http://biz.yahoo.com/seekingalpha/ [...] .html?.v=1

Merrill: Intel's More Interested In Crushing AMD Than Improving Margins

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Speculations on Paul O.'s motives, anyone?

I'm especially interested in rational or sensible motives he might have, if someone can offer some.

First to address one side of it (sans innovation for a moment), just how important is 80% market share vs 75%?

To see why it's questionable, imagine you made bicycles and I did, and we competed, and I made mine for about $105, and you made yours for about $115. Suppose when we started I had 75% of the market, and you 25%, and the this type of bicycles sold for about $200 on average. Would it be a good business decision for me to cut my average price from $200 down to $140, since I can make them cheaper, and gain market share, and still make profits?

I'd be cutting my margins, hoping to increase my unit shipments.

Often by cutting prices a business can increase the volume of units, and thus end up with more net profits, but....most businesses don't own 70%+ market share to begin with. If you *start* with a very high market share at the beginning, you can't double your market share, for example.

Starting at a high 75%, I might only get to 83% in a few years, if many people like the other brand for other reasons, like it's logo, or it's dealers, or whatever. Even if my bikes are better at times, or cheaper at times.

In this example, it would cost me more lost profits than I gained from extra market share, and if you had determination to persist also, it could actually cost me a great deal of money over years of time. I'd give up a *lot* of profits.

This is what Intel is in the middle of doing.

Not really what most people would think of as the way they'd run a business. After all, you go into business to make money, right? You don't normally give up a big chunk of your profits to gain 1/15 more share, or even to increase your volume moderately.

But the other side of this is innovation.

http://www.crmbuyer.com/story/GB8E [...] Wars.xhtml

Perhaps there is *another* reason 80%+ share is very important for Intel.....

Any ideas, anyone?

The 2nd link is worth reading, just for the overall picture it draws together succinctly. But what exactly is Paul O. after?

It could make sense if Intel could maintain even the 50% margins, and the world growth in computers would make for good profits.

But....Intel seems to have another plan. The Catch is, Paul O. doesn't own Intel. Stockholders do. The great majority of the owners expect the corporation to be run like a business, with business objectives that are about good profits over time. They don't want margins to move down to 45% or lower, and then stay there down there for years, just for modest gain in share of total market. They are more interested in making more profits and having their stock appreciate.

Intel can make a lot more profits at 73% market share and 60% margins than it can at 80% market share and 43% margins.

consider their previous business model pre amd. if amd does not exist there is no real need to spend a fortune on r&d. they can simply refine their process and raise the clock speed of their cpus. intel knows that the avg consumer doesnt have a clue on what makes a cpu tick and will only look at the amount of gigahertz. i definitely hope barcelona and r600 is a smash hit like conroe cuz i would hate it to become a one horse race again.

I think that sometimes some people lose sight of the fact that Intel is into various chipsets, that CPU's is just really a very small part of their overall product line.

They are rumoured to be entering the WiMax market in a big way, and are already making chipsets for various mobile products. Not to mention that they are the largest integrated GPU maker (which is not to say the best...). They are into the server market with the Itanium though they seem to have quit developement recently...

So think of Intel as an octopus, with a tentacle in every camp that they can get into. WiMax not profitable? Drop it. Itanium not moving? Shelve it. Controllers not moving? Think about buying AB. CPU's taking a loss? No problem, one of the other divisions will take up the slack.

Add to that their marketing acumen, their arm twisting deals... Immoral maybe, illegal in some areas, but BAU in others, and one gets the beginning of the true global power of a chipmaker like Intel. Frightening, eh?

Now take a look at IBM...

I think that sometimes some people lose sight of the fact that Intel is into various chipsets, that CPU's is just really a very small part of their overall product line.

They are rumoured to be entering the WiMax market in a big way, and are already making chipsets for various mobile products. Not to mention that they are the largest integrated GPU maker (which is not to say the best...). They are into the server market with the Itanium though they seem to have quit developement recently...

So think of Intel as an octopus, with a tentacle in every camp that they can get into. WiMax not profitable? Drop it. Itanium not moving? Shelve it. Controllers not moving? Think about buying AB. CPU's taking a loss? No problem, one of the other divisions will take up the slack.

