Intel speeds up Celeron strategy

Intel sped up its sub-$1,000 (£600) PC strategy Monday by releasing a 433MHz Celeron chip nearly three months early.
Written by ZDNet Staff, Contributor

The chip maker also said it will unveil a faster version -- widely expected to run at 466MHz -- next quarter. "We are trying to be as aggressive as we can with the sub-$1,000 price," said Ron Peck, director of Intel's "Value PC" group. "Our strategy is driven by a market that wants [faster Celerons] and the fact that we can deliver them quickly."

The company needs some life at the low-end of the PC chain. Intel's share of the sub-$1,000 market is down to historically low percentages, thanks to a number of major direct and retail PC sellers offering computers built on chips made by competitors such as Advanced Micro Devices Inc.

With the latest chip, Intel now offers Celeron processors at 433, 400, 366 and 333MHz speeds, each with 128KB of onboard secondary cache for speeding applications. A year ago, the Californian company held a 73 percent share of the sub-$1,000 PC market, according to research by market watcher ZD InfoBeads.

That share fell to 20 percent when AMD's game-oriented K6-2 chip grabbed a hefty bite of the market and chip maker National Semiconductor Corp. -- parent of Cyrix Corp. -- slashed prices to unheard of levels. "We haven't seen a whole lot of success with the Celeron chip in the low-cost market," said Matt Sargent, industry analyst with InfoBeads, a subsidiary of ZDNN publisher Ziff-Davis Inc. "Customers are willing to sacrifice a chip's brand name and go for cheaper AMD and Cyrix processors."

Market researcher PC Data had different numbers, but the gist was the same: Intel fell behind. While Intel's Peck called the market "a fairly small piece of the overall pie," it is quickly becoming the lion's share of the consumer market. Market researcher International Data Corp. predicts that sub-$1,000 PCs will account for more than 41 percent of the consumer desktop PC market in 1999. "People can do a lot of stuff with a $1,000 PC, so why would people want to buy a more expensive machine?," asked Schelley Olhava, analyst with IDC. "emachines has shown very successfully that price matters more than brand."

emachines Inc. burst onto the PC scene at the end of last year with models costing $399 (£250). Still, with Sunnyvale, California-based AMD experiencing production problems with its successful line of chips, Intel could win over possible PC makers by default. Intel's Peck would not reveal its sales latest information, but said Celeron sales have been growing on a worldwide basis.

Perhaps more than Intel's new processor speeds, the change in Intel's terms for the sub-$1,000 PC segment are a telling clue into the company's dedication to the market. At one time, sub-$1,000 PCs were denigrated by Intel as the "basic PCs" market, or "segment 0," in attempts to highlight how underpowered many of the low-cost PC were.

Since the New Year, however, Intel has turned over a new leaf, calling the cheaper computers "value PCs." Peck says the company is now in for the long haul. "I don't think this is a sprint at this time, it is kind of a marathon," said Peck. "The companies that can put technology into the sub-$1,000 PC market over a period of time will eventually win."

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