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Intel Corporation Message Board

  • true8 true8 Nov 1, 1997 12:58 AM Flag

    Did you changed your year end target? WH

    AMD is out of the way now. INTC is going to take off. Today
    some suckers dumped INTC shares like AMD shares. This would
    create the buying opportunity for long-term investors. Just be
    patient. <i><b>The stock is heading to $110 by the end of October and
    possible $140 by December.</i><b> Look for another split announcement
    by January 98. When INTC annouce 64 bits Merced processor next
    year, the stock will have another jump again. All my friends that
    own Pentium Classic are looking to upgrade to Merced in 1998, I
    am sure some of your friends would do the same. Besides, less than
    45% of American families even own a PC and probably less than
    5% of the world families own a PC, so don't worry there is a long
    way to go before the PC market is satuarated (2050
    maybe).

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    • Are you purposely being obtuse or do you really not get the (crucial) distinction? A ROYALTY is a fee that Company A charges Company B for the use of intellectual property. A gets part of B's revenue stream. A can use extra $$ to UNDERCUT prices of
      B. In this case, a ROYALTY by Intel would be: Company C sells a $500 system with an AMD/Cyrix CPU, and Intel gets a $50 royalty. If it were an evil monopolist (which it is) and could get away with it (which it might or might not), it might EVEN use the extra $50 to help subsidize the its own CPUs (although, due to its market share, this would only result in a subsidy of ~$5 per Intel CPU - but if Intel's competitors were half as good as IBM's were, it would be more like $60/CPU), thus enabling
      them to REDUCE prices.

      A PREMIUM is when a company can charge MORE for THEIR OWN product than the competitor for a like product.

      With a ROYALTY, the owner of the intellectual property can actually charge LESS while making MORE than its competitors. With a PREMIUM, the company believes that it can charge MORE than its competitors, thus increasing its profits.

      Do you understand the distinction between ROYALTIES and PREMIUMS?

      Part or all of the PREMIUM, may be known in economics as RENTS. The ironic thing is that Intel is unable to avoid RENTS in this market. If Intel lowers prices to the prices of equivalent AMD/Cyrix products, unless AMD/Cyrix further lower their prices,
      the market for AMD/Cyrix products DRIES UP, and they would sell nothing. Thus, to STAY IN BUSINESS, they must concede Intel its rents. Thus, you have essentially misunderstood the market, here. Lower prices are the only way for Intel's competitors to STAY IN BUSINESS. Intel can only MATCH prices by setting them where AMD and Cyrix can't afford to lower their prices below Intel's, at which point, AMD/Cyrix no longer have viable businesses. To some degree, Intel actually does this. From AMD's
      Q3 report, they lost money in part because, "Average selling prices (ASPs) for K6 processors fell sharply from the immediate-prior quarter." Now, did they lower prices so that they could lose money on purpose? They lowered their prices, incurring LOSSES, to remain COMPETITIVE. To STAY IN BUSINESS. This is a frank admission by AMD that they cannot get as much as Intel for similar products. Far from CHASING Cyrix/AMD down with lowered prices, Intel is PUSHING them down. Thus, Intel lowers its
      prices, reducing, but not eliminating, the rents that it collects, and (only!!!) makes $1.5B in Q3, while AMD is pushed to lower ITS prices to the point of LOSING money.

      Now, let's ask a question, True8. What would happen if Intel sacrificed all profits for 2 yrs in order to reduce prices further? Well, Intel stock would plungefor 2 yrs. But, they could CPU prices $125/CPU. AMD sold 1.3M CPUs Q3, and lost $30M. Now they have to drop the price by $125/CPU. Instead of losing $30M, they now lose about $160M. How many quarters can withstand this?

      Then Intel wouldn't have direct competition, and would be sued by DOJ. Which goes back to message 191 -why do Cyrix and AMD exist? To provide anti-trust cover for Intel.

