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

To: Mary Cluney who wrote (67168)	10/22/1998 1:41:00 PM
From: stak	Read Replies (1) \| Respond to of 186894

Mary, >>There is a lot of truth in both what you and Fred are saying. But, the key point both of you are missing is that this is a technology business - and there are inherent differences between this business and other consumer type businesses. << I really agree with you . Some posts back you made an analogy between Intel and Coke. I think they're both market leaders with great business plans and products, at the time I mentioned that Coke's product costs only a few cents to make and that they have close to zero development costs(they use the same 100 year ol' formula). Both Intel and AMD will never enjoy the luxury that Coke has in that area. >>We, and especially Fred , have been bashing Jerry Sanders - a lot of it is for his own personal profligacy - but the truth is this guy has been very tenacious - and has kept this competition going where Fred's "better management" would have thrown in the towel long ago. << I think most of us would never even dream of going against Intel in the first place.:)) There's gotta be easier ways to make a living. >>It is like being the incumbent in politics - the longer in office - the more patronage provided - the harder to unseat. Only in this case - there is only one Intel - and they have played the incumbency game very well - it gets tougher and tougher for anyone else to succeed.<< I agree for now. However soon there's going to be a "future shock" in the PC industry. The status quo that was the "law" forever and a day will come to an end. Like hot lead shrapnel violating flesh. The communications industry will go thru even greater pain shortly. It's gonna be one hell of an exciting time going forward from year 2000. Here's one product that I think will be a hit. Nino by Philips. nino.philips.com E-mail by 19.2K modem, with voice command, fits in your pocket. stak

To: Mary Cluney who wrote (67168)	10/22/1998 2:28:00 PM
From: nihil	Read Replies (1) \| Respond to of 186894

RE: Sanders' tenacity Mary, Good post. I am concerned about the attempt to combine different competitive experiences into one theory, and your point about the differences of tech durables and consumer nondurables is important. Interbrand competition in consumables is tough -- and entering a habit market (e.g. Coke in Japan with 90% share in colas) I believe can only be achieved by sharp price cuts and a product with superior consumer acceptance for a substantial fraction of the users (remember the Pepsi Challenge?). Pepsi and Coke have fought awful battles in many markets with huge (50%) prices cuts on supermarket promotions. When the price is cut, sales of that brand mushrooms (they rarely both discount at once. Then we have immense payments to stores if they will only discount Coke or Pepsi (these have been attacked by anti-trust) or promotion allowances. These are attempts to create (illegal) exclusive dealing. Businesses in this kind of competition are often stuck in endless cycles of fight over share. Because the fundamental costs change little it is rare that anyone can knock out their rival, and there is always the threat of entry. Chips are vastly different, but you do not have to knock out Intel to make a living. As a dominant producer, Intel has no interest in undercutting the price of a competitor (particularly if it cannot discriminate in price among segments). It can tolerate a stable price differential indicating the competitor has accepted a follower or secondary position (and a small stable share) in the market. If the rivals cuts price too much, the leaders signals by cutting price to close the gap. If the competitor announces a fixed ratio differential (AMD's infamous 25%), it signals the leader that it is challenging a price war. It is okay to decorously compete with the dominant firm but one must never challenge the leader to a price war, particularly while increasing capacity sharply. I believe AMD was aggressive in buying NexGen and that was okay. I think it was foolish to announce K-6 with a speed advantage over Pentium (a move that is said to have infuriated Grove) and before Pentium II. If you strike at the king, you must kill him, and this AMD has not done and shows little likelihood of doing. Intel is hardly bleeding, although profits could be better. AMD has sunk deeper and deeper in debt. If I were AMD, instead of buying NexGen I would have bought stock in Intel. I would rather compete with NexGen (which needed capital) than spend a bunch to buy it so I could continue to lose money competing with Intel. This is not a joke. One benefit of being beaten to a bloody pulp by a thug is learning not to fight him again, and another is knowing who to bet on if there is another fight.

To: Mary Cluney who wrote (67168)	10/22/1998 6:32:00 PM
From: Fred Fahmy	Read Replies (1) \| Respond to of 186894

Mary, <....but the truth is this guy has been very tenacious - and has kept this competition going where Fred's "better management" would have thrown in the towel long ago.> This is not true and you are missing much of my point. A better management team not only would have not thrown in the towel, but given the exact same resources could have been much more successful and profitable. Jerry's mismanagement has been AMD's downfall....his tenacity is largely to blame. This notion that he stated several years ago that AMD was going to be the next Intel says it all. Instead of being content to nibble away at market share with much more reasonable pricing, he chose to take Intel head on. A "better" management team would not have taken this approach. The overall opportunity has been growing quite nicely over the last several years. There was/is plenty to go around for all. AMD would have done much better to maintain a smaller market share with more reasonable pricing and let the overall market growth fuel AMD's growth. Not to say that they shouldn't try to increase market share but not so quickly and not by promoting a price war with an industry giant. As many have pointed out, the deck is stacked against AMD for several reasons including Intel's size and vast resources. Given that going up against an Intel is no easy task for any company, the last thing you need is a mediocre to incompetent leader. I'm not sure that there is anything that Jerry could possibly do wrong to convince some people that he simply hasn't got what it takes to successfully lead AMD. The mere fact that AMD has survived is hardly a reason to give Jerry credit for some great achievement. Many executives could have done much better because they would not of let their ego dictate their strategy. FF