Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: The Vinman who wrote (58867)	6/26/1998 7:23:00 PM
From: Barry Grossman	Respond to of 186894

Vinman, <<It sounds like you are making the argument that INTC is dropping prices to drive out the competition>> I didn't say that. The argument I am making is this: Intel has MOST of the worlds capacity for making microprocessors for desktop, home, and notebook computers. Their newest capacity is aimed at servers and workstations, at least initially. Intel has the LOWEST COST per unit of sales. Intel needs to keep the plants as busy as possible. New capacity is constantly coming on stream utilizing newer technology (currently changing over to .25 micron) which both increases the capability of the product produced and decreases it's unit cost. Intel needs to constantly stimulate the market to keep it growing at a rate which will utilize the capacity they've put in. This is why they can lower prices with only a slight effect on total margins. The PC makers are ONLY RESPONDING to lower chip prices and lower overall component prices by lowering their own prices. They do this FOR COMPETITIVE REASONS. They could put the savings in their pockets but don't. Instead, in a battle royal for market share, they choose to sell PC's competitively against each other. In the segments where there are more options available to the PC maker, the competition is greatest. <<box makers are getting killed with cheaper ASP's and INTC has no choice but to cut prices>> There are many box-makers. The winners, the one's with the highest profits and greatest ability to survive, will be those with the lowest costs to get the product to market. Internal efficiencies will determine who has the lowest costs - and who survives and who doesn't. <<if you look at the numbers from recent quarters they are experiencing lower rev's, which means margin pressures are a bigger negative than the positive of increased demand>> Comparing numbers quarter to quarter in this game is essentially meaningless. Look at the year to year picture if you want to see what is happening. You know, you can't see the forest for the trees if you only look at quarters. Barry

To: The Vinman who wrote (58867)	6/27/1998 1:43:00 AM
From: Darren	Respond to of 186894

I do? It sounds like you are making the argument that INTC is dropping prices to drive out the competition. INTC has no choice but to drop prices, and if you look at the numbers from recent quarters they are experiencing lower rev's, which means margin pressures are a bigger negative than the positive of increased demand, not a good sign.....box makers are getting killed with cheaper ASP's and INTC has no choice but to cut prices. What is Compaq going to say? "Hey, we are experiencing lower margins, you can cut prices if you feel like it." I don't think that is what they are telling INTC. You definitely have it backwards. INTC used to jam new products through the food chain so competitors couldn't keep up -- they'd make out because they could afford the R&D. Then they'd jam the channel with the faster, lower priced chips and AMD/Cyrix/NSM whoever would end up at least one generation of chip behind...this has been going on for years. Cyrix finally caved in -- not even a fabless shop could compete with INTC. How much is the top-of-the-line Pentium II? $500? That's about what they were 5 years ago, so no margin bleeding. And PC growth has quadrupled since 1993, so they are getting the same prices with more volume. And, the US market is only 40% saturated. Buying INTC today is the equivalent of buying AT&T in the 50's. 50%+ of the country still needs some computer hardware, and whether it's an expensive chip or a cheap chip, it's still an INTC chip... Might I suggest you make a small purchase for yourself before you pick the direction of more stocks -- Valueline. Inside the WSJ, there's an ad for a $55 starter kit. I am certain this will help you out...