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

To: Joseph Pareti who wrote (47931)	2/17/1998 8:28:00 PM
From: gnuman	Respond to of 186894

Joseph Pareti, re: Intel product mix. There are two articles in the March 10 issue of PC Mag that bear reading. Jim Seymours' "Sub-$1000 PCS go to Work" and Jake Kirchners' "PC Prices, How Low Can They Go?" According to Seymour, "The explosion of under-$1000 PCS has marked a permanent downward shift in PC pricing". Also, (paraphrasing), these are darn good machines, from major manufacturers and even a classic Pentium 166 is capable of running 95% of the software available today. This market shift must create a quandary for the makers, and to some extent Intel. (One wonders if Compaq is happy with what they started?) I just read that Intel in the past few months has gone from zero to 650 people working on this new low end market. The key problem facing the makers is the specter of the low end machines being accepted as adequate solutions for the majority of the consumer and business markets. The margins for everyone in the chain are abysmal. Worse would be if the market starts evaluating PCs on functionality and not the performance hype. It's getting to the stage where the percentage points difference in benchmarks are no longer that big a deal, and the market may be beginning to sense this. If editors like Seymour keep saying it's so there may be wide acceptance in the markets. So what do the suppliers do? I think Intel and the major makers are going to mount a major marketing campaign differentiating the market price segments. (The Chevy/Cadillac approach to PCs). I think they sorely need to create a perception of wide divergence in performance between a $1000 PC and a $2000 PC, way beyond actuality. I think I read that Intel plans to rename their CPU's for the low end market. I view this as clever marketing ploy, again the Chevy/Cadillac approach. "Would you rather have a Pentium II on your desk, or a "Diddly 1"?" But I wonder if the result won't be the same as the automobile analogy. They both get you where you're going, have the same basic features and functionality, but Chevy outsells Cadillac by a huge margin. So getting to your question, the market is changing so quickly, I'm not sure even Intel knows what their product mix will be in six months. We've seen it change a lot in just the past few months with the introduction of Covington, and soon Mendocino coming for the low end. I won't venture to guess. How many of the 100 Million PCs sold this year will be sub-0's? If Intel gets 80 million of the total units and they want a $20 Billion business in that segment, they need an ASP of $250. But you don't sell $250 CPU's into the sub-0 segment. What if sub-0's were 40% of the total market? One thing I believe for sure, we're going to see a major new marketing campaign from Intel and the box makers. When you're in the commodity business marketing has the power to make or break. As for the sell-off, I don't think it's just Kurlak, a lot of analysts are forecasting flat numbers for '98. I think it may go up mainly because Intel may start commanding a higher PE ratio. Gene