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Custom-System Builders: Intel Price Cuts Move Processor Sweet Spot

System builders say Intel's latest price cuts will help them clear out old inventory and should move the sweet spot of the company's processor lineup to the 3-GHz Pentium 4 from the 2.8-GHz Pentium 4.

After acknowledging inventory imbalances, the Santa Clara, Calif.-based chip maker earlier this week slashed prices by as much as 35 percent for some of its higher-end Pentium 4 processors, including chopping its 3GHz Pentium 4 to $178 from $218. The price of the 2.8-GHz Pentium 4 remained the same at $163. Pricing is based on lots of 1,000 units. Intel's move was not unexpected.

"It's moving out the old inventory, bringing it down to the lowest price level and bringing in the new product," said Robert Schaffer, president of Source Micro, a Randolf, N.J.-based system builder and solution provider. "Our products end up in SMBs. [Those customers] are looking for more of the mainstream than the high-end, cutting edge."

Intel also reduced the price of the 3.6-GHz Pentium 4 to $417 from $637 and dropped the 3.4-GHz Pentium 4 to $278 from $417.

Intel routinely cuts pricing in its microprocessor lines several times a year and, last month, the vendor signaled that it may see a softer pricing environment in some areas as it works to move excess inventory.

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