PENTIUM 4 LIKELY TO BE CHEAPER THAN EXPECTED

October 27, 2000

COMMERCIAL NEWS

San Diego, CALIF. — Michael Kanellos reports that the Pentium 4 will debut at a fairly low price next month, as Intel battles increased competition in the PC chip market.

The 1.5-GHz Pentium 4 will come out at $795, according to various sources, while the 1.4-GHz version of the chip will emerge at $625. The price applies when purchased in quantities of 1,000. While the exact price could change, sources have said the final price will be close to the above figures, which are lower than Intel’s usual introductory price for new processors.

Consumer computers containing the chip will cost around $2,000, not including monitor, said one computer manufacturer. In addition, Intel will offer rebates of around $70 to computer makers that couple the chip with Rambus memory and the Intel 850 chipset. Initially, computer makers will have no choice but use the 850 chipset and Rambus memory.

Intel would not comment on the Pentium 4 prices, but a representative for the company acknowledged the Rambus rebates.

The Pentium 4 will mark an evolutionary step in Intel’s product line and will likely allow the company to once again take the coveted “world’s fastest desktop chip” title from rival Advanced Micro Devices. The chip embodies an entirely new design, or micro-architecture, that will serve as the basis for several generations of chips in the future.

The last time Intel introduced a new micro-architecture was in 1996, when the Pentium Pro came out. The chip overall is designed to improve how tasks such as multimedia performance and encryption are handled.

The release date is expected to be Nov. 20, sources have said, although several demonstration systems will be displayed at the Comdex trade show starting Nov. 12.

The introductory price of the chip is a further indication of a shift in Intel’s pricing strategy, prompted in all likelihood by competition from AMD. Typically, the fastest Intel processors come out at prices closer to $1,000. The company released the now-recalled 1.13-GHz Pentium III in July, for instance, for $990 in volume quantities. The high price is grounded in the fact that demand is high while supply is low at launch.

Supply will be limited on the Pentium 4 at launch. Intel will produce “hundreds of thousands” of the processors this year, Paul Otellini, general manager of the Intel Architecture Group, said in a conference call with analysts earlier this month. But “hundreds of thousands” is not a great number in the overall market.

The chip has also been noted for its size. At 217 square millimeters, the Pentium 4 is twice as big as the Pentium III, a factor that limits how many Intel can produce on its production line. Analysts have said this factor, ordinarily, would lead to higher, rather than lower, prices.

The big change for Intel has been the level of competition. With the Athlon processor, AMD has managed to surpass Intel in terms of desktop processor performance and has gained considerable brand recognition among consumer PC buyers. And AMD, which operates on lower profit margins, sells its chips for less. A 1.2-GHz Athlon officially sells for $612 in volume, although it can be purchased for less. A 1.1-GHz Athlon goes for $460 officially, but also sells for less.

If anything, should Intel come out with the chip at the prices listed above, it will be an indication that the company is serious about selling the chip, noted Nathan Brookwood, an analyst at Insight 64. In the past, Intel has used high introductory prices as an indirect way to defer demand. Brookwood added that it “is likely” that Intel will introduce the chip at below $800.

Which chip – the Pentium 4 or the Athlon – will provide superior performance? It depends on the application. Overall, analysts have said the Pentium 4 could outperform Athlon on multimedia functions, while Athlon could have an edge on standard office applications.

While the Athlon has become a familiar quantity, comprehensive benchmark measurements for the Pentium 4 have yet to emerge.

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