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Politics : Formerly About Advanced Micro Devices
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To: Fred Fahmy who wrote (64805)7/12/1999 12:54:00 AM
From: Kevin K. Spurway  Read Replies (2) of 1580007
 
Re: "no one really (except perhaps Scumbria) believes that AMD can destroy Intel "

Maybe not destroy Intel per se, but maybe destroy Intel as-we-know-it? As in monopoly prices, huge margins, unbelievable market share, segmentation strategies that border on the absurd, etc.

Your concern over exactly this possibility explains your presence on this thread.

Re: "I know exactly what predatory pricing is....and it's not Intel cutting prices to stay in line with AMD."

As far as Intel cutting prices to stay in line with AMD--this really is absurd. Intel sets the prices in this market. Practically speaking, it's pretty simple. AMD can ONLY sell K6 chips at some discount to Intel. Why? (1) The K6 is underperformed by Celeron clock for clock in floating point, therefore it is a less capable chip, which people clearly will only be willing to buy at some discount. (2) Intel has successfully established a brand name which has some value in the market. If AMD wants to sell even one chip, it's going to have to price it lower than Intel's closest competitor. That is a FACT. Now, Intel has gone out and priced its chips where is is unlikely its earning an economic profit. It's quite possible that Intel is even selling chips below the total (not average or marginal) cost of production. Given this, it's pretty obvious why AMD is swimming in red ink. There's really nothing illegal or even unethical about Intel's tactics, either. It's just interesting that there are many industries where an unbranded, higher cost producer still maintains decent margins and levels of profitability (albiet lower than the leader) because the leader has chosen to maximize profits for its shareholders by setting prices in such a way that it earns economic profits across its entire product line. Intel has chosen an alternative course of action. It may or may not come back to bite them in the *ss. The next twelve months will tell.

Have a nice day.

Kevin
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