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Technology Stocks : Intel Corporation (INTC)

INTC 36.08

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3:59 PM EST

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To: Mary Cluney who wrote (44323)	1/7/1998 5:56:00 PM
From: gnuman	Read Replies (1) of 186894

Mary, re:"I would have thought Compaq needs Intel a little bit more than Intel needs Compaq". I'm sure Eckhard knows this. But he also knows he is the largest supplier of PC's in the world, and Intel needs that. From what I know of the history of Intel and their customers, Intel has always been a very demanding supplier. I think friction between Compaq and Intel goes back at least ten years. I think even Rod Canion had problems with the relationship. It's interesting that Intel was charging as much as $1000+ for X87 products back in the late eighties. When IIT and Cyrix introduced competitive products, I believe Compaq jumped on this as an opportunity to get better prices from Intel. I believe that as soon as they had an alternate source they used it to their advantage, much as Intel uses a proprietary product advantage. Between 1987 and 1990 FPU prices dropped to the $75 range. I'm sure Compaq believes that in order to expand and grow their business they must penetrate markets with price. The CPU being the largest single contributor to cost, this becomes the major target. This is a dicey game, but I see Compaq and the consumer as the big winner. AMD will never be the source or resource of an Intel, but I think they provide new bargaining power. Intel must be concerned that AMD will develop enhanced brand recognition through suppliers like Compaq and IBM. (I see that 5 of the top 10 makers have now committed some product to AMD). So I think they will address Compaq's initiatives in a businesslike manner, unlike some posters that think Intel will retaliate. They need each other, and I think this love/hate relationship is neverending.

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