<<Four recent examples that come to mind, Standard Oil in the 1890-1910 period, US steel companies in the mid 1960's, US auto makers in the 1970's, ATT in the 1970's, and IBM and DEC in the 1980's.>>
Of the examples just mentioned, which of them had a solid technological lead to support their monopolistic stature, It wasn't ATT due to regulatory restrictions, they couldn't capitalize on innovative technology. I cannot comment on Standard Oil except for the fact that the oil industry of the late 1800's and tech industry of late 1990's are nearly diametrically opposed (reference the rate of innovation in each insdutry, which reflects the importance of a solid technological lead). The US auto and US steel makers actually lost thier advantage due to a lack of innovation and rapid technological advancement to the Europeans and the Japanese, respectively.
While I agree that you have to constantly observe the monolithic stature of all monopolistic companies. Intel is considerably ahead of the curve in financial ability, marketing might, technology, rate of innovation, brand recognition.
The biggest problem that I see for INTC is the diminishing returns of thier present method of chip manufacture. I am not an expert on these matters, but if I'm not mistaken, there is but so much more performance they can squeeze out of a .35 micron manufacturing process, hence the addition of extensions for performance boosts (ex. MMX technology). The intorduction of these extensions grant them much needed time to perfect the next generation of chip manufacturing/design (the co-venture with Hewlett Packerd suggests the difficutly technical difficulty and expense involved in such a "paradigm" shift - why share technology if you don't have to). This presents itself as both an extreme risk and oppurtunity fo INTC investors:
1.) If they take too long to produce the technolgy, competitors such as AMD, Cyrix, and the PPC/risc processor crowd may erode the respite granted INTC at the top of the food chain by their extension technologies.
2.) Once the technology is successfully produced (and if it works well of course), it creates a significant barrier to entry in the top end of the PC market. Before the lesser financed competitors break through that barrier, cash flows from the new technology probably would be sufficient to enable INTC's efficient "slash and burn" pricing technique to push the competition away form the higher margin markets (circa 486 and Pentium upgrade cycles). |
