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Strategies & Market Trends : ahhaha's ahs -- Ignore unavailable to you. Want to Upgrade?

To: Bilow who wrote (864)	1/22/2001 9:45:11 AM
From: GraceZ	Read Replies (1) \| Respond to of 24758

I brought up Matrox because they were a really good example of a small company that made a specialty product with very small reach. That $1400 24 bit card had a hand numbered serial number 98. They came out with a $300 card that they sold zillions of units of and they licensed their technology to OEMs. Somewhere between the $1400 card and the almost free prices of today the company made a great deal of money selling their product (obviously because they are private I can't back up my estimation with figures). I would guess that the $300 card made them a great deal more money than the $1400 card. But as video card prices went down to $30 the higher sales numbers no longer produced a reasonable margin. Almost all high tech products follow this same pattern as they move from early adopter to main street. Perhaps all tech hardware companies are subject to exactly the same fate of the video card manufacturers that you cited or maybe it is simply the product itself that is destined to low or no margin hell. Perhaps routers will follow the route that printers took, the consumer products are low margin almost free and the professional are suspended at a price point and each subsequent generation has to offer more and more functionality to hold that price at least until the point in which they cease to exist. As you stated, the router no longer has enormous costs associated with design and manufacture. You think that leaves the market open for competitors and it does. It took JNPR 9 quarters to take a significant market share away from CSCO. If CSCO doesn't get cranking pretty soon they are doomed. You could say that CSCO itself has brought this fate on themselves by trying to hold back the direction that the technology wanted to go in to keep selling their existing technology. Intel would do that with processors, but they weren't dumb enough to do that when others were nipping at their heels (although, even they recently got caught by AMD) All technology (not just that without moving parts) is subject to moving slowly towards free and non-existence. The computer hardware industry has actually adapted rather well to this downward price spiral (imagine for a minute this same spiral in the car industry), although at the high cost that most companies have gone out of business. There will be very few companies that will enjoy the runs that INTC and CSCO have had, but there will always be replacements for them, just perhaps the cycle will become shorter and shorter from startup to peak. All companies will be profitable in the future, but only for fifteen minutes. (my apology to Andy)