Re: Do you want me to believe that demand for P.C.'s suddenly falls off a cliff because of the $50 hike?
The way you described it, absolutely. Take Intel's desktop ASP last quarter of $83.
siliconinvestor.com
You realize this means that half of all of Intel's desktop volumes are sold for under $83, right? Increasing prices by $50 across the board would have a devastating effect on market demand.
Re: I'm well aware of the meaning of price elasticity. But you're attributing an outrageous elasticity to this market with absolutely no justification.
If you're so familiar with price elasticity, then how can you say there's no justification?
Intel's sales are either among very mature markets, or very new emerging markets. In the case of mature markets, the vast majority of buyers already have PCs, so raising prices leads to people delaying their upgrade cycle, because the *need* for a new PC is almost non-existent. *Demand* for a new PC therefore ends up being very much price driven.
And as far as emerging markets, people may "demand" PCs, but they simply cannot afford them. $50 to someone in an emerging nation is an absurd amount to pay over today's prices. These are the nations exploring $200-300 PCs, and yes, a $50 price boost (plus additional margin for the PC vendor, which makes it more like a $55-60 price increase) quickly makes the purchase unaffordable.
Re: Let me ask you: do you have a position in AMD or Intel? Because if you really believe what you've written, it would be hard to justify investing in Intel.
I have a substantial long position in Intel, and I feel it's justified. Except for last year, Intel has managed falling ASPs expertly well, and they've taken advantage of a steadily expanding market. I believe this is what a well managed company would normally do.
Furthermore, I believe Intel's direction with Silverthorne is very appropriate. Rather than fighting commoditization, they are embracing it with an extremely inexpensive design. I think there's plenty of reason to be bullish due to this, not to mention Intel's other strong products: Nehalem, Larrabee, 32nm products, etc. |
