Tench Re..Hmaly, price wars have always ended up hurting AMD more than Intel. The price war back in late-1998 and early-1999 drove AMD deep into the red. It took Athlon, execution screw-ups at Intel, and red-hot demand to save AMD from bankruptcy. This all happened despite the price war, not because of it.<<<<<<<<<
I disagree. This all happened because of the price war. First off, Intel had to commit resources to develop Celeron to compete in the price war, instead of concentration upon improving PIII, which left Intel vulnerable to Athlon. Secondly by lowering prices so far, Intel developed the red hot demand, which Intel later couldn't satisfy. Thirdly, AMD was much better positioned to win the aftermath, with the new chip and new plant. Intel meanwhile has to commit their resources to Celeron, to satify the low end demand they created, which allowed AMD to clean up on sales and profits on the high end, not to mention the black eye Intel got from not being able to produce. Within a yr. after the price war, AMD was sitting pretty, while Intel was a stumbling colossus.
. At least Intel is making money, which is well above average considering the recession. Once again, this price war is hurting AMD more than Intel.<<<<<<<<<<<
That isn't what Businessweek thinks. Read it and weep.
Barrett's invasion into new markets has been even more dismal. So far, some $4 billion of Intel's more than $10 billion in new investments have produced little. This year, Intel stopped making network servers and routers after some of its biggest chip customers, including Dell Computer Corp. (DELL ) and Cisco Systems Inc. (CSCO ), slapped Barrett's hands for competing against them. In February, Barrett shut down a service for broadcasting shareholder meetings and training sessions over the Web. He shuttered iCat, an e-commerce and hosting service for small and midsize businesses. And he has retreated so far in the information-appliance business that Intel now markets its Web-surfing devices only in Spain. "Certainly, Craig's vision looked a lot more attractive a year and a half, two years ago," sighs board member David B. Yoffie, a professor at Harvard Business School.
EARNINGS DROP. What went wrong? Critics say Barrett has been trying to move Intel into too many new markets, fracturing the company's focus on its core business. To execute on so many fronts, he has decentralized the organization and delegated a lot of decision-making. But getting a workable structure in place has been a challenge. Barrett has restructured the business groups at least three times in as many years, shuffling execs like cards in a deck. Even in the core microprocessor group, a startling 80% of the unit's staff were given new roles in a March shakeup. "Typically, people moving around a lot are not sure where they are going," says one longtime customer. Adds G. Carl Everett Jr., a former general manager of Intel's Desktop Products group, who left the company in 1996: "They're dabbling in everything and overwhelming nothing."
Now, Intel is bracing for its worst financial results since it fled the memory-chip business in 1985. Sure, the entire semiconductor industry is in its worst slump in a decade, suffering from overcapacity and weak demand that will cause global chip sales to tumble 34% this year, according to researcher IC Insights. But Intel will take a bigger hit, because it has failed so far to wean itself from dependence on a slowing PC business. Intel's revenue is expected to decline 52%, from $33.7 billion in 2000 to $25.5 billion this year--the chipmaker's first revenue drop since the 1985-86 tech recession. Profits are falling off a cliff, too, plummeting from $10.5 billion in 2000 to $773 million this year, estimates Merrill Lynch & Co. And it's likely to get worse. <<<<<<<<<<<<<
Intel's has problems. Why do you guys think a price war will solve all of Intel's problems. I have news for you. A price war won't solve all of them. Intel needs to refocus. Intel needs a CEO who is capable of that. Intel needs a CEO who is smart enough to know a price war will increase demand; is smart enough to know engineering is the future of Intel, not marketing; is smart enough to know the customer comes first, not after profits. |
