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

To: Scumbria who wrote (121843)	12/10/2000 10:16:23 AM
From: Gary Kao	Read Replies (5) \| Respond to of 186894

I mailed the following letter to Intel's Barrett today. Dr. Barrett: As a shareholder with Intel since graduate school, technology-enthusiast, and now family man, Intel’s recent inept and ineffectual advertising has continually pained me. I am taking this occasion --Intel’s second consecutive revenue warning-- to take the trouble to write you. Of course much of the blame of the inability to stimulate sales this quarter, particularly at the consumer high-end, lies in the OEMs which consume Intel’s CPUs. However, Intel has to shoulder a considerable amount of the blame itself. Intel subsidizes advertising costs for many of the OEMs, does substantial advertising on its own behalf, and Intel is seen as the bellwether of the industry. The crux of the weakness of current advertising strategies may be summed by the simple question: “Why should I upgrade to a Pentium IV?” I simply cannot think of a cogent reason. In fact, there does even seem to be a cogent reason to upgrade from a Pentium II box to one with a Pentium III! None of the advertising I have seen anywhere articulated compelling and memorable issues. The advertising has completely failed to enunciate in real-world terms any striking reason to do either upgrade, or buy a top-of-the-line machine. I think this is potentially grievous issue, because if Intel does not strike a chord in this sociodemographic group –highly educated, early adopters of technology, and with discretionary income to spend—what hope does Intel have in any other group? In the following paragraphs, I would like to suggest to you specific actionable strategies: It is clear that not all categories of consumer electronics has suffered the same dismal fate as PC’s. Digital cameras, PDAs, MP3 players, and RW-CDs are flying out store shelves and dominate any listing of the hottest selling products this season. There are compelling reasons to buy each of these items NOW, self-evident to any breathing person who is even remotely sociable. Digital camera: instant preservation of precious moments, with the convenience of near-instant editing and transmission. PDAs: essential to the maintenance of a healthy social and professional life. MP3 players: customized music in an unbeatable form factor. RW-CDs: virtually cost-free archiving of precious data (e.g. digital photos!) and total and convenient control over one’s music and software collections. Latest PC with Pentium IV CPU: ??? who knows??? The irony of course is that each of the hot consumer categories would be near-useless without a powerful PC. And the quality of experience with each of these “accessories” is affected by the power of the CPU in that central PC. It is just that Intel’s advertising has completely neglected to drive home this point! I would suggest that Intel and its partners focus on the time-savings with that more powerful CPU. Time is not only money, it is life itself. Intel has completely neglected to take advantage of the desire for immediate gratification that is ingrained in all thinking beings. The six hours that I need to rip and encode a music CD is agony, because it is time away from my family and time unable to do precious things. Of course I could set it up to run overnight, but that immediate gratification is gone. And what if something goes wrong during the night? To be able to rip songs, encode and transfer it to a MP3 player within minutes, all while holding my son in my lap, and to then to see him run around enjoying the music in his headphones while smiling from ear-to-ear, NOW THAT is an experience I would pay thousands of hard-earned dollars for! I would suggest similar themes apply to each hot consumer product category, as illustrated in the following examples: 1. Digital Camera: a slow computer cannot handle the digital manipulation of 3 meg photos from a 128 meg CF card fresh from a family outing. 2. PDAs: a slow computer is not able to digitally edit, compress, and transfer choice photos from digital camera to my PDA to take to the office to show coworkers. 3. MP3: stuck in front of the slow computer all night, trying to rip, encode, and transfer music files, while missing dinner with family. 4. RW-CDs: slow computer takes forever to prepare small amounts of music files or digital photos or movies…can barely fill zip disks with data in an expeditious manner, let alone full CDs. What little literature and advertising I have seen seem to coyly suggest that Pentium IV machines are particular good at manipulation of video streams. Even though digital camcorders and broadband video are still relatively rare, this theme can be emphasized NOW. Most people know and have come to expect that the price of technology and access will continually drop, and would like to know that the computer they buy today will be able to utilize that coming new technology. Others will dream and hope that they will be able to buy or be gifted with that equipment in the near future. Intel needs to hammer away consistently and relentlessly at this theme, but with concrete real-world examples that leave little ambiguity and confusion in the mind of the purchasing public. In summary, it is possible my family and I represent a socioeconomic perspective that may be difficult to obtain, even in focus groups. However, I would submit the themes I am raising apply to large aspects of the buying public, in this country as well as much of the world. Effective advertising strategies can play an educational role in informing about the concrete benefits a fast machine brings, and which the purchasing public can relate to. Conversely, advertising may help many others realize the extent of lost opportunities inherent in a substandard machine. Effective advertising can ignite the passion and loyalty that drives one to purchase a product that is seen as a high-priority. On all these accounts, Intel’s current advertising strategies fail miserably. Respectfully, Gary D. Kao, Ph.D.