    • True8: You are very unfair to dfrusso. He was telling the truth but you did not like to hear. There is one most precious asset that a business loves to have. This is called "brand loyalty". When I buy a tube of toothpaste, I prefer Crest to Colgate.
      When I buy a box of facial tissues, I prefer Kleenex to Scottie. When I buy a TV, I prefer Sony to RCA. When I buy a washer I prefer Maytag to GE. When I fly I prefer Delta to American. I was in Japan last May and I could not find any vending machine sells Pepsi. I think that Japanese prefer Pepsi to Coke even we know they are the same. I know you love Cyrix chips but not everyone has the same taste like you. I will not buy any Cyrix chips. I know you would say that we are stupid but this
      is the behavior of most conusmers. Unless I am screwed up by Intel very bad, I will not change my brand preception.

    • True8:

      I know lots and lots of folks (including myself) who need to have a couple of WIN95 office suites (there goes 400 - 500MB), some other stuff, and YEARS worth of data. I'm glad 1GB does it for you, but it doesn't for a lot of people. However, that $499 PC wouldn't be so bad if I could add another hard disk drive down the road. But, alas, it has only three drive bays, and it has three drives. No room at the inn.

      I don't know what the stripped PII 300MHz will look like when it is priced out. I know that Pentiums w/MMX are selling for below $1000 fully loaded. With an extra drive bay or so.

      I don't think that I've EVER said that marketing is everything. I've said, and do believe, that it is the most important thing. As for IBM, this proves the point. Before the mid-80s, most folks believed two things about IBM: they had mediocre technology;
      they had superior marketing, everything from their advertising through their sales force, through their after-sale care. And while they ran their show like this, they were unstoppable. In the 1980s, something happenned. Two things, actually. First, IBM began to think of itself as being a leading-edge technology company (a mindset not wholly unreasonable). Second, IBM got sloppy in the marketing department. IBM became a superior technology company (they really did), and a less than superior
      marketing company. And they took a REALLY BIG dive. Now, they've reversed course, again, and they are doing well.

      I can name lots of companies that have been very successful over time that did not always have cutting-edge technology but that did have long-term superior marketing. It's harder to name companies that over the long-term had consistently superior technology, inferior marketing, and actually managed to make it in the long-term, no less thrive in it.

    • Dfrusso,

      You may choose to call it premium vs. royalty, but the
      end result is the same.

      Higher prices for Intel's processors.

      Isn't competition wonderful. ;-)

    • RE: You obviously don't do much with your PC. ;)

      I'm not a PC guru, but I do know more about computers
      than 80% of the population. If my 2 year old 1Gb harddrive is only used to 55% of its capacity, it's because I remove file
      clutters. You should try it.

      The Stripped down Intel 300MHz pII (with level 2 cache) is
      targeted for the $1500-$2000PC. Still too high.

      Marketing is everything...sounds like shades of IBM strategy.

    • True8:

      Intel isn't asking ANY royalties on ANYTHING with AMD or Cyrix products sold by ANYONE. In your view, they are asking for a PREMIUM for their own products. And in every industry there are generally at least one or two suppliers who can ask a premium.

      In case you're not getting it, IBM was asking the likes of Compaq to pay IBM 10% of the price that Compaq charged its dealers for a COMPAQ computer, not an IBM computer (since Compaq never sold anything from IBM). COMPAQ would have manufactured the entire computer, including the MCA bus within the computer. IBM was demanding that for the privilege of incorporating an MCA bus within a Compaq computer, Compaq would have to pay IBM a royalty.

      I am unaware of any royalties paid by AMD or Cyrix on the basis of quantities of PCs sold for any Intel intellectual property.

      Furthermore, the retroactive royalties that IBM desired on the ISA architecture were beyond even regular royalty agreements. IBM didn't really invent the ISA architecture. They took a bunch of off-the-shelf technology and strung it together to get the ISA architecture. Then, they promoted it as an open architecture for five or six years. THEN, they demanded retroactive royalties as part of the price to be permitted to pay royalties on MCA.

      I am unaware of Intel using any off-the-shelf technology, promoting it as an open standard, and then trying to charge retroactive royalties for others' use of the technology.

