A magnetic component having intermixed first and second regions, and a method of preparing that magnetic component are disclosed. The first region includes a magnetic phase and the second region includes a non-magnetic phase. The method includes mechanically masking pre-selected sections of a surface portion of the component by using a nitrogen stop-off material and heat-treating the component in a nitrogen-rich atmosphere at a temperature greater than about 900.degree. C. Both the first and second regions are substantially free of carbon, or contain only limited amounts of carbon; and the second region includes greater than about 0.1 weight % of nitrogen.
STATEMENT REGARDING FEDERALLY SPONSORED RESEARCH & DEVELOPMENT
 This invention was made with Government support under contract number DE-EE0005573, awarded by the United States Department of Energy. The Government has certain rights in the invention.