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Technology Stocks : Compaq -- Ignore unavailable to you. Want to Upgrade?

To: John Koligman who wrote (26828)	5/30/1998 11:36:00 PM
From: Jack T. Pearson	Read Replies (1) \| Respond to of 97611

John, I assume that DEC has priced Alpha to cover their costs (production, marketing, support, etc.). Those costs, per chip, are relatively high because of their low production. They are in a competitive market. They have a share of that market. If they wish to increase their share of that market, they either have to offer better performance for the same price, or cut their price. They already have the best performance. I assume that they haven't cut their price because they feel that their margins would then be too low, or that their competition (Sun, IBM, and HP) would simply respond with lower prices of their own. In either case, cutting prices would hurt margins = lose money. Their market share, at current prices, is relatively stable because it is a pain for a customer to switch CPUs. IMHO, when Intel gets into the workstation chip business, they won't produce 10,000 a year, they will produce 10 to 100 time that. They will price them low because at those production rates, their costs per chip will be very low. And the software will be there, possibly at lower prices, because you can make more money writing software for a chip that sells in higher volume, even if you price the software lower. That will be rough on the companies that only produce 10,000 CPUs per year. HP has already seen the writing on the wall and made arrangements to switch to Intel. IBM and DEC couldn't do that. HP doesn't have as much corporate ego invested in their CPU as IBM and DEC do. That's my logic. Could be wrong. But it seems like this has happened before. My company was one of those that switched from DEC VAX to Sun. Just before we made the decision, I was trying to determine if the applications software we used was available on Sun and HP as well as the VAX. It turned out that everyone I called was using the Sun computers to develop the software, because they were much less expensive. Sorry it took so long to explain. Jack