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

To: Fred Fahmy who wrote (66905)	10/16/1998 9:49:00 PM
From: alex pierson	Respond to of 186894

Thanks for the explanation Fred. Guess it makes sense that if you have no profits (like AMD) you can't really stay around forever taking market share. (Though in the short to medium term you may cause some real headaches for the competition. Dumb competitors can be the worst kind...) Alex P.

To: Fred Fahmy who wrote (66905)	10/17/1998 7:10:00 AM
From: nihil	Read Replies (3) \| Respond to of 186894

RE: Market value added A popular way to measure performance is "Market value added" or the increase in total capitalization of the firms in the market in question. If you look at the last couple of years, you see that of the total increase in capitalization of the four x86 producers, that Intel has 100 per cent of it. The other three (AMD, NSM, and IDTI) have destroyed market value. The conclusion is unavoidable, that according to this measure, Intel has taken all of the market value added, and the others have deprived their stockholders of value. In retrospect, it would have been better for their stockholders to have abandoned the x86 market altogether a couple of years ago and to have invested the capital in becoming dominant in markets that they could dominate. At the same time, Intel should have focused entirely on the x86 market and on pushing even faster into the large-scale server (mainframe surrogate) market. Today business strategists despise diversification, entry into dominated markets merely to be number two or three, and allowing anyone else to catch up due to failure of design or production technology. All four of these companies have made terrible mistakes (according to these strategists), but Intel, though threatened by anti-trust constraints, has come close to obtaining permanent domination of PC mpu's (which it had only periodically before) and is on course to begin to dominate large scale server mpu's in the next 5 years or so. If the other three cannot soon make significant earnings, they will fail. No one will want to buy them and take on the burden of financing sacrificial fighting chips. Intel may be allowed to acquire them under the failing company doctrine. The key to their survival is their ability to create and manufacture competitive chips with superior price/performance to Intel. There is no evidence that Intel will willingly give up market share even in the low priced segments, which means price competition (although Intel will usually earn a premium price). Intel may well build new fabs and produce low margin chips for years rather than give up market share. This could mean slow grow or even a decline of EPS (if high margin server and workstation and high-end PC chips do not grow rapidly enough). But as long as profits are positive, the long run survival of Intel as a dominant firm is more important than continued growth of EPS. Stockholders had better understand the risk that Intel will continue to fight in the low cost segment rather than to permanently cede market share. Unless stockholders recognize the long-term value of dominance, and cheerfully accept less than stellar EPS growth in the next two or three years (i.e. no Dell or Cisco) they may be disappointed. The plight of the little three is much more severe. Unless they can break into high margin segments, they will fail. Intel is not required or inclined to afdopt a merciful live and let live policy. I cannot predict whether market acceptance of the little three's new chips will be sufficient to make real money for them, or merely spoil Intel's margins in the high-end PC market. The future high-end x86 server chip market (Merced) has been wrapped up pretty tightly by Intel. It is not clear that anyone -- even Compaq -- would be interested in promoting someone else's chip. It's going to be a highly uncertain and competitive three years.