Ibexx and thread - From one fabulous market babe to another:
fabmktbabe.com
>>>> The Curse of Kurlak
Yes, our boy Tommy strikes again!
Too bad his reasoning was just a tad bit off.
Here's why.
First of all, as a quick recap, Kurlak cut his numbers on INTC yesterday citing the price wars on the lower end.
Translation: the mighty Tommy speaks, the stock get whacked.
Now here's the real story.
Just to be clear, INTC is involved on the low end of the market for two reasons. First, a fair amount of visibility is gained from the large amount of volume that is generated on this end. Secondly, if INTC strictly focused on the high end, a large amount of the customer base would balk, given the roughly $300 price difference between the just-about-the-same-in-performance K6-2 and the Pentium II. In contrast, the difference between the K6-2 and the Celeron is between $50 - 100.
Definitely much easier to swallow.
Plus, by marketing to the lower end, INTC is employing a very smart strategy. That is, by making itself known on the cheap end, as users mature and acquire more money, they are more than likely to stay with who they know.
Otherwise known as INTC.
And, if you are looking for a reason, feel free to look up the words "brand loyalty."
Now as for the price cuts that Kurlak is "making us aware of'" this is certainly not the first time INTC has cut prices on its chips, given the company's regular schedule of this is between 4-6 times per year.
And that would be because...
This is method that INTC employs to dictate the shifts in the market as it transitions to new product lines.
And, just so there isn't any confusion, INTC does not sell its discounted chips at a loss, as it clearly figures in price cuts into its production schedule.
As for the whole AMD issue, INTC clearly doesn't have anything to worry about here, given, simply stated, AMD definitely does not have the fab plants to enable them to, let's say, for example, gear up to 50% share.
Now let's switch our focus a bit and look at the profitability issue.
INTC does not make much money on the low end, but serves that market for the reasons outlined above. As such, the real profits from the company come from the higher end chips, such as the Pentium II, the upcoming Pentium III, Xeon, etc.
Plus, it is important to note that INTC does not solely book revenues based on its microprocessor line, given that when a customer buys a Pentium powered machine, INTC not only gets money from the CPU, but from the chipset, possibly the graphics controller, etc.
In short, even though INTC's CPU's are the most visible, the company has significantly branched out both on the chip side as well as to areas such as multimedia, the Internet, etc.
And that is the real story.
As for the reasons behind Kurlak, with his tunnel vision, not pointing out the above, I'll let you be creative and fill in the blank on that one.<<<
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