About Intel's Pentium III

Pentium III plugs holes for Intel, not for IT Intel Corp.'s Pentium III may solve more problems for Intel than it does for IT managers. At a Preview Day event next week (Feb. 15, 1999) in San Jose, Calif., Intel plans to show off the new processor for the first time in public. About 200 OEMs and software developers will be on hand with new PCs and applications that take advantage of the Pentium III's new graphics-oriented instruction set. Intel (INTC) plans to ship the Pentium III the following week. The Pentium III, which Intel is touting as its most important product launch of the year, offers enhancements geared more to consumers, as the Santa Clara, Calif., company tries to persuade buyers of sub-$1,000 PCs to go back to buying pricier systems. PCs using the Pentium III are expected to cost about $2,000. Intel and PC makers may have a harder time persuading IT managers of the chip's worth. "I don't see buying [Pentium III PCs] until they're in the price point we're looking at. Right now, we're paying about $1,200 per machine," said Jeff Johnson, network administrator at Triple S Plastics Inc., in Vicksburg, Mich. "The only nice thing I see about Pentium III is that the price of Pentium IIs may drop more quickly, once Intel ramps up production," Johnson said. Faster 3-D processing The Pentium III will offer a host of new graphics-enhancing capabilities, thanks to new SIMD (single-instruction, multiple-data) extensions -- aka Katmai New Instructions -- which enable faster three-dimensional graphics processing. The instructions will liven up the Web and offer the ability to view animated Web pages that integrate 3-D, audio and video. The instructions should also boost performance of applications such as Office 2000, which will be optimized for the processor. Officials at graphics chip maker S3 Corp. said the Pentium III improved the performance of applications such as 3-D graphics by as much as 30 percent. Along with the graphics capabilities, the Pentium III offers higher performance through a bump in clock speed and the addition of on-die, or integrated, cache. All this, by Intel's own admission, may be more appealing to consumers than it is to corporations. "You don't need this kind of additional capability [increased graphics processing] unless you're playing games," said Kimball Brown, an analyst at Dataquest Inc., in San Jose. "To me, it comes down to clock speed, and that's why people would want it." Bigger IT concerns But to many IT managers, raw processing speed is not all it's cracked up to be. They're more concerned with removing performance obstacles in the PC system bus, memory and graphics subsystems. "I have not given [the Pentium III] much thought, since processing power is not the greatest bottleneck we are currently facing with our software applications," said John Weaver, vice president of IT at Elektra Entertainment Group, in New York. Weaver may want to wait until Intel ships its 820 chip set, code-named Camino. The Pentium III chip set, due in the second half of this year, offers a 133MHz system bus, support for as much as 1GB of Direct Rambus dynamic RAM, a four-speed advanced graphics port, which is a separate bus for graphics processing, sources said. Even some PC makers are underwhelmed by the Pentium III. "We're treating this more as a speed bump than anything else," said an official at Dell Computer Corp., in Round Rock, Texas. "There aren't as many ISVs out there to take advantage of [SIMD] in our space." While the Pentium III may not suit IT managers right now, the new chip will likely solve some strategic problems for Intel. For one, the Pentium III will sell for about $580 and $825 for the 450MHz and 500MHz versions, respectively, sources said. By comparison, the 450MHz Pentium II sells for $562, while Intel's 400MHz Celeron is now $133. While Intel officials wouldn't comment on specific Pentium III pricing, they did acknowledge that the new chip could contribute to improved gross margins next year. The Pentium III will also help Intel further segment its product line. Because the Celeron and Pentium II offer similar performance, Intel has had a tough time convincing users that the Pentium II is worth the premium buyers pay for it. The Pentium III, on the other hand, offers distinct advantages. "There will be applications that only work well with Pentium III. One of them is speech recognition," said Mike Aymar, an Intel vice president and general manager. Tightening the screws on AMD Almost as important for Intel, the Pentium III will put more pressure on the competition. After ironing out its strategy for low-end PCs with more frequent chip launches and aggressive price cuts, Intel had competitor Advanced Micro Devices Inc. crying uncle in a recent warning by the Sunnyvale, Calif., company of an earnings shortfall. At the high end, the Pentium III could blunt AMD's new K6-3 chip, a 400MHz processor that features 256KB of integrated Level 2 cache. The K6-3 is expected to debut on Feb. 22, 1999. While the Pentium III may get off to a slow start in corporate circles, it's only a matter of time before it catches on, believes Achim Kuttler, a product marketing manager in Hewlett-Packard Co.'s Commercial Desktop Computing Division, in Grenoble, France. "It's a function of time and a function of price," Kuttler said. "The new Pentium processors certainly will become important in the corporate space over time."

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