Pentium prices take a tumble

Intel slashed the price of Pentium 4 processors for desktops and notebooks over the weekend by up to 53 percent, an annual spring ritual designed to stimulate demand for its premier PC chip.

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The Santa Clara, Calif.-based chipmaker cut the prices of the desktop versions of the chip by between 12 percent and 43 percent, according to a price list issued by the company. The 2.4GHz version of the chip dropped from $562 to $400, a 29 percent change, while the 2.26GHz and 2.2GHz versions of the chip fell from $423 to $241, a difference of 43 percent. Other Pentium 4s were cut by between 12 percent and 32 percent.

Notebook processors dropped even more. Pentium 4 notebook chips have not sold as well as expected, according to analysts, especially in the corporate market. They're primarily used in the thicker "desktop replacement" notebooks, rather than the "thin and light" versions more popular with corporate America. Both price cuts have been expected.

The 1.8GHz mobile Pentium 4 fell 48 percent, from $637 to $348, while the 1.7GHz version dropped from $508 to $241, a 53 percent decline. The 1.6GHz version was discounted 51 percent, from $401 to $198. The company also marginally cut prices on Pentium III mobile chips.

The price cuts should lead to cheaper PCs. Earlier this year, some PC makers raised prices and changed configurations of some consumer models because of the rising cost of flat-panel LCD monitors and memory--but that trend has largely reversed itself. Although flat-panel monitors remain in tight supply, memory prices have been dropping. Many PC makers have also been increasing the size of their in-store rebates to encourage sales.

Advanced Micro Devices, Intel's rival in processors, will likely cut prices to match Intel's cut. AMD typically announces price cuts a day or so after Intel. The Sunnyvale, Calif.-based company is also expected to soon release "Thoroughbred," a faster version of its Athlon chip, made on the 130-nanometer manufacturing process, for desktop computers. The company is currently shipping the chip to PC makers, a spokesman confirmed, and will release the chip to the public shortly.

In the past, the company has introduced new chips at Computex, a large computer show in Taipei, where many contract manufacturers and motherboard makers debut new products. The show begins the first week of June. A notebook version of the chip came out in April.

The massive spring price cuts for Intel and AMD are something of an annual fixture. In March 2001, Intel executives promised that the Pentium 4, then found only in high-end consumer PCs, would displace the Pentium III in desktops by the end of the year, a rapid turnover of the kind generally accomplished by price reductions. Prices were cut by up to 60 percent in April and May. By the end of 2001, the Pentium 4 had displaced the Pentium III on desktops.

The price cuts also put the pinch on AMD's balance sheet. Since the first quarter of 2001, when it turned a profit and saw its market share increase from 17 percent to 21 percent, AMD has posted successive losses due to price cuts and declines in the flash memory business, while its market share has settled down to 18.2 percent. The company has managed, however, to make greater inroads into the notebook and server market.