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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Earlie who wrote (45853)	2/5/1999 1:43:00 PM
From: Knighty Tin	Respond to of 132070

Earlie, I agree with all you said except for Intel preparing for negative pc growth. How exactly could they have prepared for it? That's their market. It is no longer growing rapidly. I guess they could have added less capacity, but that would hardly have helped them grow. Diversification? That has been a joke. More internet investments? Now we got somethin'. <G> MB

To: Earlie who wrote (45853)	2/6/1999 3:01:00 PM
From: Mary Cluney	Read Replies (3) \| Respond to of 132070

Earlie,>>>INTC does many things well. They are superb manufacturers for starters.<<< How about making money? They make more money (net profits) than all but maybe two or three other companies on earth. I don't understand what you mean when you first state they are superb manufacturers and then go on to say they have real trouble in cost reduction. By definition, if you are superb in manufacturing that means you are efficient at producing the highest quality product with the highest yield at the lowest cost. Am I missing something? You also go on to say "they've thrown their hands up with respect to the Merced project. " Intel has admitted delays in this project and will start production late next year. Whether the production model is the Merced or the more advanced McKinley may yet to be decided. This is an enormous undertaking and will have major impact in the world of computing. This is a quantum leap in technology. Much more complex and more important than Windows95, Windows98, Windows NT or Windows 2000 et al. Yet, we understand how in development of advanced technologies time tables slip. If it were easy, anyone could do it. The Merced project is not something someone will come out with something from their garage to compete as might happen to Windows Software (Linux being an example). With the Merced project you get a window into the magnificent management of hi-tech projects that will be the envy of the world and foreshadow how large technology projects will be managed in the future. It is not something just anyone could manage. The Merced project team leads the way but before they are finished, a McKinley(sp?) project team is designing and developing a follow-up microprocessor. If there are further delays in the Merced project, they may just cut over to the McKinley design. Work has already begun on successors to the McKinley and investments have been made in a Virtual National Laboratory for further advances in microprocessor technology. With an R&D budget bigger than the total revenues of any of it's direct competitors and larger than the GNP of some countries in the UN, Intel is poised to dominate the Computer World for some time to come. >>>Without HWP's assistance, their more advanced micro projects would be dead meat.<<< I believe that to be an opinion that would be hard to prove one way or another. >>>From my perspective, INTC's difficulties in the immediate future will relate to: - poor return on their high-end chips,<<< Unless you could cite some specific sources for this, what we see is that Intel sold out 4Q and didn't sell as many low end chips as forecasted because they had to shift production to the high end Xeon where they couldn't meet demand and where margins are much higher. From what we understand, Xeon Chips sold out in January and indications are that sales are strong for February. The Xeon chips sell for between $800 and $3500. Gross margins may be close to 60%, if not higher. If you are in business you probably know with the exception of some drugs (recreational and otherwise) there are few products that maintain that kind of margin. >>> The high end market has no sales drivers at the moment. New apps could change this but so far, they're not on the screen.<<< I noticed that you have been in the computing consulting business for quite some now, but when was the last time that you have heard a CIO, or the top computer person in any business (no matter how big or small) tell you that he/she has enough MIPS, fast enough response time, no more new application to develop in order satisfy company's management growing list of demands? Do you believe that that day is near where these people will say that have all the computing power they need? From your past posts, it may seem like you are in an environment that I don't have any experience with or can imagine - and indeed, you may have that kind of experience. Anyhow, do you think there are businesses (or large number of businesses) in Europe and Asia who would not lust for the kinds of computer systems and programs that is available to American companies? Do you think there are school kids anywhere who would not lust for the latest, greatest, fastest processors available even though all they may need is a 486 laptop to do some wordprocessing? >>>New apps could change this but so far, they're not on the screen.<<< Do you believe that what there is, is only what you can see? Do you have any faith or belief that just underneath your radar screen, there is an enormous amount of talent working on new apps? If there is any truth to the saying "build it, they will come" - this is it. >>>Mediocre sales also implies heavy price cutting, so I expect very serious reductions to margins as this plays out. <<< It all depends on how you define mediocre. All I know is that Intel is selling more microprocesors in unit terms and in dollars terms than in the history of mankind. Serious reductions to margins also depends on how you define serious reductions. Intel has never had margins of much less than 50% and will continue to have 50%+ margins for as far as anyone can reliably predict. >>>- Cash. Intel has always had tons of it, but the taps have been open of late, <<< Intel has made a number of investments in technology companies and are carried on the books in the balance sheet at purchase price. Most of these invesments have appreciated several hundred percentage points. These are hidden values that most value investors like to stick their noses into and unearth. >>>The growth of the bottom end in the PC world. This is an Intel nightmare.<<< Where it is a nightmare to some, others find great opportunity. Intel has embarked on a segmentation strategy where they keep the prices high on the high end and very low on the low end - causing a nightmare perhaps for its competitors who exist on the low end. But even here, because of Intel's manufacturing prowess, they could produce low end chips for less than the lowest cost producer and still make a good profit. >>>- PC saturation. >>> Let's just agree to disagree. I have yet to see any PC growth forecast less than double digit. My own sense is that there are several hundred million (and perhaps billion) people who are poised to enter the computer age. The day is not too distant where you will not be considered literate until you are also computer literate. >>>I may be wrong but I also see Rambus shaping up as an ugly problem. Rambus is efficient, but its expensive to build. It also provides no real benefits unless it is employed by a high end micro.<<< I can understand that if you were running things, you may not take the risks that others may take. Only time will tell who is right and what the payoff is. That is what makes a market. >>>Intel won't die,<<< Well, eventually everything will come to an end - but fortunately or unfortunately, I will not live to see that day. Regards, Mary