Intel Corporation (INTC) Message Board

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Technology Stocks : Intel Corporation (INTC)

INTC 41.14

-3.4%

Jan 8 3:59 PM EST

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To: The Vinman who wrote (58867)	6/26/1998 7:23:00 PM
From: Barry Grossman	of 186894

Vinman, <<It sounds like you are making the argument that INTC is dropping prices to drive out the competition>> I didn't say that. The argument I am making is this: Intel has MOST of the worlds capacity for making microprocessors for desktop, home, and notebook computers. Their newest capacity is aimed at servers and workstations, at least initially. Intel has the LOWEST COST per unit of sales. Intel needs to keep the plants as busy as possible. New capacity is constantly coming on stream utilizing newer technology (currently changing over to .25 micron) which both increases the capability of the product produced and decreases it's unit cost. Intel needs to constantly stimulate the market to keep it growing at a rate which will utilize the capacity they've put in. This is why they can lower prices with only a slight effect on total margins. The PC makers are ONLY RESPONDING to lower chip prices and lower overall component prices by lowering their own prices. They do this FOR COMPETITIVE REASONS. They could put the savings in their pockets but don't. Instead, in a battle royal for market share, they choose to sell PC's competitively against each other. In the segments where there are more options available to the PC maker, the competition is greatest. <<box makers are getting killed with cheaper ASP's and INTC has no choice but to cut prices>> There are many box-makers. The winners, the one's with the highest profits and greatest ability to survive, will be those with the lowest costs to get the product to market. Internal efficiencies will determine who has the lowest costs - and who survives and who doesn't. <<if you look at the numbers from recent quarters they are experiencing lower rev's, which means margin pressures are a bigger negative than the positive of increased demand>> Comparing numbers quarter to quarter in this game is essentially meaningless. Look at the year to year picture if you want to see what is happening. You know, you can't see the forest for the trees if you only look at quarters. Barry

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