Paul,
In my opinion the lower end of the x86 product line has become somewhat commoditized. I believe that Intel has realized this and cut their prices on the low end more aggressively than they might otherwise have done (of course they would have continued their established cuts in any event). They have done this, not to destroy their competitors (who are doing an excellent job of self-destructing without anyone's help), but to keep their fabs running at capacity.
I would have to agree with Kash, that this will have the effect of cutting Intel's margins.
However, I agree with you that the high end products, especially Xeon, will partially compensate for this. These products are unique to Intel and, therefore, allow for higher margins.
In any event, these price wars have been accounted for in Intel's price, perhaps excessively.
We have entered into a period (which we have been in for some time) where the processing power at the high end has exceeded the requirements of most software. This has been experienced before and will be again. What is different this time is the size of the market has grown and new customers are willing to purchase machines based on older technology.
When newer, more processor intensive, applications arrive, I expect a large surge in sales from new buyers and from buyers of these sub $1000 systems.
Personally, I like to get 5 years out of a PC for home use. I purchased a Pentium 60 in February 1994 and I don't expect to need a new PC until next year or, perhaps, 2000.
I don't believe that someone purchasing a $1000 system will be happy with it for more than 2 years. We'll see.
Larry |
