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Technology Stocks : Intel Corporation (INTC)
INTC 46.48-3.6%3:59 PM EST
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To: Paul Engel who wrote (33846)10/5/1997 1:33:00 AM
From: Joe NYC   of 186894
 
Paul,

Of course, there will always by a Cyrix or an AMD that thinks they will make a zillion dollars by giving away their CPUs for free. Talk about poor mathematical skills!

Whenever you have a product with very high margins, it will attract competition. When the market is huge as well, the attraction will be even stronger.

Arrival of competing products will lower the margins. It's just economics 101.

I know many naive Intel hope that Intel will just kill the competition and go back to $500+ ASP for CPUs, but it will probably never happen.

I think the fact that marketplace keeps Intel at least semi-honest ultimately benefits Intel investors. (Even though you all hope that Intel becomes a monopoly)

Here is why I think market and competition ultimately benefit Intel: Competition forces Intel to sell at least some CPUs for reasonable prices, makes Intel work harder on technological advances and just the fact that there are some competing chips makes Dells, Compaqs and Gateways feel somewhat less dependent on Intel.

If AMD and Cyrix disappeared and Intel went back to $500+ ASP CPUs, the computer makers together with MSFT would revolt and switch to a non-propriatory CPU design. Not to mention what FTC would do.

I think the present situation is ideal for Intel. 2 struggling competitors create an illusion of competition.

Joe
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