To: Ulrich Santo who wrote (43214 ) 5/31/2000 9:42:00 AM From: pompsander Read Replies (1) | Respond to
Ulrich: The price war forecast takes into account the tremendous cash reserves of Intel and its greater fab capacity. Later this year Intel and AMD will both be producing far more 1 GHz chips than at present, as well as improved production of sweet price point chips in the 800 and 900 Megahertz range. If Intel wants to slow AMD progress it has to use the weapons at hand. Historically AMD has had cash flow and leverage problems. If Intel institutes a price war whereby it sets out as a corporate objective to hold or win market share by shaving margins on key product lines, and AMD is forced to match to hold market share, then Intel can win such a war of attrition. If demand stays high, both firms can sell even more chips than predicted because price will encourage consumers to "step up" or "step In" when they might have not bought at all. But, with more cash and much more capacity right now, Intel could maintain such a pricing strategy longer than AMD. It would not kill AMD because with their recent successes they have access to funding they would not have had before, but it would hinder their desired move to become a long-term profitable corporation. This could slow down expansion or new product initiatives and shake investor confidence. Intel can manage such a ploy without hurting earnings outlooks as long as demand stays strong. They have the efficiencies coming into the manufacturing process to facilitate this.
