Mr. Intel Trader:
I am sorry for Intel's performance, but that is the trend INTEL can not be immune alone.This
BTO model will have impact on all component suppliers , including INTEL.
The problems for INTEL are as follows:
1) Couple years ago, Intel almost had no competitors, now there are AMD, Cyrx, IDTI,
for low end and middle CPUS, and maybe Alpha for high end in the near future. You can
see the pressure on INTEL.That is the reason why the price of CPU kept dropping. If INTEL won't drop price, well AMD will, so I go to AMD for CPUs, that is the current situation of the market. So, the period of 50% profit margin is over, not anymore.That is
the situation for other component suppliers. However, this not necessary be a problem
to box makers like IBM, CPQ, HWP ...etc, because their cost of components reduced
significantly. Recently, IBM reach a foundry deal with AMD, this means there are very
high demand for AMD's CPUs, otherwise, there won't be such deal.
2) The BTO model killed the component suppliers.
Before the BTO models , the box makers operated based on a prediction of future sales
model and build up the inventory accordingly. This meant much higher cost of doing business for box makers. With the BTO model implemented, the inventory burden was switched to the commonents suppliers, because the time to process wafers generally will
take more than one month, while with the BTO model, the component suppliers will need
to deliver the components immediately when the order is in, which means build up of heavy inventory by the suppliers to meet the immediate delivery requirement. This result in higher
cost to do business for those components suppliers, and reduce profit.
3) Based on my understanding, CPQ contract a lot of box manufacturers in the US, with the
BTO model of doing business, the contractors of box assemblers will share the burden of
bear heavy inventory with the components suppliers, which include components, cables,
power supplies and some finished systems to meet the immediate delivery requirement.
This means, the profit margin of contracted box makers, component suppliers all drop. While on the other hand, CPQ will not bear any inventory , either components or boxes,
and the cost of doing business is reduced significantly. The recent survey on Taiwan's
board, cards manufacturers is the volume is increased significantly, and the profit margin was also reduced significantly. While in the US, the result showed that the profit of those box makers increased significantly, while the profit margin of those components reduced. This
pretty match what happened in the market.
For CPQ, the manager team had done a very good job recently, strategic planning for the
long long term. By buying DEC, push CPQ into the high margin enterprise market (The cost of manufacturing a high end workstation will not be much higher than that of PCs, while the
selling price is much higher). If CPQ did not buy DEC, it will take at least more than three
years for CPQ to get into the enterprise world. By buying DEC, the time has been shorten significantly. For PCs, CPQ's has diversified product lines to fill the need of customers of every level. The future PC business is big volume, which means market share. You spend 100
millions to build up 150000 units and sell it immediately with the BTO model, and use the same 100 million dollars to order another 150000 units and sell them immediately, what I means is with high volume and big market shares, the same 100 million dollars can turn around much faster, and the cost of doing business reduced significantly, and the revenue
accumulats fast. All, in all, you have to have a very big market shares to make sure that your money will not be idled and can turn around over and over.
Those Analysts know nothing about the business, they just stay in their towers with calculators doing the numerical dreams, never have any idea about the real world. INTL's
loss is really CPQ's gain, they are unreleated at all. Pls just read INTEL's news again, and read carefully with brain, you will find the secret.
|
