US Special Report: Has Intel goofed with Celeron?

Intel's battle plan for introducing new processors is fairly straightforward: Rev up the marketing machine, call in a media blitz, and roll out several platoons of supporting PC makers.

Those PC makers, however, will be breaking rank in San Francisco tomorrow, when Intel announces Celeron, a pint-sized Pentium II for the sub-$1,000 (£600) market.

"Right now we don't have any (Celeron-based) products planned for the immediate future," said Andrew Hayden, a spokesman at IBM's consumer division which makes several sub-$1,000 Aptiva PCs. "We are not sure where this [processor] really fits in our product line."

IBM is not alone in snubbing Intel. Dell, Hewlett Packard, and Gateway 2000, have also decided not to show Celeron products at the Wednesday event. All four companies are still evaluating the chip, according to sources within the firms.

Packard Bell and NEC will announce a product, but will not ship it until the Autumn.

The lack of support suggests that Celeron will, at the very least, not hit the market with a bang.

Why are the big PC makers shunning Celeron? Intel's new processor is a Pentium II without the built-in fast memory, known as Level 2 cache, which speeds the PII processors. That lack of cache means slow performance which gives the big PC makers pause, particularly if they already make PCs powered by rival chips from AMD or Cyrix.

In fact, US chip watcher, MicroDesign Resources, has predicted the performance of the Celeron will be worse than a Pentium MMX at the same clock speed. This is a major problem for vendors who want more speed, not less.

In fact, sources speculate that Intel may have paired up the Celeron announcement with the release of its powerhouse 350MHz and 400MHz Pentium II processors to make sure the major vendors showed up.

"We will have products there, but not based on the Celeron," said Denise Smith, spokeswoman for Micron Electronics in the US.

Intel denied support would be weak for the new processor. "We expect some of those PC makers [mentioned above] to be showing new computers" based on Celeron, said Manny Vara, an Intel spokesman.

Intel refers to the sub-$1,000 PC as "basic PCs," but the market numbers are anything but. Sales of sub-$1,000 computers made up almost 50 percent of PCs sold in stores during the month of February, according to computer market research firm ZD Marketing Intelligence in the US. Some would rather use the current Pentium MMX processors, which are both cheaper and faster than the Intel's emasculated Pentium II processor. "We're resisting the move to Celeron," said a source at one PC maker, who asked to remain anonymous. "We need a full-featured product to give to the sub-$1,000 market and we can't do that with the Celeron."

Some analysts believe Intel will quickly replace its initial Celeron with a processor code-named Mendocino, which integrates a cache on the chip, giving it much better performance than Celeron. It wouldn't be the first time Intel had entered a new market with a processor that did not outperform its predecessors. "The very first version of something isn't always a leap forward," said Dean McCarron, principal analyst at semiconductor market watcher, Mercury Research in the US.

Cyrix and AMD see Celeron as a misstep, continuing a low-end trend that has already given them a leg up in the market. In January, sub-$1,000 PCs using AMD processors took the top two spots in the retail sales charts, blasting by Intel-based PCs. Cyrix has also done well in the low-cost PC category.

Cheaper processors give customers the ability to add better hard drives, main memory and graphics boards to their computers, said Stan Swearingen, senior director of product marketing at Cyrix, a subsidiary of National Semiconductor Corp. "Computers can perform radically differently, depending on how fast you make the hard drive, memory and graphics card," he said. "Intel wants you to believe that megahertz matter, they really don't."