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Technology Stocks : Intel Corporation (INTC)

INTC 41.41

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Dec 5 3:59 PM EST

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To: Paul Engel who wrote (48311)	2/23/1998 7:36:00 PM
From: Harry Landsiedel	Read Replies (1) of 186894

Paul Engel. Re: Computers/VCRS. Kurlak's greatest failure IMHO is comparing PC's to VCR's. PC's are significantly different on several dimensions. 1. Speed matters. A faster VCR is meaningless. Not so with a PC. People with a slower PC accept it, 'cause they know no better. That's 'til they upgrade the 1st time. Then they're hooked on more speed is better. 2. PC's are two-way communicators. The VCR is a one-way machine. A PC enables a dialogue. It's inherently more valuable as a "tool" 3. PC's are multi-dimensional. You can use PC's for lots of things. (Remember your tool analogy). That means a persons PC GROWs in importance as the user finds new uses for this tool. And these uses are expanding and will continue to expand. Not so with the VCR. It's function, like TV's has been essentially unchanged in 50 years. 4. PC's are personal. Not enough is made of this factor in fueling the PC boom. Because is a PERSONAL productivity tool, people are more involved in PC's and hence willing to pay more for them and upgrade them more often. A VCR is not personal. 5. Faster PC's improve productivity. With 75%-80% of the PC's going to business, more productivity is a key factor fueling the upgrade phenomonon. Look at how low unemployment is. In the U.S. managers are opting to upgrade PC's to get more out of their current workforce rather than pay more to hire more people. That's why as unemployment drops capital spending goes up. Any economist will tell you that that higher prices (on labor) will encourage managers to replace those "inputs" with lower priced ones (cheaper computers). It's a virtuous cycle. It is Wall St's failure to understand the PC phenomonon that has enabled investors like us to buy these companies cheap and watch them grow. It amazes me that these supposed smart people (like Peter Lynch) do not look at these companies as superb marketing machines. They get dazzled by the mumbo-jumbo of the technology and cannot see how they satisfy consumer needs, just like Coca Cola, Gillette and other more established franchises. Amazing but profitable for us. HL

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