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Preholiday price cuts from Intel, AMD

In a prelude to the coming shopping season, the two companies trim prices on several chips by as much as 35 percent.

Both Intel and Advanced Micro Devices cut the price on several chips, a prelude to the PC holiday shopping season.

As expected, Intel reduced the cost of its Pentium 4 desktop chips by between 7 percent and 35 percent on Sunday, with the most expensive chips receiving the biggest whack. The 3.2GHz Pentium 4 dropped from $637 in volume quantities to $417, a 35 percent drop, while the 3GHz Pentium 4 with an 800MHz system bus declined from $417 to $278, a 33 percent reduction.

Additionally, the company reduced the price of the mobile Pentium 4, used primarily in consumer notebooks. The 3.2GHz Pentium 4 for notebooks dropped from $653 to $433, a 34 percent decline, while the 3.06 version with an 800MHz bus slid 33 percent, from $433 to $294. Discounts on other Pentium 4 and Celeron chips can be found on Intel's pricing site.

AMD, meanwhile, trimmed prices on its Athlon processor line, but did not cut the price on its 64-bit chips, which came out at the end of September. The Athlon 3200+ dropped from $433 to $325, for example. The new prices can be found at the AMD processors site.

The extent and effect of AMD's price cuts, however, are sometimes larger than the price list indicates. The company often gives extra, negotiated discounts to large distributors and PC makers, which in turn, often pass on the additional discounts when they sell chips to dealers and smaller manufacturers.

Typically, price reductions on chips lead to lower PC prices in the subsequent weeks and, generally, help boost sales. This year, PC shipments are again showing double-digit growth and exceeding analysts' expectations. Both AMD and Intel reported better-than-expected earnings for the third quarter.

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Intel's discounts often follow the pattern of a ziggurat, the step pyramid of the ancient Mesopotamians. When the company cuts prices, the highest-price chip takes on the price of the second-most-powerful chip, and so on. The 2.8GHz Pentium 4 with an 800MHz bus, for instance, dropped from $278--the new price of the 3.0GHz model--to $218, the old price of the 2.6GHz chip with an 800MHz bus, which dropped to $178. Some analysts have speculated that Intel is more confident in its business when this rigid pricing model is used.

The Intel price cuts, which came to light in July, were originally intended to pave the way for Prescott, a new chip with a number of new features.

Now, though, Prescott likely won't hit shelves until February. Instead, the cuts will smooth the runway for the Pentium 4 Extreme Edition, a version of the Pentium 4 with 2MB of performance-enhancing cache.

The company added the 3.2GHz Extreme Edition chip, which is almost identical to a Xeon chip for workstations, to its lineup late in the summer. Dell, among others, is expected to release a game PC with the chip to coincide with the Nov. 16 kickoff of Comdex, the Las Vegas trade show.