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

To: Burt Masnick who wrote (55582)	5/15/1998 12:39:00 PM
From: Larry Loeb	Read Replies (1) \| Respond to of 186894

Burt, You make good points. Computer manufacturers can replace just about any DRAM with another. They are a pure commodity. They cannot do that with processors for several reasons. Specifically, they aren't plug compatible (Intel stopped using Socket 7); I believe that they need different chip sets; and they advertise the processor in the machine - difficult to change quickly. Also, in the case of Intel, most customers seem to look for the Intel brand (Intel Inside) when shopping for a computer - even if they have to pay a few more dollars (I know the retail under $1,000 market is growing and is giving Cyrix and AMD some opportunity to compete, but this is not the bulk of the market). Kurlak's comments on margins and shrinks vary from my understanding of semiconductor economics. As long as the same processor is being shrunk to smaller sizes, the wafer cost increases slightly and the number of die increase significantly (given good yields - at Intel). Thus, Intel can afford to sell these die at a lower price while increasing volume, with no effect on margins. These smaller die also tend to be faster than their predecessors, which give opportunities for higher prices. In regard to Kurlak's comments on the Texas facility, yes - Intel did delay that facility. My recollection, however, is that they started that facility before they knew they were getting the DEC fab. I believe that they have only minimally reduced their capacity expansion from their original plans. Kurlak also seems to ignore the XEON product line which is replacing Pentium Pro at the high end. These chips will beef up the ASPs even as costs are declining due to shrinks. In summary, there are pricing and volume issues, but IMO not to the degree Kurlak is implying in his report. I'm waiting for Paul to start his day and give us his spin. Larry

To: Burt Masnick who wrote (55582)	5/15/1998 10:06:00 PM
From: Paul Engel	Read Replies (2) \| Respond to of 186894

Burt - Re: " All Intel has to do is control wafer starts and the "problem" goes away. " Kurlak mad an additional fundamental error (I posted one earlier). His assumption that production increases by AMD and Cyrix as well as Intel would result in a glut on the market. The reality is that there probably is not a huge overall demand for processors made by AMD and CERTAINLY THERE SEEMS TO BE LITTLE OR NO DEMAND FOR CYRIX PROCESSORS! In other words, he made the juvenile assumption that all processors are created equally! The obvious market preferences for Intel products will prevent a real glut - especially as Intel transitions to Slot 1 processors. The AMD and Cyrix CPUs may not find many homes due to their "lack of technological relevance". Paul