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To: mishedlo who wrote (55960)	9/29/2000 11:55:09 PM
From: Don Green	Read Replies (2) \| Respond to of 93625

Top -- Intel's Financial Hiccup Signals Need To Adapt Sep. 29, 2000 (Electronic Buyers News - CMP via COMTEX) -- Intel Corp. played the unenviable role of Nasdaq speed bump two weeks ago, when the company warned of lower-than-expected third-quarter revenue. The scapegoats were close at hand: higher global oil prices and a troubled euro-so troubled, in fact, that it required the central banks of several nations to prop it up. So far, Intel has been the only voice to blame its fiscal hiccup on a weaker Europe, which leads one to ask if other factors may be contributing to its malaise. While Intel's lower revenue projection is worth noting, the company also warned that third-quarter gross margin could drop three points to 61% in a worst-case scenario. This is a more troubling sign. In addition to rising fuel costs and the declining euro, it's just as probable that Intel is facing renewed pricing pressure from Advanced Micro Devices-most likely at the low end of the PC market. But even here, competition from AMD is only partly to blame for Intel's predicament. The simple fact is that the PC is a commodity product that's presenting Intel with a set of market dynamics that don't necessarily guarantee continued stellar margins. Early last decade, the X86 architecture and more powerful audio, video, and graphics applications set Intel firmly in the driver's seat when it came to the PC market's direction. But other than belatedly joining its rivals to drive cost out of the sector-a hallmark of any commodity industry-the chip manufacturer has done little to differentiate the PC platform for consumers since rolling out its MMX multimedia instructions more than three years ago. Rather, the PC sector has been marked recently by a relentless series of incremental clock-speed advances. The brouhaha over Direct Rambus DRAM and the race to break the 1-GHz threshold provided temporary distraction, but in the end brought little in the way of innovation. Instead, the megahertz marathon has packed the average PC with more processing power than the majority of users know what to do with, leading developers to play a game of catch-up as they try to direct this overhead to applications that move data, voice, and images over the Internet. However, Intel has no clear advantage here, and for the first time in 10 years the PC industry could see the balance of power shift from those who enable content creation to those who provide a delivery path for that content. Of course, it's never wise to rule out Intel's ability to adapt, but to take on more entrenched rivals, it may have to sacrifice some of its margin advantage. E-mail me with comments at (amaclell@cmp.com). ebnonline.com