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Technology Stocks : Intel Corporation (INTC) -- Ignore unavailable to you. Want to Upgrade?

To: Tenchusatsu who wrote (84890)	7/4/1999 12:58:00 AM
From: Barry Grossman	Read Replies (3) \| Respond to of 186894

Ten & Thread: Intel Is Taking No Prisoners It's slashing prices to gain share and blitzkrieg the competition businessweek.com@@TjlqxmYAyL@MYgAA/cgi-bin/premium/issue/premium_story.pl?url=premium/99_28/b3637090.htm BUSINESSWEEK ONLINE : JULY 12, 1999 ISSUE NEWS: ANALYSIS & COMMENTARY Last January, Intel Corp. Executive Vice-President Paul S. Otellini declared the chip giant was 'deadly serious' about grabbing market share in cheap PCs. Maybe he should have used less ominous words: Intel's aggressive marketing and price cuts have indeed delivered big share gains, but the impact on its rivals has been so severe that some are now struggling to survive. For antitrust enforcers who continue to watch over Intel's practices since it settled a Federal Trade Commission suit last March, the failure of one its competitors w38ould set off bells. When Otellini began his push, though, it was Intel that was on the run. At the end of 1998, it had 75% of the PC processor market, down from 86% the year before, thanks to gains by rivals Advanced Micro Devices Inc. and National Semiconductor Corp., whose low-cost knockoffs of Intel's Pentium chips were getting a huge chunk of the hot sub-$1,000 PC business. Although Intel still dominated the chip market and had a lock on the upper--and more profitable--end of the business, that wasn't enough. 'Every time Intel's share drops below 80%, a big red light goes off in the CEO's office,' says analyst Linley Gwennap of Cahners MicroDesign Resources. Intel responded by cutting the price of its low-end Celeron chips in half--some now sell for only $35--and courting PC makers with discounted packages of PC parts. Since February, U.S. retail sales of sub-$1,000 Celeron PCs have surged 50%, according to PC Data. Rivals, meanwhile, are reeling. On May 5, National dropped out of the PC processor business, saying it couldn't make a profit in it. AMD has lost 10 points of market share in cheap PCs. It has warned Wall Street that it may post a $200 million second-quarter loss; analysts don't expect profits before next year. 'Three price reductions by Intel made it hard to compete,' concedes AMD CEO W. Jerry Sanders III. Intel has used the same aggressive pricing to grab share in other businesses. For years, it chased 3Com Corp., the leading supplier of network adapters--circuit cards used for connecting PCs to networks. But since February, Intel has turned up the heat. As it matched Intel's price cuts, 3Com saw revenue from its network-card business shrink by $40 million in its latest quarter. 'Intel is killing them,' says SG Cowen Securities Corp. analyst Christopher Stix. The next nail: Intel hopes to replace network cards with chips, where it has the upper hand. Intel can be superaggressive on price in Celerons and network cards because it generates big profits on other lines. 'Intel isn't making money on Celerons, but it can subsidize scorched-earth pricing with its high-end chips,' says SG Cowen analyst Drew Peck. Nearly all of Intel's expected $7.7 billion profit this year will come from processors used in computers costing $1,200 or more. BARELY LEGAL? What Intel is doing is perfectly legal--as long as it isn't actually selling products below cost. But antitrust experts say Intel could run afoul of regulators if they found that its actions were meant to protect a monopoly through predatory pricing. Intel will not comment on that issue, but CEO Craig R. Barrett says his company is merely 'competing vigorously.' Even if Intel were to actually sell chips below cost--as some rivals now say it must be doing--proving that is nearly impossible since a big manufacturer can easily shift overhead cost from one product to another. The FTC won't comment on Intel, but continues to look at the company's practices. If for no other reason than to keep the feds at bay, Intel needs AMD, 3Com, and other rivals to stick around. 3Com is racing into new markets such as cable modems and home networking. And AMD is pinning its hopes on a new high-performance chip called Athlon. But with AMD's cash dwindling, and 3Com predicting lower sales for the next two quarters, Intel, 'may have put the squeeze on a little too hard,' says Gwennap. 'If AMD collapsed, the FTC would surely react.' Maybe it's time to dial back from deadly serious to really serious. By Andy Reinhardt in San Mateo, Calif. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

To: Tenchusatsu who wrote (84890)	7/4/1999 1:51:00 AM
From: Paul Engel	Read Replies (2) \| Respond to of 186894

Tenchusatsu - Re: "one thing that these so-called "experts" forget is that Intel is the company that is best positioned for a brave new world of sub-$1000 PCs. Volume, volume, volume, plus a little market leverage is key. Cost-cutting and integration with Celeron, Whitney, and even Timna in the future will help Intel strengthen its position in the changing PC market where high margins are quickly disappearing. And let's not forget about the 0.18 micron process, the 0.13 micron process, and the 300mm wafer technology that will help Intel "pave the silicon road to the Internet." Excellent, excellent points. Thanks for bringing these up. That reminds me of Tom Kurlak's prediction in early 1998 that AMD and Intel would GLUT the market with CPUs since they were both rapidly transitioning from 0.35 micron to 0.25 micron processes - and the number of CPUs/wafer would "double". That shortsighted idiot never figured out that NEW CPUs with double the transistor count would rapidly use up all that "extra silicon". By the time he did figure this out, Intel was soaring and Kurlak was TOAST. Paul