300-MHz Pentium II box for $1,999

Computer prices took another dive this week as a major retailer started selling 300-MHz Pentium II systems for under $2,000.

One of the lowest prices to date on a system with Intel's fastest chip, the system is apparently coming to market with the approval of the Santa Clara, California-based chip manufacturer. Intel, according to sources and Computer City employees, is the contract manufacturer on the project.

Computer City this weekend released the Wingen 5830, a 300-MHz Pentium II for $1,999, one of the first instances of an outlet selling a fully-loaded consumer PC for under $2,000. Typically, 300-MHz Pentium II systems start at about $2,500 and go up from there.

Despite the low price, the 300-MHz Pentium II Wingen, which is Computer City's house brand, is no slouch when it comes to components. The machine comes with 32MB of memory, a large 6.4GB hard drive from Western Digital, a 24X CD-ROM, and a 56-kbps modem, according to Computer City sales representatives.

Certain Computer City outlets are bundling the computer with a 17-inch monitor, an Epson stylus printer, and a sub-woofers and selling the total package for $2,699. The prices started as a weekend special but are continuing in most outlets, depending on stock, sales representatives said.

Computer City corporate officials were not available for comment. Store sales representatives, however, said that fact sheets stated that the Wingen and its motherboard are both made by Intel. Analysts confirmed the same.

Shrinking prices have been one of the dominant themes in the computer industry all year. Prices on memory, hard drives, microprocessors and other components have continuously dropped. Likewise, prices for completed systems have plummeted. Sub-$1,000 systems, a rarity a year ago, now come from nearly every manufacturer.

Similarly, the Pentium II has become a processor for sub-$2,000 computers sooner than any previous Intel processor. The Pentium II, released this past April, moved into systems costing under $2,000 within two quarters of its release, while it took the Pentium chip approximately two years to hit the same price point.

This past July, the 300-MHz Pentium II was selling for $1,900 in volume through wholesale, nearly the price of the entire system offered by Computer City.

Some price cuts, including some of Intel's price actions, have occurred as a deliberate attempt to preserve market share, but some discounting has been a way to get rid of excess inventory. Memory manufacturers all year have been saddled with large inventories, despite high demand for their parts. High inventories likewise have driven the price of hard drives to $99.

Some analysts believe that Pentium II price cuts have occurred because of lower-than-expected demand for the new chip--though Intel maintains otherwise.

Adam Grossberg, an Intel spokesman, confirmed that Intel manufacturers computers for its business partners, but would not disclose whether the company was making computers for Computer City.

Typically, in these situations, Intel may perform nearly all of the design and manufacturing tasks on behalf of a computer vendor during the first generation of a model. Later, the business partner may take over the some of the design aspects, such as selecting the components.