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The best way to sell a new high-end chip: lower its cost so consumers will buy systems built around it.

That seems to be Intel's thinking this week. The company has shaved a few dollars off the prices of its desktop microprocessors, as part of a broader effort to accelerate the adoption of its recently launched Pentium 4 chip.

Cuts From Bottom Up

The cuts, which Intel says are part of its normal pricing activity, are deepest on its Celeron processors, aimed at budget PCs priced below about $1000. The chip giant also cut Pentium III prices by as much as 11 percent and prices for its Pentium 4 chip by up to 4 percent. The new prices took effect March 4.

"We're really ramping pretty aggressively with the Pentium 4 and trying to move into all mainstream price points throughout [the first quarter]," says Intel spokesperson Seth Walker. "To do that we have to adjust pricing across our entire product line."

Intel hopes Pentium 4 systems will be available for as low as $1500 from all major U.S. PC makers by the end of this month. Taking into account promotional and rebate offers, systems at that price point already are available from Dell, Compaq, Hewlett-Packard, and Gateway, Walker says.

Pushing P4 Ahead of PIII

While the price reductions on the Pentium 4 are relatively small, this is the second time this year Intel has cut prices on that and other products. The vendor hopes to reach the crossover point between Pentium III and Pentium 4--that is, when it sells more Pentium 4s than Pentium IIIs--by early 2002, Walker says.

Intel's 800-MHz Celeron processor is now priced at $112, a drop of 19 percent, according to figures published on Intel's Web site. Among other reductions, the price of the 766-MHz Celeron was cut by 8 percent to $103, while the 733-MHz version fell 6 percent to $83, Intel says.

The 1-GHz Pentium III processor is now priced at $241, a drop of 10 percent. Intel shaved 7 percent off the price of a 933-MHz Pentium III, making it $225, while the 800-MHz version dropped 11 percent, to $163.

Price cuts on Intel's newest desktop chip, the Pentium 4, were more shallow, keeping it well above the cost of a PIII. The chip giant cut 1 percent from the price of its 1.5-GHz and 1.3-GHz Pentium 4 chips, putting them at $637 and $332, respectively. The price of the 1.4-GHz part was cut by 4 percent, to $423, Intel says.

All prices are for processors bought in 1000-unit quantities.

Intel's price cuts come at a time when PC sales are down. The price cuts could give PC makers added incentive to cut prices on new systems.

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