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

To: Paul Engel who wrote (52474)	4/8/1998 10:26:00 PM
From: Harry Landsiedel	Read Replies (1) \| Respond to of 186894

Paul Engel. Re: "Have they made the right adjustments?" Thanx for your very cogent response. It's nice to read something based on facts and logic rather than the colonic exuberance posted by the anti-Intel faction. HL

To: Paul Engel who wrote (52474)	4/9/1998 4:56:00 PM
From: gnuman	Read Replies (3) \| Respond to of 186894

Paul, That doesn't address the real changes taking place. If we look at the market for PCs, the only real "killer app" introduced this decade is the web, and it works fine on Pentium. While Intel continues to provide higher performance CPU's at declining price points, the need for this performance increase dwindles. Worse, product displacement seems to occur more frequently. For example, the PII/333 goes from their high end PII to the entry level PII part in just two quarters, and disappears a quarter later. Combined with the steeper than normal price learning curve, we're seeing a price/performance curve that's getting pretty wild. (And this is good for the consumer). But the market wised up to these shifts some time ago and I see some bad effects for Intel. The first problem is that no matter when you buy the latest and greatest system, it's going to be mediocre in six months. The upgrade market consisting of well off consumers is giving up. If the ego trip only lasts for a few months, forget it. In the past this segment passed down their old PC and bought the fastest machine available for the replacement. But now they can get a damn fast PC by just buying the entry level PII. Exacerbating the situation is that there really aren't any "killer app's" that require all the power available. I have a number of friends who used to buy Intel's latest and greatest every two years whether they needed them or not. Now they're all asking, "When will the PII/333 sell for $1200 ?" From this small sample I sense a major shift in buying habits. The fastest growing segment of the market is low-end PC's, driven mainly by the internet. These are primarily new owners from the lower income group that are enthralled by the net. And what they're able to buy for $1000 was the high end $2000 box just a year ago. And for those buying second and third PC's, they also get a lot of machine for a $1000. The general business segment sure doesn't need a PII/450. I suspect they'll be quite happy with a PII/266 or 333. With the PII/266 the entry level machine this quarter, and the PII/333 the entry level in a couple of months, they'll get excellent prices. (In fact, K6 or Celeron will be more than sufficient for the majority of applications). So the problem as I see it, while Intel continues to introduce performance upgrades, (and at ever faster rates), the market is migrating down the performance curve. And with CPU prices coming down faster than normal, I think there will be a revenue/earnings/margin hit on the PC segment of Intel's business. When you combine this with Intel's increasing focus on commodity/consumer products, (which mean much lower than normal margins), I see some real changes in Intel's business over the next few years. In fact, I'll make another WAG. When Intel hits $50 billion they will be a 25% gm company. Hey, that's not all bad, but it would mean the same earnings as on their current $25 billion business. Can't wait to see the responses to this one ;-) Gene