Mary:
No question INTC makes money, but :
- it hasn't made as much of late (last several quarters) as it used to.
- the stock price is a lot higher.
- some of the money they make wasn't made producing micro-processors ("hedge fund activities") (g).
With the stock price having gone the opposite direction to earnings, a better question is,...will the company make more or less than it does now, and by how much. My contention is that the slide in earnings will continue.
Yes, you are missing something, but only because I didn't provide sufficient detail. Over its recent history, Intel has enjoyed a situation where:
- it was a monopoly,
- applications led hardware performance,..... the market desired better performance chips
- Intel could force market acceptance of new or higher performance chips by simply cutting off production of lower level chips.
As a result of this, the company never developed the engineering skills required to reduce the cost of a product (as is the norm in most other industries). By the way, Intel's engineers will tell you this without hesitation. As a result, when the K6 appeared, (a chip that was as good as, but significantly cheaper than Intel's), the company took a long time to respond, and the response (Celeron) was a bomb.
Like I said, the company literally didn't know how to get the cost down on a low end chip
You are dead wrong in your assumptions about the Merced/Mckinley projects. Intel is bringing up the rear in this area. Digital's Alpha came out in 1992, if memory serves me well, and other 64 bit chips (IBM, SGI, Sun, HP, most RISC-based companies) have been around for a long while. "Quantum leap"?,.....more like "scramble to catch up".
"Inside Intel" (that is, inside the company), it is the HWP engineers who now carry the ball on these projects. Incidentally, I don't have to prove it, just ask anybody in their engineering ranks. While Intel has obvious reasons for not wishing to discuss it, this is a fact. (it's a joint project). There have been several gaffs in other ways as well. Worried that it was late, the company talked up the chip well before it was market ready. "Bag-of-nails" dumb, from a marketing perspective when there is no delivery.
"Major impact on the world of computing"? Not a chance. A yawn is more like it. Your comments that follow, ("window into the magnificent management of high tech projects,....etc"), sounds like company marketing hype.
Will the Merced make it to market? Highly unlikely now. Not enough bang for the buck. Mckinley coming? yes, but it had better not experience much more delay.
Intel does have a big R&D budget, but it had better pull up its engineering socks . The x86 has been around for an age, and Intel hasn't really done anything except refine it. Their R&D has been a yawn as far as really new developments are concerned.
"Poised to dominate the computer world"? They did for a while and it could happen again, but giving up a big chunk of an exclusive market in less than a year doesn't suggest this.
Mary, do you know where Xeon chips are employed? Look at the price, as it is an indication.
Couldn't sell all their low end chips? AMD did. A related problem?
Intel "sold out" in Q4? Sure they did,...so how come the micro spot market is experiencing "soft pricing" and "plenty of availability" in Intel's products?
Care to comment on Intel's sales of the P2?
With respect to "poor return on high end chips",.....
Because of AMD's remarkable penetration at the low end of the market, Intel has been forced to effectively cannibalize its Pentiums (compare specs to the supposed "new" Celeron). Margins here are now grubby, so the company had better make it at the high end. If Intel can't keep its high end chip production lines running at or near capacity, the margins come off quickly with each percentage reduction. Additionally, if the chips don't sell, prices are reduced. (See recent price reductions to see what I mean). Current sales sure don't give one a lot of confidence. This is Intel's biggest worry right now.
Re. Needed PC power,....
For the average guy or gal, we've long since surpassed required processing power, and it is available at $699. There is already plenty of "over-kill" being sold at the CompUSAs. In business, the I.T. guys tell me every day what they want,.... word processing and some spread sheet capability,...a bit of graphing and email. This also comes for $699. today and that is more than what they want to pay. (g). I talk to a bunch of them. By the way, for the high powered stuff, have a look at what work stations do for you, and at their prices. Like I said, without new apps, more processing power is not widely required. .
With respect to the development of new apps........
I agree with you that they are probably out there somewhere under development. I spend a fair amount of my time chasing around looking at junior tech companies and get to see my share of exciting projects. So far, no new apps have shown up for me. It also takes quite a bit of time for these things to percolate out into the field, and one often gets to have a look at them well before they get to the public due to beta test requirements. The tech sector rumour mill is reasonably efficient. Without those new apps, we are stalled out with respect to further big time growth in PCs
Asia may lust for that PC power, but they are now very poor and more concerned with next week's meals and clothing the kids. PCs are not a survival requirement and Asia is in survival mode. Europe is buying,...and is still a viable market, but L. America was too, until a few weeks ago. A huge problem for PC producers is that they have lost half the world as far as potential customers are concerned, and more are disappearing each month.
I'll take the bet on Intel's margins. Under 50% by mid year.
Intel has made a number of venture investments. They take time to mature. As I've done venture capital in the past, I can tell you that it is a tough game. I sincerely hope a good fraction of them work out. Time will tell. Intel has also made investments that may not work out. Rambus for one is in trouble and I can't see how Intel will get its money out. The company is pouring money into dubious Rambus-related situations. Yuk. Sure, the Dram producers will happily take the cheques and let Intel take all the financial risk. If it doesn't work out, the "hit" will be substantial. I gave my reasons in the last post for my worries
Cash. Intel's main cash drain is stock buyback. This is a dubious activity at best.
The slowdown in the PC sector isn't evident? IDC says corporate sector is "saturated". Nine of nine resellers report nasty results for last quarter. The largest retailer of PCs just coughed up a clanger (earnings down by more than half) and big inventory increases. Everybody in the game is worried about inventories. Looks obvious to me.
Intel's main business is micros. Most are sold to PC producers. A PC slowdown hurts few companies as directly as Intel.
Best, Earlie |
