Intel Investors - Intel's Dominant Market Position Still Looks Solid
A recent article off the TechWEB indicates that Intel's dominant position as the premier CPU supplier will be in tact despite the "presumed threats" by AMD & Cyrix.
Please read the attached article.
Paul
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techweb.com
Jul 13, 1997
July 14, 1997, Issue: 745
Section: Distribution Census 1997:Hardware Distributors
Clone Suppliers Steer Steady Course -- Alternative
processors and budget PCs have little impact on
thriving clone business.
By William Terdoslavich
Hardware distributors, the longtime mainstay of the clone market, are remaining surprisingly calm amid the sea changes at
work in the PC industry.
With alternative Pentium-class processors on the horizon and brand-name vendors aggressively cranking out budget PCs, he supposed demise of the clone is once again at hand. And once again, its death is being greatly exaggerated.
If vendors are hoping to use lower-cost processors and systems to put a dent in the clone business, they are going to run into some tough competition from dozens of clone-making distributors that have weathered plenty of storms in the past.
Indeed, the ability of these distributors to adopt new technology and adjust to market changes is a key competitive advantage.
"Change is never going to stop. Change is a constant in the computer industry," said Gary Brothers, executive vice president
of D&H Distributing Co., Harrisburg, Pa. "We constantly do what we need to do to tweak the business."
D&H is among the larger hardware distributors that supply VARs with components and custom-built systems. The broad-line
national distributor, which also carries software and targets various specialty areas, delivered $450 million worth of PC products last year.
But there are dozens of others. They range from local,
one-warehouse operations that often source from larger
distributors to multiregional distributors such as ASI Corp.,
Fremont, Calif., Supercom Inc., Milpitas, Calif., and Almo
Distributing, Philadelphia, which serve multiple markets from
local warehouses. Broad-lined national distributors such as
Synnex Information Technologies Inc., Fremont, Calif., Liuski
International Inc., Norcross, Ga., and SED International Inc.,
Tucker, Ga., are also major players in the clone market.
The CRN Distributor Census identified 85 hardware distributors,
making them the most numerous of any segment. Collectively,
they captured nearly $8 billion in sales in 1996, or about 20
percent of all U.S. distribution sales, according to estimates
based on the Distributor Census.
Nearly all of the hardware distributors offered configuration
services and were selling components, such as motherboards
and disk drives. More than 50 distributors were building
private-label systems for VARs, the Distributor Census found.
As such, clone distributors were paying close attention to the
emergence of alternative processors, waiting to see if any large
systems vendors make inroads with the processors. If they do,
clone distributors will likely jump on board. But for now, it is an
Intel world.
At ASI, Advanced Micro Devices Inc.'s K6 processor is not yet in
its plans. "We don't have a non-Intel platform," said Fritz
Knochenhauer, product manager for ASI's NSpire systems. "We
don't see resellers demanding a lower-priced AMD or Cyrix
solution."
Hardware distributors could become an entry point for alternative
Pentium processors, much as Liuski helped push AMD's 386
processors into the market a few generations ago. But this time
around, Intel seems to be more firmly entrenched than ever with
clone-making distributors.
Intel is pumping $250 million into its co-op marketing program,
Knochenhauer said, while AMD and Cyrix do not have that kind
of money to pass around.
Almo Distributing, a regional hardware distributor that has
expanded as far west as Colorado from its home base in
Philadelphia, does carry AMD as well as Intel processors and is
watching the market closely. The distributor recently added an
AMD-based model to its systems line.
What AMD's K6 has going for it is the equivalent performance of
Intel's Pentium 166 with MMX instructions, but at a price
differential of about 25 percent less, said Dave Guzzi, vice
president of sales and marketing for Almo's Trademark systems.
But while price advantages will help AMD penetrate the VAR
market, Guzzi said he is concerned about AMD's ability to keep
the channel stocked.
"They have to make sure the manufacturing is straightened out,"
he said. "If the reseller tries to blaze a trail for AMD, and they
can't fill the orders . . . that can cause some permanent damage."
As with other clone makers, Almo is proceeding cautiously. "We
want to make sure it is a trend, not a fad," Guzzi said. "We felt a
certain amount of business will naturally fall to anyone who is a
competitor to Intel. Monopolies work against themselves in some
ways."
Mini-Micro Supply, Santa Clara, Calif., a West Coast hardware
distributor, is sticking with Intel for its OfficePro clones. The
Intel-inside logo remains an important draw among VARs.
"Intel is like a Cadillac. AMD is like a Ford or a Chevy. The
Cadillac is nicer," said Danny All, sales manager at Mini-Micro.
While D&H has held discussions with AMD, D&H has no plans
to offer the manufacturer's K6 processor yet. Brothers said AMD
has not made any aggressive efforts to enter the VAR channel.
"If VARs are clamoring for the K6, I'm not hearing it," he said.
Brothers added that Intel can easily correct any price difference
with AMD's K6. "The sheer manufacturing capacity of Intel versus
the capability of AMD all by itself precludes them from being a
huge threat," he said.
Budget PCs, hitting retail shelves at sub-$1,000 prices, are not
being felt by hardware distributors, either, executives said. While
VARs are looking for distributors that can deliver
price/performance advantages with their clones, they are putting
the emphasis on performance.
"The reality is that the sub-$1,000 PC is going to the first-time
buyer," Brothers said. "It has more to do with market expansion."
Mini-Micro Supply sticks to the MMX and Pentium II end of the
Intel spectrum with its NSpire systems. All said the company's
clones occupy a strong middle ground between brand-name
vendors' top-of-the-line systems and their sub-$1,000 offerings.
Distribution executives said they could build budget PCs if VARs
wanted them to. The components are available, and Brothers
said resellers can always offer a better solution at a better price.
All said a clone system from a distributor comes with better
service, a better price and more bells and whistles. The
Compaqs and the Dells will succeed in bringing to market
inexpensive, bottom-line systems. But for the VAR selling at the
same price, "he'll probably throw in a video card," All said.
No distributor is going to offer a sub-$1,000 PC, however,
according to ASI's Knochenhauer. He said vendors are looking
at the low end as a way of selling additional upgrades and
peripherals as an aftermarket.
"It's like buying the bicycle, then buying the water bottle and the
shorts," said Knochenhauer. "We're leaving it up to
Hewlett-Packard and Compaq."
Almo does not plan to enter the sub-$1,000 market with its
Trademark systems. But if a VAR needs such a system, Almo
can build it. "We can build them with low-end Pentiums or
AMDs," Guzzi said. "It depends on the horsepower the customer
wants."
For hardware distributors, the question has always been
knowing what the reseller wants and then adjusting to change.
While distributors are not going to be blazing technological
frontiers, they are not going to be trailing far behind, either.
Copyright r 1997 CMP Media Inc. |
