Re: accelerated price cuts
<<What he may be fearing is that Intel and AMD, in an effort to accelerate development to outdo each other, could be leaving the consumer behind. We haven't seen such low prices on the top-of-the-line PC's in ages. This could mean that PC's are accelerating faster than consumer needs, which means this market could fan out even more as less and less people feel the need to buy the latest-n-greatest. What happens if the K7 takes the performance crown away from Intel, only to find that the consumer is then saying, "Nah, I don't need that kind of performance anymore"?>>
Bingo. I was wondering when someone would address this. It's not that MPU prices are falling, it's that the entire MPU price scale is being compressed (except for the Xeon).
So what does this mean? Technology investors have always been big believers in price elasticity (where unit growth is more than enough to offset price declines so that total revenues grow). So here we are with PCs selling at prices not the lowest "in ages", but the lowest ever (at least until next week). Where's the unit growth expansion? Granted that the IDC/Dataquest numbers have been bumped up, but given the scale of the price cuts, the unit growth appears to be less than the amount necessary to drive revenues.
I believe that AMD investors should be concerned in the short term that the benefits of price elasticity are likely to mostly fall in the less-mature markets. AMD has picked up share in US retail, but that's probably the most mature slice of the most mature market. Intel, on the other hand, has been very aggressive in developing markets such as China with fairly high level people sent over for literally years to build that presence. So if elasticity begins to work for MPU vendors, it might not be shared equally. Longer term, AMD should benefit from having the larger opportunity for incremental growth (but as Keynes pointed out, longer term we're all dead). - Tad LaFountain |
