notebook designs.

The Pentium II processor uses more power than the Pentium MMX chip, but other factors compensate for the extra drain on power, Nachtsheim asserted. First and foremost, applications run more quickly, he said, which means tasks can be performed in two-thirds of the time it took on older processors. Analysts and vendors make more modest claims about performance.

Computer vendors are pushing the design envelope on their own, tweaking products so they will conserve more power. IBM, for example, increased the capacity of its batteries for the Pentium II launch, said Dan Lowden, worldwide segment manager for mobile computing at IBM. As a result, battery life on Pentium II ThinkPads is about the same as it was on the Pentium MMX models.

IBM introduced the Pentium II in its 385 line, 770 line, and the new 600 line. The latter is the first slimline notebook specifically designed for the Pentium II, Lowden said. The 600 weighs 4.6 pounds at a minimum, measures 1.4 inches thick, and comes complete with an integrated hard drive bay which can accommodate a DVD drive.

In another design innovation, the new Pentium II chips come in two separate packages: a mobile module which holds the "Northbridge" segment of the chipset--the Pentium II's ancillary chips--and a mini-cartridge, which contains only the Pentium II chip. The mini-cartridge is designed to allow notebook vendors to reduce the size of their products.

The module is far more popular. Nearly all vendors are using this form, mostly because it is the same design used with the last version of the Pentium MMX chip. In other words, by incorporating the module notebook makers did not have to change current designs to accommodate the new chip.

Only three vendors present at the event--Compaq, Toshiba, and Fujitsu--said that they have adopted the mini-cartridge. Ironically, none of their notebooks were in the slim form factor category that the mini-cartridge facilitates.

Compaq adopted the cartridge so that it could use its own chipset, said Lewis Schrock, director of portable marketing at Compaq. Toshiba uses the Intel chipset but adopted the mini-cartridge as a way to get a better grip on power management.

The 233-MHz mini-cartridge version of the chip sells for $466 in quantities of 1,000, while the 266-MHz version sells for $696. The module version of the 233-MHz processor sells for $542 while the 266-MHz version sells for $772. The mobile Pentium IIs cost more than equivalent desktop Pentium II chips, but the mobile chips use more complex packaging, which necessitates a higher price, Nachtsheim explained.

Although many vendors appear to be opting for standard designs, a number of "second-tier" vendors came to the event showing off new architectural features.

Siemens-Nixdorf displayed off its Scenic 800, a large form-factor notebook that comes with a detachable infrared keyboard and a magnesium case. The case conducts heat better than plastic versions, explained the Siemens representative, and will allow the company to adopt faster versions of Intel chips without redesigning the product. The Scenic will also be capable of accepting a 15-inch screen, he said.

NEC Computer Systems showed a prototype of a 1.3-inch-thick Versa notebook that will come out within the next 60 days. NEC is thinning the machine by using a new type of hard drive that measures 9 millimeters in thickness. Standard hard drives measure 12 millimeters, explained Bob Levin, vice president of product marketing at NEC. The upcoming computer will use the mobile module, he added, not the mini-cartridge.