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Technology Stocks : All About Sun Microsystems
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To: THE WATSONYOUTH who wrote (57025)11/23/2003 8:03:33 PM
From: rudedog  Read Replies (1) of 64865
 
Watsonyouth - the play works something like this - and it's not a completely dumb play, it's a way to get traction to solve the 'chicken and egg' problem of getting systems out to build critical mass.

Intel goes to their OEM buddy HP and says 'both of us need to see Itanium succeed, and to get apps written we need to show some units. How about you do an aggressive seed program, some steep discounting, and basically anything you can think of to move units. We'll help you by providing a very substantial MDF. How substantial? How about 80% of the value of the units you move up to a limit of xxxx?'

HP only has to generate reveune equal to 20% of the street value of the products to come out even. Intel books the 'sales' to HP, and they are real sales. HP talks about units shipped (note they never talk about Itaniums sold), and gets bragging rights for any customer wins.

I have heard estimates of between 60% and 80% for the percentage of 'freebies' to revenue units. While that is not unusual for a very early stage product, it is unusual for one which has been in the market as long as Itanium. But then one could argue that I2 is the first 'real' Itanium...

In any event, I would be surprised if total units placed under any scenario exceeded 30,000 units. Some watchers place the number much lower. A few venture up around 40K units. But no one I have spoken with takes the 100K number seriously, and the general sense is that Otellini was talking about total Itanium shipments ever, and the remark was taken incorrectly as either I2 shipments or as Itanium this year. I have not tried to track down a replay of the actual comments that sparked this discussion to try and understand what was really said.

But my purely speculative estimate for Itanium in 2003 would be maybe 30K units with maybe 10K sold for profit in 2003...
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