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Early Pentium III sales irk Intel

Intel's legal department is looking into ways of stopping it, but there doesn't seem to be much to do.

Intel's legal department is looking into ways of stopping sales of Pentium III processors in advance of the chip's official release, but isn't likely to do much about the irksome practice.

As reported last week, some computer resellers and chip dealers are already selling Pentium III processors to consumers--even offering to build systems around the chip--although the product's official rollout won't come until the end of the month. The 500-MHz version of the Pentium III is selling for $823 to $899 in retail while the 450-MHz version of the chip can be had for $569.

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"It's clearly against our sales guidelines," said an Intel spokeswoman, confirming that the company's legal department is evaluating the situation.

But legally there is probably very little the company can do, according to analysts and resellers, since these dealers often don't have sales contracts with the Santa Clara, California, company.

Pentium III processors now coming into the market are a classic example of "gray market" products. Computer makers have been stocking up on Pentium IIIs in anticipation of the processor's release, but because Intel will in all probability cut the chip's wholesale price the day it hits the market, some are selling their excess inventory to independent dealers.

"We've been aggressively stocking our distribution channels for this release," Intel's spokeswoman confirmed.

Pentium III chips will hit the market February 26 and Pentium III systems will arrive on February 28, said Gordon Casey, director of investor relations at Intel.

In the meantime, Intel will run what it calls "blue door" ads touting the chips. Intel will plug the chips' 3-D abilities and Internet capabilities, for tasks such as better Internet navigation and data visualization.

Intel could potentially present a claim against computer makers which shuffled their excess inventory to the dealers, but, historically, it has been much easier to turn a blind eye.

"The first Pentium IIs were available at Fry's a month before the release," said Nathan Brookwood, an analyst with Insight64. "The general rule is don't have an inventory of processors at the same time that Intel is about to make and announcement and lower the prices on the ones you have."

Intel's spokeswoman added that the company has found isolated instances of dealers taking orders for the chips, but no examples of dealers who have actually completed transactions. Dealers, however, tell a different story.

"We've sold about a half a dozen," said a sales representative at Components Direct LLC, a California-based reseller.

"If you order one today, I can have it by Monday," said Stewart Cahn, a representative at CPU Limited in Southern California. "A full system will probably cost around $2,500."

Another computer dealer said that his company had sold a Pentium III to Intel itself. "They buy them for testing purposes," he said.

New chip comes close to Xeon
Computer resellers who have tested the 500-MHz version of the chip say it comes close to Intel's more expensive, but slower 400-MHz Xeon processors for servers and workstations and even outperforms it in some respects. The 400-MHz Xeon performs approximately 10 percent better on benchmark tests for accessing data from main memory, according to Roland Baker, president of Net Express, a Silicon Valley reseller and workstation manufacturer.

The 500-MHz Pentium III, however, is about equal in performance to the 400-MHz Xeon on number-crunching applications, he said. "This is important for the scientific community."

Baker added that computer buyers need to be careful when upgrading. The core voltage of the Pentium III is different from the core voltage of the Pentium II and therefore will not work properly on all Pentium II motherboards, he said. The Asus P2B motherboard is so far the most compatible board for the task, he added.