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Intel, AMD cut prices before earnings reports

The two chipmakers cut desktop and notebook products this weekend, the latest round in a pricing war that has decimated AMD's profits.

Intel and Advanced Micro Devices have sharply cut prices across all desktop and notebook products, the latest round in a processor pricing war that has decimated profits for AMD.

The price cuts come as the two chipmakers prepare to announce their first-quarter financial results this week.

Intel is expected to report earnings of $1.10 per share tomorrow, according to a consensus of analysts on First Call, while AMD is likely to report losses of about 52 cents a share. The latter's troubles partly stem from manufacturing difficulties, but mostly from price pressure in the consumer PC markets.

Since the beginning of the year, the two companies have been locked in a relentless game of one-upsmanship in the cheap PC segment. In January Intel started cutting prices to gain back lost ground in the consumer segment, as AMD has been landing large design wins with companies such as Toshiba and Gateway.

But AMD has been hemorrhaging money because the average selling price of its processors has gotten so low. One of the reasons AMD chips appeal to consumers and PC makers is their low cost, but last week the company was forced to issue its third earnings warning this quarter, in part because its ASP has fallen to $78 from $89. AMD has often said that it needs to achieve an average price of $100 to turn a profit.

Some of the largest processor price cuts will come from Intel's mobile line, a market where AMD recently has made significant inroads. The 366-MHz Pentium II mobile processor will drop about 30 percent to $530, said sources.

The 333-MHz and 300-MHz Pentium IIs, meanwhile, will drop around 30 to 40 percent to $316 and $187, respectively. Intel's 300-MHz mobile Celeron will go to $106, and the 266-MHz mobile Celeron will drop to $85.

On desktops, the 500-MHz Pentium III and 450-MHz Pentium III, introduced about one-and-a-half months ago, will drop to around $635 and $412, respectively.

The 450-MHz Pentium II will drop from around $476 to $397, while the 400-MHz version of the chip will fall from $284 to $237. The 350-MHz Pentium II will decline to $164. The Celerons will be cut as follows: The 433-MHz version will drop to $144; the 400-MHz chip will go to $103 and the 350-MHz chip will drop to $72.

AMD will make similar cuts. The 450-MHz K6-III will drop to $397 and the 400-MHz version of the chip will decline to $237. The recently released 475-MHz K6-2 will sell for $213 while the 450-MHz model will fall to $158. The 400-MHz version will sell for $103, and the 350-MHz chip will be priced at $68.

All prices are in volume quantities and are estimates. Retail prices likely will be higher.