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Technology Stocks : Intel Corporation (INTC)
INTC 43.48+8.6%Dec 2 3:59 PM EST
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To: G.M. Flinn who wrote (50133)3/8/1998 12:42:00 AM
From: Paul Engel  Read Replies (1) of 186894
 
G.M. Flinn - Re: "Will or can CPQ go after DELL's high end stronghold with a one-time fire sale? I pose the "can" because I do not think CPQ's cost structure will allow it."

Compaq may try the fire sale route -to purge their bloated pipelines - but their dealers have to make a profit and that is where Compaq is hurting big time compared to Dell - no dealers.

Also, we have about 5 /12 weeks before Intel unveils a whole new line of Pentium II/Deschutes devices - Slot 1, Slot 2 and Celeron (Slot 1).
Dell will be able to offer these new products as direct competition for Compaq's "older" products - and demand a premium because the machines are newer, faster, ;ower power, etc.

So Compaq has no real short term advantage over Dell -- except pricing - deep discounts.

Compaq needs to structurally change their business.

For 12 months the media journalists and analysts have been damning Intel because of their lack of a sub $1000 focus. Well, Intel has made money up till now - and Compaq is about to NOT MAKE MONEY!

And Intel, with the Celeron line, to be followed up by Mendocino (Deschutes + on board L2 cache) and Whitney (Chip set with audio and graphics) will survive and Dell will be a major beneficiary.

In fact, my guess is that Dell will use the Celeron line to push his entry level prices lower and still maintain comfortable margins.

Paul
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