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Strategies & Market Trends : Value Investing
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To: jeffbas who wrote (7755)7/14/1999 11:08:00 AM
From: Michael & B.Anne  Read Replies (1) of 78486
 
Cause seems unrelated to effect on predicted decline in chip earnings. ... Am I missing something here?

IMO perhaps yes

Until we have a major technology insertion in the form of
very fast communications bandwidth ... e.g., fast cable across
the country or fiber , current cpu speeds are fast enough
(within PC's) for

a) anything coming in over the "wire"
b) all current sw applications

(not really all: flight sims (games)
and simulations could use more MIPs --
but they are hardly large markets.)

So there is no trading up ... (any of you need a 500 Mhertz CPU?)
and therefore future marketing efforts require expanding the base
-- selling existing and new products to new people

sell current products -- -- -- selling new products
to existing customers -- -- -- to existing customers
(easiest "cash cows") - -- -- (best growth position)

selling current products -- -- -- selling new products
to new found customers - -- -- to new customers
(mrk & sales cost more - -- -- the dreams of which IPO's are made

given that the market is saturated for existing customers
you must expand in the harder (more costly) new customer sectors.
-- where in the computer industry making money (in these
expansion sectors) requires a growth rate (historically) of
30+/yr merely to offset sales and manufacturing start up costs.)

Further (as Intel), you must do this with a product that costs
less each passing day and against a re emerging competition that
has neither the need nor the desire to make the same margins
required of you.

Further, you have history against you. No one has ever been
able to move their organizations as fast as the decline line
required. I give witness to the demise of Digital (DEC) and
the near demise of IBM (re branded as a service company)

And if the history of computing is insufficient. Consider the
advent of previous "civilization changing" technologies ..
airplanes, rail, autos .. and refer to the comments of no
less an authority than Buffett on their lessons and the
similarities to today.

Finally you have to fight against god (whatever that means) --
in the world of the future computers will always cost less
(CPU functions can be replicated today in protein molecules)
and bandwidth will be free.

regards
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