Rande...
Intel's Old News
22-Sep-00 00:06 ET
[BRIEFING.COM - Gregory A. Jones] In Monday's brief, Robert V. Green noted the value of occasionally taking a step back from short term stock price movements and considering the big picture. While it will be hard not to focus on the carnage that Intel's (INTC) warning will produce on Friday, a big picture view is once again necessary, and will demonstrate that Intel's problems, while certainly not limited to Intel, are even more certainly not shared by the entire technology sector.
It has been two years since we first said it and it's still true -- the technology paradigm has shifted from processing power to bandwidth. Intel's warning last night is yet another reminder.
As is often the case in the stock market, the fact that Intel's stock price continued to move higher even after we first wrote about the paradigm shift prompted many to question our view. But lost in the focus on Intel's rising stock price was an acknowledgment that the stock prices of bandwidth purveyors such as Ciena (CIEN), Nortel (NT), and JDS Uniphase (JDSU) were vastly outperforming Intel.
There was and still is a very good reason for that outperformance. Processing power has risen to the point where growth in supply does exceed growth in demand. Early in the processor paradigm, the demand for processing power rose even more quickly than the soaring supply of processing power. But as with all technology revolutions, this period in which supply creates its own demand is not limitless. Somewhere between 200 and 400 mhz chips, the supply of power moved beyond the computing public's ability to put such power to use.
And then came the Internet. Instead of massive power on the desktop, users suddenly demanded massive bandwidth to connect to other desktops. The shift started, and the era of Intel as a technology leader ended. Instead of producing a supply of processing power that would creates its own unlimited demand, Intel was just another commodity technology producer. The chip wasn't displaced by a new technology, it simply matured to the point where the growth rate in demand for ever more powerful processors began a slow but inexorable decline.
Bandwidth is now the driver of the technology revolution. We are still in the early stages of the bandwidth paradigm -- the stages in which the soaring supply in bandwidth is being outstripped by demand. Out go Intel, Microsoft (MSFT), Dell (DELL), and a host of other standard-bearers of the processor revolution, and in come Sycamore (SCMR), Ciena (CIEN), and their bandwidth brethren.
Those who look at Intel's warning as a dark omen that the end is nigh will miss the fact that the end started a long time ago. Look at the stock prices of the aforementioned companies that were leaders in the processor revolution -- they have hardly been leading the technology sector.
The torch was passed a long time ago. If this was Nortel or JDS Uniphase or Sycamore that was warning, then you would have a story. But Intel?! We should be surprised that it didn't happen sooner.
We can't say with any certainty how long the post-Intel carnage will last, but we will say that the Intel warning is not an indication of an insidious disease eating at the technology sector. Technological paradigm shifts, while problematic for the standard-bearers of the old guard, are actually a clear indication of health for the technology sector. Paradigm shifts reflect the best attributes of technology -- its dynamism. Just as Wintel rose from the ashes of IBM in the 1980s, so too can the bandwidth companies rise from the ashes of Wintel in the 2000s.
Greg Jones - gjones@briefing.com |