    • True8:

      You obviously don't do much with your PC. ;)

      The only point regarding the close-out parts is that one could put together an Intel-based unit for not a whole lot more.

      As to the ability to upgrade CPUs via software, I don't view that as a "conspiracy" and don't see what our dear friends at FTC and DOJ would have to say about that. Sue Intel for making their products better? How offensive of Intel to do such a thing!

      MMX just marketing? Not quite, but you help make my point by saying so! Selling this stuff is NOT primarily about having the best technology, though that doesn't hurt. It is about being able to position your technology in a way that better appeals to the market than your competitor. And it's NOT primarily about price.

      As to 300MHz Cyrix CPUs, I think that I read somewhere that Intel will or is bringing out a low-end Pentium, minus some cache, at 300MHz. Remember, the monopolist doesn't need to overwhelm the potential competitor to maintain position. The monopolist merely needs to block the potential competitor from developing a significant advantage.

    • Dfrusso,

      IBM asked only 10% royalty for MCA and Intel is asking 25-66%?
      Yep, Intel is not like IBM.

    • Dfrusso:

      If close out means using 12xCDROM and 1Gb hard drives,
      I don't have a problem with this. My 2 year old PC has them.
      The point is: at $499 the buyers won't care.

      This $499 special will do everything the majority of buyers needs and more. BTW, my 2 year old, 1Gb drive still has 450Mb
      to go to be full.

      Cyrix is planning to come out with MediaGXi and MediaGXm
      with clock speed of up to 300MHz later this year or early
      next year.

      As to Dovark's article, the conspiracy theory if holds true
      will no doubt bring FTC/DOJ investigations. Enchancing the
      MMX instructions by downloads sounds interesing, but really
      how many applications currently uses MMX? MMX was just another
      Intel marketing scheme to differentiate them from the pack.

      Age and treachery beat youth and talent every time.
      With Age comes wisdom, but also bulk, whick tends to slow
      growth.

    • True8:

      No. Not really. IBM tried to get greedy. When MCA was announced, IBM stated that they would want royalties on every PC sold with MCA. Compaq, Dell, and others were lining up to pay the royalties. They figured, what's IBM going to hit us up for, 1%? 2%? We can live with that.

      And they would have lived with that. And MCA would have been the standard 32-bit bus. And IBM would have periodically released upgrades and enhancements to MCA, and kept the new stuff for themselves for about 6 months, and then let everyone else have at it. And they'd have collected royalties equal to about 1% or 2% of the entire non-IBM brand market.

      So, what happened?? IBM didn't ask for 1%. Or 2%. They asked for TEN PERCENT. That's right, 10%! And not on the value of the MCA, but on the price of the entire computer! PLUS, a retroactive royalty on every ISA PC sold by anyone who wanted to
      license MCA. For every PC a company EVER sold. I don't remember whether the retroactive ISA royalty was 1% or 2%. I just remember that almost everyone collectively shouted, "Screw you, IBM!", and they got together and developed EISA. This is a case of taking too many feathers to maintain the composure of the geese.

      This is not at all analagous to the current conversation. For it to be analagous, Intel would be attempting to charge a 10% royalty on every computer sold with a competitor's CPU. If Intel had the intellectual property rights to attempt that, I think that we could see a similar move away from Intel's technology as we saw from IBM's.

      There are lot of reasons why many folks prefer Intel. A lot of us have had unhappy experiences with AMD and Cyrix products. I have. Even if their current products are great, I'm not sure that I want to take the risk to find out. Intel long-term provides
      consistency, and responds well to the market. Additionally, it's a pretty good bet that if I buy a PC with an Intel CPU today, the company will still be in business 3 years, 5 years from now. Intel is about a $25B company with profits of about $6B. AMD is about a $2.4B company that loses money. Cyrix is about a $350M company that loses money. Maybe AMD and Cyrix will be here in 3 - 5 years, as well. But it's easier to imagine that they won't be than that Intel won't be. Maybe after being
      bought by Natl Semi, things'll be better for Cyrix. But they're a $2.5B biz that made $27M in FY 1997, and might make $300M in FY 1998.

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