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Sleek, pricey notebooks arriving

Another wave of powerful notebooks is coming, but this is not the real hot spot in the market.

Another wave of slim, flashy notebooks is due to arrive next week with the release of Intel's Pentium II 300-MHz chip for mobile computers, but the low-end of the market appears to be the real hot spot.

Notebook sales have slowed in recent quarters, especially in comparison to desktops, and mostly because of price. Starting at around $3,200, the price gap between high-performance notebook PCs and desktops is as great as ever, especially in light of the burgeoning market for low-cost desktops.

Even though 233-MHz and 266-MHz Pentium II notebooks will move down in price with the release of the new chip, most notebooks will stay above $2,000. The few notebook models from top-tier manufacturers knocked down into the sub-$1,500 category appear to draw buyers quickly, pointing to pent-up demand for low-cost models.

But the high-end will take the limelight next week. On September 9, notebook vendors will start showing off notebooks using the long-anticipated 300-MHz Pentium II chip for notebooks.

Compaq will unveil two new lines of slim notebooks to go with Intel's announcement.

To compete with IBM's 560 ThinkPad line, Compaq is releasing the Armada 3500, a slim notebook with a 266-MHz or 300-MHz Pentium II and 12.1- or 13.1-inch screens. Prices start at $3,299.

In addition, Compaq will release the Armada 6500, an update of the Ultra2000 notebook inherited from Digital Equipment, with a 300-MHz processor. Compaq will also incorporate the 300-MHz Pentium II across its product lines. An Armada 1700 with a 14.1-inch display, a 300-MHz Pentium II and 64MB of memory is expected to start at $4,999 sources said.

Among direct vendors, Gateway is expected to use the chip across its notebook line, while Dell will make some noise with the Inspiron 7000 that will ship with a 15-inch active matrix display, the largest available on a notebook. (See related story)

Dell will also release a version of its Latitude notebook with the new chip. A Latitude CPI D300XT with a 300-MHz Pentium II, 64MB of memory, a 4.0GB hard drive, and a 13.3-inch active matrix screen will sell for under $3,200, sources said.

Micron will move the new Intel chip into its Trek and GoBook notebooks, sources said. The high-end Trek with a 14.1-inch display and 64MB of memory will be priced at $2,999, while the GoBook ultraportable with a 12.1-inch display will be priced at $3,099.

Micron declined to comment on unannounced products.

Toshiba has made provisions in its Satellite 8000 and Portege 7000 line for the 300-MHz chip, and IBM will roll the chip out in the 380, 600, and 700-series ThinkPad, sources said. Hewlett-Packard, NEC, and other vendors will follow suit as well.

Meanwhile, systems with older chips will drop in price.

Notebooks with 233-MHz Pentium II chips have already dipped in price to below $2,000, and users should see some more systems slip under that mark.

Still, those price points aren't hitting the sweet spot with customers. Unit sales have been increasing for notebooks in the $1,399 price range, according to Mike Gumbert, chief operating officer of Insight, a large corporate computer dealer. Less expensive notebooks constitute over half of Insight's unit sales.

"There is a huge pent-up demand for the low end of the market," he said. "High-end notebooks are fine, but that's not where the volume is."

Other electronic resellers say that $1,399 notebooks last "a couple of hours" before selling out.

Fire sales, however, are getting tougher to come by. That's because vendors won't have as many old systems to get rid of in preparation for the new notebooks.

Companies such as Toshiba, Compaq, and IBM have been forced to keep inventory levels down because they need to be able to update technology more rapidly, since Intel, Advanced Micro Devices and Cyrix continue to rapidly introduce new processors, commented Katrina Dahlquist, notebook analyst with International Data Corporation.

"The inventory issues of a few months ago have really gone away. It's just a situation where companies are managing the channel in different ways," she noted.

Intel is an investor in CNET: The Computer Network.