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Intel cranks up P4
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August 27, 2001: 12:47 p.m. ET
New chips break 2 GHz threshold, are priced more aggressively
By Staff Writer Richard Richtmyer
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NEW YORK (CNNfn) - Intel on Monday introduced its fastest-yet PC microprocessors and priced the new chips to move.
Characterizing it as a "key technology milestone," Intel said it has begun selling a Pentium 4 processor which operates at 2 gigahertz, or 2 billion cycles per second. The company has priced the new chips, expected to be available in computer systems as early as this week, at $562 in 1,000-unit quantities.
At the same time, Intel introduced a Pentium 4 processor that operates at 1.9 GHz. Those chips are priced at $375 in lots of 1,000.
To make room for the new chips, Intel (INTC: up $0.83 to $27.96, Research, Estimates) slashed prices on its existing Pentium 4 chips, the latest in a series of aggressive pricing moves it has made in an effort to thwart market share gains being made by rival Advanced Micro Devices (AMD: up $0.26 to $13.55, Research, Estimates).
The company more than halved the price of its 1.8 GHz Pentium 4 chips, which are now priced at $256, down from $562 last week. Intel cut the price of the 1.7 GHz version of the Pentium 4 to $193 from $352. At the same time, it cut the price of the 1.6 GHz version to $163 from $294.
Click here for a full list of Intel's processor prices
Intel and AMD regularly reduce prices on their chips as they make incremental speed advances and obtain more efficiencies in manufacturing. However, the two companies in recent months have been locked in a bitter pricing war.
AMD runs a distant second to Intel in the PC processor market, garnering roughly 20 percent of the market. Still, the company's Athlon and Duron brand processors have been steadily pecking away at Intel's market share.
To counter the growing competitive threat, Intel has been aggressively pricing its Pentium 4 processors. To put the magnitude of the price cuts into perspective: When Intel introduced the Pentium 4 less than a year ago, the 1.5 GHz version was priced at $819.
Executives at AMD have vowed to match Intel's aggressive pricing moves, and the company has been slashing prices on its highest-performance processors as well. Currently, AMD is selling its fastest Athlon processors, operating at 1.4 GHz, for $130, down from $253 last week.
Click here for a full list of AMD's processor prices
While the pricing war has left scars on each company, AMD has been hit a little harder than its much larger, deep-pocketed rival. Last month, executives of AMD said they will likely post a third-quarter loss in large part due to increased pricing pressure.
The current consensus estimate of analysts polled by First Call is for AMD to log a loss of 8 cents per share during the quarter. Expectations recently had been for the company to turn a profit of 11 cents per share.
Executives of Intel also have warned of lower profits because of deteriorating processor prices, but the company still is expected to post a third-quarter profit of 10 cents per share, according to First Call's survey.
With the introduction of its 2 GHz Pentium 4 chips, Intel also widens the lead it has over AMD in the two companies' long-running processor speed race.
In recent years, Intel and AMD have engaged in a fierce battle of one-upmanship as they vied for the title of microprocessor king, with each trying to outdo the other with incremental increases in microprocessor clock speeds.
AMD held the edge for a while, beating Intel the 1 GHz threshold in March 2000.
But Intel gained the advantage late last year when it introduced the Pentium 4, which is based on a whole new architecture, called Net Burst, which is designed to optimize multimedia applications and can handle much higher clock speeds. 
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