RE: Price cutting
Intel must continue to drive chip price down as rapidly as it can with its existing capacity. It must induce customers to buy higher and higher speed chips, run at capacity, and shift the mix to higher speed and value chips. In the short-run, this decreases its cash profits below what they might be with higher prices, but it increases future value. The low prices certainly impact its mini-competitors in the short-run, but allow the rapid expansion of demand for PC's and render "appliances" more and more unsaleable.
To increase demand for high-speed chips, Intel needs three things: (1) much improved OS's (interface and reliability); (2) higher net bandwidth; and (3) applications that demand powerful microprocessors (such as DTV, 3D, speech, hifi audio, etc.). It is working to accomplish 2 and 3, but Microsoft shows little interest in 1, and is attempting to gain position in the appliance market.
Vigorous price cutting will accelerate high-end PC growth. Failure to cut and to push into new markets and market sectors could be an irreversible error for the industry. It is the best thing Intel can do for the industry and component mfrs. By increasing quantity demanded, it even benefits sales of its mpu competitors.
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