Frank,
You make some good points. Regarding the inventory/seasonal
explanation: My take is that INTC is used to having a flat
Q1 after the Xmas season, but this one (as they predict) will
not be flat, but will have a 10% shortfall. Something else
may well be affecting their bottom line.
I've heard that INTC blames it on a lagging demand for PC's.
Yeah, right, that makes sense, but what does that really mean?
If we split the PC market into business & home users & look at
business for the moment, I think a case can be made for the NC.
Think back just a couple of years (or so) ago and you'll remember
a steadily increasing shift in PC's to more & more powerful
(and expensive) units. Intel's margins depend on higher-end
machines and everyone in the PC business began touting their
ability to do "the same tasks as Unix-based workstations, only
much cheaper". I didn't hear one peep about sub-$1000 PC's or
even sub-$1500 PC's with reduced capabilities as an option anyone
was pursuing.
Then Larry (the mouth) Ellison comes out with a great, new idea:
a Network Computer that will cost < $1000 & have $0 in admin costs.
The possibility of a cheap, thin client doing PC tasks for < $1000
shocked the hell out of Andy Groves (Mr. paranoid himself).
After all, the technology already here and they can be produced for
peanuts, compared to expensive Pentium-based PC's. Intel & co. had
to have an answer for it. Bill (the idiot) Gates came up with his
usual pointless & useless specs for low-admin PC's, NetPC's, &
Windows terminals while HP and others began proposing cheaper &
cheaper PC's. Voila, here it is, 1997-98 & we see sub-$1000 PC's.
Now, the business market for these PC's is red-hot - and the margins
for INTC are low, low, low. Maybe that's why they announced that
they are renewing their commitment to the high-end market & are
going to re-double their efforts for Merced etal...
My theory is that IT managers don't care about excess capacity,
memory, and high-speed cpus. They have thousands of employees who
run stupid, slow, interactive applications every day & just want
something cheap that will get the job done. If they decide to
buy a PC & not an NC, because they just love to give BG & co. more
& more money, that doesn't mean that it wasn't because of the NC
that cheap PCs came about.
NC's have brought about a price war in computer hardware & the PC
makers are going to take it on the chin.
The home market, however, is a different ballgame. I don't see
much impact from the NC there. Marketing cheap PC's to home users
probably won't make much of a difference, except for those who have
not been in the market for a computer because of price. The real
problem with capturing the other 60% of households that do not own
or use computers has to do with ease-of-use. That is probably why
TCI is coming out with their set-top boxes.
I believe, strongly, that hardware is a commodity. You pretty
much get what you pay for. We are now seeing what happens when
PC makers bring their prices down too far. Sure, it's great to
advertise an inexpensive, powerful machine, but there has to be
a viable profit margin in every unit sold, otherwise, if demand
drops, even just a little, your earnings are in the tank.
cheers,
cherylw |
