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Politics : Formerly About Advanced Micro Devices
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To: survivin who wrote (67299)8/2/1999 10:56:00 AM
From: Charles R  Read Replies (1) of 1579025
 
survivin,

<Charles, was it you who asked for a definition of predatory pricing?

Gwennap .." Even as it cut prices, AMD began losing business. Traditionally stingy Intel began offering big discounts off its already low Celeron list prices--anything to get a design win away from the competition. OEM sources report buying Celerons for as little as $40 earlier this year, despite a minimum list price of about $65."

This article gives a nice summary of what went wrong in the first half. Also, Gwennap suggests it would be suicidal for intc to continue their price slashing given the limited supply of athlon's coming in the 2nd half. >

I don't think I ever discussed predatory pricing on this thread. I do think Intel was aggressive on pricing to their detriment but I have never subscribed to the theory that they did something illegal.

In any case, assuming Gwennap is right about Intel selling Celerons at $40 last quarter, confirms two things I believe:
- Intel's marginal costs for Celeron are under $40
- Intel's OEM prices and list prices have little correlation in a competitive market. Someone can correct me on this but I don't think the list for Celeron went below $60 last quarter - which would mean that they were selling Celerons for about 50% discount under list - in the semiconductor industry this is rare, except in commodity business. Normally I expect this to be in the 15-30% range.

I share Gwennap's views about Intel having to lose a lot more than AMD with price cuts but it is to be seen if Intel sees it the same way - a change in price war tactics on Intel's part going forward would be a divergence from their actions Q2.

Chuck
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