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Technology Stocks : Compaq -- Ignore unavailable to you. Want to Upgrade?

To: John Koligman who wrote (58081)	4/15/1999 5:26:00 PM
From: rudedog	Respond to of 97611

John - This poster assumes that High end PCs are a significant part of Intel's business now, which is just not true. This was discussed at length about a year ago by me and several others on both the Intel thread and the DELL thread. The mix that the poster's wife is proposing is reflective of what the industry at large has been doing for years. The distribution is a bell curve. The big fast machines represent about 20% of purchases and are used by "power users". As new technology comes on line (say on a 12 or 18 month cycle), those older machines move into the mainstream of the purchasing company. But since there are more mainstream users, these companies have to refresh the mainstream also, and they do so with "middle of the road" machines which are typically built using the same 12 to 18 month old technology which the older high end machines used. Finally, there are a small number of places where almost anything will do - departmental print servers, fax servers, etc. which an older desktop machine can do quite well. This does not require as many machines, so older machines (say 4 or 5 years old) either fill these needs or fall out the back end of the cycle. This results in a purchasing pattern over time which has 20% "big" machines and 80% of whatever the best mainstream buy turns out to be. The ASP for the mainstream machines has been falling fairly consistently for at least the last 15 years, and I have not seen a radical change in that recently. There was a little plateau in the mid-90's due to the pentium introduction, when the combination of Win95 and larger memory machines kept the mainstream ASPs relatively constant, but that was a temporary aberration. In 1984, an IBM AT with 1MB of memory and a 286 cost about $11K. The standard desktop system at that time was an XT or clone at maybe $5K. Today, a high end system is about $3500 and a standard desktop is about $1400. On share of Intel business, the last word I had was that CPQ represented about 14% of Intel's business, and Dell about 11%, on a Units basis, but that CPQ had a much higher use of expensive server chips than DELL (about 8 times as many, as reflected in the sales numbers). The server chips are about 5 times the cost of the desktop chips so that is a significant factor. But those were 4Q numbers. The real question is how much of Intel's 5% revenue decrease was from CPQ and how much was across the board.