Add to that their marketing acumen, their arm twisting deals... Immoral maybe, illegal in some areas, but BAU in others, and one gets the beginning of the true global power of a chipmaker like Intel. Frightening, eh?

Now take a look at IBM...

As a further example...


http://www.dailytech.com/article.aspx?newsid=6371

They are now planning on entering the phase change memory market.

This from Merrill lynch. At least the truth is out and the pricing is nearly confirmed on periferal evidence as quasi predatory.

Sacrificing GPM to put the competition out of the running,Is predatory;it requires facts to become a litigious matter; These are not facts but it adds to the pool of those who believe Intel will never stop this type of behavior.

They deserve it to bite them hard.

Wow, you would make a crappy judge. What should Intel be charging for their chips? They are still making Billions a quarter in profit. I don't think the pricing is a preditory so much as that AMD just is WAY WAY behind in Technology. What if Intel opened up the C2Ds to their full potential, did away with its single core processors and made the low end C2Ds the bottom of its line and stretched out it product line more. Would that make you happy?

If AMD launched K10 tomorrow and it was worth a shit, AMD would be fine. It is NOT Intels fault that AMD fell behind.

This from Merrill lynch. At least the truth is out and the pricing is nearly confirmed on periferal evidence as quasi predatory.

Sacrificing GPM to put the competition out of the running,Is predatory;it requires facts to become a litigious matter; These are not facts but it adds to the pool of those who believe Intel will never stop this type of behavior.

They deserve it to bite them hard.

Wow, you would make a crappy judge. What should Intel be charging for their chips? They are still making Billions a quarter in profit. I don't think the pricing is a preditory so much as that AMD just is WAY WAY behind in Technology. What if Intel opened up the C2Ds to their full potential, did away with its single core processors and made the low end C2Ds the bottom of its line and stretched out it product line more. Would that make you happy?

If AMD launched K10 tomorrow and it was worth a ****, AMD would be fine. It is NOT Intels fault that AMD fell behind.

It won't be INTEL's fault when AMD is closed next year...

This from Merrill lynch. At least the truth is out and the pricing is nearly confirmed on periferal evidence as quasi predatory.

Sacrificing GPM to put the competition out of the running,Is predatory;it requires facts to become a litigious matter; These are not facts but it adds to the pool of those who believe Intel will never stop this type of behavior.

They deserve it to bite them hard.




So I guess now I can say this without everyone attacking.


ALL HAIL THE BOTTOM FALLING OUT!!!

The new memory technology deserves it's own thread, and I think it's appropriate for the cpu forum, since memory and cpus are becoming intertwined and memory is part of cpus.

I'm curious of your thoughts on these two (phase change and edram).

IBM has said, as you probably remember, that their eDram will double cpu performance.

Also, with so many new memory technologies coming, could one of them compete with DDR3 in the memory banks? I'd like to just be able to goto to 4GB in 2008 when I do for like $120 or less. That seems like a more reasonable price to me. Maybe $150 if it's higher performance. But really, I think it should be $110 for instance, to bring out more buyers.

Another Point re the subject here:

although it's questionable to lower your *average selling price* (ASP), it isn't questionable at all to change your product mix.

So if the cpu makers move agressively to quad cores in the $200 neighborhood, but have a rich mix and decent ASPs, then the "cheap" quad core isn't really bad for business. It's the ASPs and the margins that matter, for profits.

But a 49% margin for something at $400 is a lot more monetarily than a 49% margin at $200.

The bleeding continues.


ALL HAIL THE BOTTOM FALLING OUT!!!

I realy didnt want a lesson in economics.
Why should we care?
will our opinions directly change anything?

Hey, reading is voluntary, right? I have to be pretty selective in what I read, since I barely can read 20% of even publications I subscribe to. The easiest and perhaps best strategy is to read what interests you.

Could someone please give me some more information (history) on the "dummies book". Was that a comment AMD made in public or something ....

Ahh, found it ...

Because one analyst agrees with you? If there were real worries, they'd vote with their wallets (i.e. move INTC to 'sell').

The move works for Intel is the PED for their CPUs is >1. I have no data on the elasticity, but I would guess it could well be.