Intel Less Aggressive In Latest Price Cut

Earlier this month, Intel signaled it would put the brakes on the furious price cuts that prevailed much of last year. So in its latest round of price-cutting, Intel slashed prices on its less-expensive offerings, the Celeron 1.3GHz, 1.2GHz, 1.10AGHz and 1.0AGHz processors, but didn't cut prices on its Pentium 4 line.

Ed Nielsen, owner of I-40 Computers, Albuquerque, N.M., said the Intel price cuts help his business in general but much of his strategy revolves around simply finding the "sweet spot" in the Intel product line. The most popular chip for systems he's currently building is the Pentium 4 1.7GHz, which sells for about $195, he said.

"The 1.6GHz [chips are only $10 less, while the 2.2GHz Pentiums are $400 or $500 more, and typically customers don't even get those [because of the price difference," said Nielsen. Intel's price cuts simply shift the sweet spot for end users, he said.

"If they do another price cut in a month, the 1.8GHz [chip might be the good one," he said. "Eventually Intel gets so squeezed on its prices that you can go up two or three processors for $30, and after that, it's a $200 or $300 difference."

Ron Kramer, vice president and COO of All Computer Solutions, a white-box builder in Petaluma, Calif., said Intel price cuts won't affect his business "as long as they keep discounts level between us and the branded vendors." So far, Intel has done just that, he said.

In 2001, Intel cut processor prices almost every month, sometimes slashing those prices in half, a strategy aimed at helping the vendor regain market share from rival Advanced Micro Devices and accelerating Pentium 4 adoption.