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Technology Stocks : Rambus (RMBS) - Eagle or Penguin -- Ignore unavailable to you. Want to Upgrade?

To: Jim McMannis who wrote (59221)	10/30/2000 4:20:45 PM
From: Barry Grossman	Read Replies (1) \| Respond to of 93625

Message 14687372 P4 ramp: According to the trade press (but not publicly confirmed by Intel), the Pentium 4 will launch on November 20. It was not so long ago that Intel tended to agree with the assertion that the Pentium 4 ramp would be pretty modest initially. The chip size is rather large (implying high manufacturing cost), and the infrastructure, especially Rambus DRAM, has been expensive and in limited availability. Intel's plans have changed. Mr. Otellini said that Intel's confidence in P4 and its ability to ramp to volume production naturally has increased as the launch date has gotten closer. P4 will not be narrowly targeted at workstations and servers like the Pentium Pro back in 1995. Mr. Otellini was rather frank about the die size issue: The PC market is not as strong as Intel had expected, which frees up some capacity to ramp P4 faster. In effect, Intel has committed to fixed manufacturing costs, which means that using the capacity to make more P4s is "free" compared with not using the capacity at all. On the infrastructure side, Intel is comfortable with both availability and cost and sees no "volume limiters." The recent trend of lower memory prices helps. Although Mr. Otellini admitted that cost reductions across the P4 platform (e.g., shrinking the processor on 0.13 micron technology, introducing a chipset that supports SDRAM, etc.) will be important to continue ramping to even higher volumes in 2H/01, he sees no problem getting to substantial volume in 1H/01. P4 pricing will not be much different from the pricing of PII and PIII at initial launch. P4 wafers will yield better margins than Celeron and will be a good trade-off for Intel. Mr. Otellini was not willing to discuss system price points on P4 launch to avoid preannouncing customers' products. Mr. Otellini would not be drawn into a discussion of future P4 clock speeds beyond the 1.4 GHz level at launch, but the company's product roadmap has leaked to the trade press, and it includes 1.7 GHz in 1Q/01 and 2.0 GHz in 2Q/01. This is a pretty good story, as clock speeds sell processors. Mr. Otellini said that P4 performance will be roughly equivalent to PIII on a clock-for-clock basis, but there will be a clear clock speed separation between the high end of PIII and the low end of P4 (unlike when PIII was introduced and overlapped with PII). Rambus pricing issues: Mr. Otellini admitted that Rambus memory prices remain at substantial premiums to mainstream SDRAM and said that Intel will have to help with subsidies this quarter and next quarter; he called this "pump priming" to get the Rambus market to critical mass. Mr. Otellini was no more specific than that, but the trade press is. According to Electronic Buyers' News (EBN), Intel is offering PC OEMs a $70 rebate per P4, not huge in the context of prices that are expected at $950-975 for a 1.4 GHz P4 and over $1,000 for a 1.5 GHz P4. Further, according to EBN, Intel is selling P4 to the non-OEM channels (motherboard manufacturers, distributors, and resellers) bundled with Rambus DRAM modules, thereby addressing both availability and pricing. EBN does not say what the subsidy is in this case but does note that 64 megabyte Rambus modules trade in the spot market currently at $200-250, compared with $58 for the equivalent SDRAM (133 MHz).