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Vendors Jump on Celeron Bandwagon

Cheap 366-MHz and 400-MHz chips spur a new price war among desktops.

By Tom Spring, PCWorld   

Intel says its new Celeron chips run 10 to 20 percent faster than earlier versions. The chips are already loaded in numerous systems from Gateway, Hewlett-Packard, IBM, Compaq, Toshiba, and Dell.

"The shift toward low-cost computers isn't going away any time soon," says Matt Sargent, researcher with ZD Market Intelligence. "Intel needs to shift its focus to the sub-$1000 market or it will go out of business."

Dramatic shifts in PC buying trends have forced Intel to push its budget-conscious Celeron chip strategy harder than ever, Sargent says. Intel is hemorrhaging profits to rivals Advanced Micro Devices and Cyrix, which primarily make cheap computer chips for budget PCs, says according to ZD Market Intelligence.

"Its new Celeron chips won't stop the bleeding," Sargent says. Intel's market share of U.S. retail PC desktop sales has shrunk to 44.3 percent from 78 percent in November 1997, says Sargent. Sales of sub-$1000 PCs nearly tripled between October and November of 1998. The Celeron chip is designed to compete in the sub-$1000 PC market.

Fast, Cheap, and Plentiful

Dell introduced a Celeron 400-MHz chip into both its consumer and corporate desktop boxes. Prices for Dell's Celeron 400-MHz Dimension systems, aimed at consumers, start at $1299. They come with a 8.4GB hard drive, 32MB memory, an 8MB 3D graphics card, and a 15-inch monitor.

"Celerons are ideal for customers who want quality systems with exceptional value," says Daniel Young, a Dell representative. "We are very pleased with the performance and stability."

IBM announced a 366-MHz Celeron system that joins IBM's business line of 300GL systems. The $859 "microtower" PC is fitted with a 4.2GB hard drive, 32MB memory, and a 2MB video card (monitor not included). IBM says it doesn't plan to introduce a consumer Celeron PC. It already uses AMD's chips in its Aptiva line.

Hewlett-Packard will power its business-class Vectra and Brio lines with the 366-MHz and 400-MHz chips. The low-end HP Brio is loaded with a Celeron 366-MHz processor, 4.3GB hard drive, 32MB memory, and 2MB video card for $842. For an extra $297 you can upgrade to a Celeron 400-MHz chip with a CD-ROM drive, bigger hard drive, and more memory.

Compaq introduced new Celeron machines in two product lines. Its Celeron-equipped retail Deskpro business computers start at $1089, and the Prosignia products start at $1299, including a 17-inch monitor.

Toshiba announced a 366-MHz Celeron machine into its business line of computers and promises 400-MHz machines will be available February 22. Prices begin at $999, not including a monitor.

Too Little, Too Late?

Intel's Celeron chip still faces an uphill battle, says Kevin Knox, analyst with the market research firm Gartner Group of Stamford, Conn.

Intel is still battling poor performance reviews of its initial Celeron chips. The company has substantially upgraded the chips' performance since then. But the company has had difficulty convincing quality-conscious businesses to buy Celeron systems, Knox says.

"Celeron has been getting legs over the past couple months," Knox said. While Intel has grown its market share, Knox and other analysts still question whether Intel can stop AMD and Cyrix from eating away at its margins.

Intel says it will announce a 450-MHz Celeron chip later this year. AMD says it will release its next-generation processor, K6-3, early this year.