Compaq Message Board - Msg: 3500111

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Technology Stocks : Compaq

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To: FUZFO who wrote (17896)	2/22/1998 4:26:00 PM
From: Obewon	Read Replies (1) of 97611

A couple of questions for the thread to get people focused on the future (rather than DELL's past). 1) Intel's Merced chip is due out in just over a year. What will its affect on the sub-$1000 market (considering their price will be too high to include in this segment)? MY VIEW: Could significantly hurt CPQ since Intel will be putting all its marketing muscle into Merced's advantages over Pentium, Pentium II, and their knockoffs from AMD and Cyrix. People will be more hesitant to buy a computer with a PERCEIVED tech disadvantage. Neither AMD or Cyrix have an equiivalent chip anywhere near the market so chip prices may not fall as fast as with the Pentium and Pentium II chips. The rise of the sub-$1000 market has occurred not just because prices have decreased but that the gap in tech advantage from high end machine and low end machine has narrowed significantly. There is little software these days which can't be run well on even low end machines. The Merced chip with an accompanying 100MHz bus combined with Windows 98(/NT wannabe) will most likely seriously change this equation as software written for this will see serious performance degredation on a lower end machine. 2) Prices on computer components have fallen greatly over the past year as memory chips, disk drives, CPU's, modems, and CD-ROMs have seen overwhelming competition and overcapacity in the market. Will this continue and what will its affect on CPQ be? MY VIEW: While I believe that competition will be as fierce this year as last, I think the computer makers have seen the bulk of the component price drops for the near future (one to two years) except in the area of CPU's which will drop quickly the closer we get to the Merced rollout. While all computer makers will be affected, those who have used their low inventory as a strategic advantage (getting new products to market quicker) will be hurt the hardest as this won't make as much of a difference as in the past. The transition from CD-ROM to DVD may also slow the pace of component price drops as DVD is significantly more expensive than CD-ROMs currently. These are of course my views. What are yours? OB

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