AMD slashes prices on processors

Chip maker Advanced Micro Devices Inc. revealed steep cuts of up to 45 percent in its line of PC processors on Monday.

The cuts leave the company's most expensive processor -- the 450MHz K6-III -- at a price of $220 (£134), almost half that of its former $397. "We do what is required to make sure our products are compelling to customers," said Scott Allen, spokesman for the beleaguered chip maker.

The prices on AMD's other chips fell from 18 percent to 29 percent.

The price cuts will yet again make it hard for AMD to hit its stated goal of an average selling price of at least $100. The company has failed to meet that profit-boosting goal ever since it released the K6 processor series, and the average selling price right now for its chips is about $80.

That's because Intel's Celeron just makes too much sense at the low end, said Peter Glaskowsky, senior analyst at chip technology watcher MicroDesign Resources Inc. "K6-2 and K6-III are definitely competing with the Celeron despite what AMD would like," he said. "If people have the money, they will go with the Intel Pentium III."

AMD's current prices place its K6-2 processors slightly below that of Intel's Celeron chips, while the K6-III is slightly below the price of the Pentium II and III. Also today, Intel, as expected, launched a faster Pentium III processor that allows personal computers and larger server machines to more easily handle functions such as Web audio-video. The latest Pentium III processor -- the brains in high-end PCs -- runs at a speed of 550MHz, up from the 500MHz Pentium III chip Intel launched in mid-March.

PC makers ranging from Compaq Computer Corp. to Toshiba Corp. and Intergraph Corp. said they were using the 550MHz Pentium III chips in a range of consumer and business computers. An advantage of the faster processor is its ability to more easily handle the 3-D graphics, video and audio being piped into computers over high-speed Internet connections.

The 550MHz chip also contains new instructions to handle Internet audio-video broadcasts and speech recognition systems, Intel said in a statement.