It seems these days as if Intel would prefer phasing out the Pentium III immediately in favor of the Pentium 4. Intel is indeed increasing its efforts to make the Pentium 4 a worthy successor of the highly successful Pentium III. However, Intel's new flagship CPU is having a rather hard time to beat AMD's Athlon or the Pentium III, especially when operated at equal clock speed. Pentium 4's other flaw is the fact that is has to be combined with RDRAM memory right now, which drives the system costs into the sky if you need more than 128 MB main memory. Lots of Pentium 4 CPUs are sold in bundle with RDRAM memory to make the package more attractive. Additional memory has to be obtained separately; brand types usually start at $ 200 per 128 MB RIMM.
Maybe you still remember the launch of Pentium Pro in 1995. At that time Pentium Pro was also unable to outperform a Pentium MMX.
Today, there are millions of Slot-1 and Socket 370 based systems in operation, working between 233 and 600 MHz on the average. A vast part of their owners do not want to replace the whole system and prefers a processor upgrade instead. In addition, SDRAM memory has become incredibly cheap, allowing most users to finally equip their machines with a decent amount of RAM. Why should anyone throw away a Pentium II system if he can most likely upgrade it with a faster CPU?