Intel says the extra cache gives the new version a performance increase of 16 percent over the original 3.06GHz Xeon. With additional power like this, the chip could allow computer manufacturers to boost their single and dual processor workstations and lower-priced servers.

The large-cache 3.06GHz Xeon lists for $690 and is now the most expensive chip in the lineup of Xeons for single-processor or dual-processor computers. As part of Monday's launch, Intel dropped prices on the rest of the lineup by as much as 34 percent. Its regular-cache 3.06GHz Xeon dropped from $690 to $455, for example--a price reduction of 34 percent.

The company also cut the price of its 2.6GHz, 2.66GHz, 2.8GHz and 3GH Xeon chips by between 10 and 34 percent. The chips now sell for between $234 and $433, when purchased in 1,000-unit lots.

Intel sells a different flavor of Xeon--the Xeon MP, for servers with four or more processors. Xeon MP chips offer either 1MB or 2MB of cache.