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Processor Prices Sliding Again

In an effort to boost sales and squelch market-share loss to competitor American Micro Devices, Intel has unleashed a new series of price cuts on Pentium II processors. The price cuts are the fourth such action from Intel this year, with more expected before year's end. The new price cuts are driven primarily by a slowdown in demand for sub-$1,000 PCs. While manufacturers and vendors have had to bite the bullet and eschew higher profits in exchange for greater sales volumes, a slump in consumer demand for inexpensive PCs has led to a surplus in low-cost machines. Intel has been steadily losing ground to American Micro Devices, which has been chewing its way through market share since PCs broke the sub-$1,000 barrier. According to industry analysts, processors from AMD have accounted for more than half of all sub-$1,000 PC sales and more than a third of PC sales overall. And since AMD, which increased sales from 1.6 million to 2.7 million units in the last nine months, traditionally has priced its processors about 25 percent lower than comparable Intel chips, price cuts from the Sunnyvale-based chip maker can't be far off. Intel also has advanced the release date for its new low-cost 300-MHz and 333-Mhz Celeron processors. This is the second time since Celeron's debut that the release date has been changed. The chip is manufactured using Intel's new .25 micron production process. Celeron processors, which will sell for between $100 and $179, differ from Pentium II processors in that they do not currently feature cache memory, which could impact performance negatively. But at speeds comparable to even the fastest Pentium II chips, Intel expects Celeron to be a hit. Under the new pricing structure, prices for a Pentium II 400-MHz processor will drop to about $550, while the price of a 350-MHz will be reduced to $395. The 333-MHz Pentium II will sell for $295, and the 300-MHz chip will drop to about $220. All prices are based on bulk sales to resellers and computer manufacturers. On the higher end of the scale, Intel has announced that its new 450-MHz chip probably will debut at a price of about $655 in large quantities. It is unknown what the single-chip price for that processor will be. Meanwhile, Motorola has introduced a fast new 366-Mhz PowerPC 750 processor slated for incorporation into high-end servers and computers from Apple this fall. The new chip, which will join Motorola's 300-Mhz and 333-Mhz in Apple's new G3 product line, will be the fastest chip available for Macintosh computers. Motorola has said the processor is expected to sell for $595 in large quantities. The chips are important also because they incorporate Motorola's new process technology, which reduces power consumption in the chips by half.

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