Intel slashing chip prices Monday.

INTEL will lower its 550MHz Pentium III from $658 to $487, a price cut of about 26 percent, sources said. The 500MHz Pentium III will receive the largest price cut, a whopping 41 percent from $423 to $251, sources said. The 450MHz Pentium III will be reduced by about 21 percent from $230 to $183, and the recently introduced 600MHz Pentium III will stay the same at $669, sources said. Intel will also lower prices on Pentium II chips. The Pentium II 450MHz will be reduced from $230 to about $183, while the 400MHz will fall from $173 to about $163, sources said. All of the listed prices are in 1,000 unit quantities. Intel officials would not comment on it processor pricing. Intel, however, discloses these price cuts to PC makers well in advance. The PC makers use the information to plan their own price reductions and to plan new models based on the new, lower chip pricing. The reductions from Intel mean, for example, that a number of low-cost 500MHz Pentium III desktop models will be available for the upcoming holiday buying season, sources said. Hewlett-Packard Co. and IBM will utilize the price cuts Monday by announcing price reductions on their desktop models, sources said.