Merrill: Intel's More Interested In Crushing AMD Than Imprv

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?

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.

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 ****, 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...

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.

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!!!

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.

Ahh, found it ...

Well, the stock market itself seems to be not enamored with Intel lately. People there are voting with their wallets, so to speak.

What's "PED"?

Doing badly compared to AMD?

PED is Price Elasticity of Demand, a simple theory which, ceteris paribus, determines whether a price change will result in increased revenue.

You can learn a lot more about stock charts if you like. Intel is well off it's own peak. Even if you ignore the 2000 peak and just use $34.

the 1 yr is no more or less relevant than the 1 month or the 5 year, etc., etc.

Yeah, it would have been nice to pick up some Intel in the 1980s!!

My thoughts to the letter. Intel just wants AMD out of the game or marginalized to the point where they more or less have a monopoly again. I don't think AMD will let that happen, though. But if they make one big misstep right now, it'll bode very poorly for all of us.

I may be crazy here, but I actually think intel's strategy makes sense.

This is why.

When you go to a movie theatre, the little tiny soft drink is $3.00, and the huge giant vat'o'cola is $4.00

Why? - because the margin on pop is so large that the extra buck for the huge vat make sense. They give you 14 cents more pop (at their cost) for another buck in revenue ... HUGE margin on the upgrade.

It's the same with CPUs.

Firstly, an E6850 cost the same to make as an E6300. If they can get you to upgrade from a $163 E6650 to a $266 E6850, intel makes another $100.. $100 in essentially pure profit....

Granted, Intel sells a few $ E6800s at $999 but it's quite few.... I bet the extra E6850s at $266 will generate far more revenue than the few at $999.

Quad cores?

Two E6600 in one package to make a Q6600 does NOT cost twice as much to make - it costs maybe a few dollars extra

Intel has already paid for the fabs, the R & D, etc..

It's like Microsoft and Windows.. the FIRST copy cost $5 billion... the second copy cost 23 cents...

If Intel can get you to pay an extra $150 to go quad core, they are laughing all the way to the bank.. the second chip on the package costs waaaaaaaay less than $150.. Intel ALREADY has the masks, the litho tools, the R & D... Cranking off a few million extra E6600s so folks can "double up" to quad core cost Intel maybe a few bucks per chip...

It's exactly like the pop in the movie theatre.... did you want the tiny pop for $3.00 or the Vat'o'cola for $4.00 ?

Just my 2 cents worth...

Ummm... Going to the movies and buying a pop there, you know your getting raped for the money you pay.

I don't think that would be a good analogy to what intel is doing to amd... well from a customers point of view. We just want great prices.

Edit:
To clarify:

2 companies going head to head in trying to make profits, while one gets more attention for its price and performance vs a bunch of people in line suffering from thirst, just doesn't paint the right picture..

No doubt Intel has enough excess capacity to sell the Q6600 at these prices without cannibalising its dual-core sales. If they run out of capacity and start forfeiting the sale of two dual-core CPUs for every quad-core sold, they will reduce their profit at these prices:

1 x Q6600 = $266
2 x E6550 = $326
Loss to Intel = $60

1 x Q6600 = $266
2 x E6850 = $532
Loss to Intel = $266

The Q6600 is a bargain if you run quad-core optimised applications and will put downward price pressure on the AMD desktop quad parts. Although by the time their desktop quads are out Intel will be close to releasing/have released their 45nm quads and those will obviously be cheaper to manufacture.
So it seems as if AMD won’t be able to nearly compete with Intel in performance per manufacturing cost even if the new architecture kick serious ass. We can talk about IPC and performance per watt etc but the bottom line in many ways is IP$ (Instructions per manufacturing cost). I can’t see Intel losing the lead here and that allows Intel to be very aggressive with their pricing.

As CPUs become more and more a commodity item, the manufacturing cost becomes more of an issue and performance becomes less important. A quad-core 2.4GHz CPU at $266 with 8MB cache on a 65nm process shows which way the market is heading.
This is the environment that AMD and Intel have to compete in.

Often I have the sense in posts like this the suggestion is that Intel will progress, and AMD's progression will ..... kinda not happen. Like fusion won't happen, AMD/IBM won't do 45, or whatever. etc.

If you could freeze AMD in time later this year, then sure....

Intel has four (4) 45 nano 300 mm wafer fabs planned. They will have Sh*tloads of capacity.

Some of this will be taken up in 2008 when Intel enters the discrete graphics market (GPUs tend to be really big dies) but still the 45 nano node will crank out a lot of chips.

What is REALLY unusual about Penrym is that it seems to be just about a "prefect" shrink - In theory the shrink from 65 to 45 nanos saves you about 47% on the die size (all things being equal) and when you factor in the 6 megs of cache and the extra 23 milliion logic transistors in Penrym, it actually is very close to 47% feature size shrink.

Intel is using it's advantage (fab capacity) to the max.

AMD is using it's advantage (direct Connect Architecture) to the max.

As they say in retail, "you sell what ya got"

We'll see which one wins out.

, just further reinforces the subject. War is about 'crushing' your opponents.

If the rumoured 3Q pricing (3.0 ghz E6850s on 1333 FSB for $266, q6600s at the same price)) is correct, yes, this is outright economic warefare by Intel.


In the short term, you and I win - big time.

Seriously, $266 for an E6850? - that's just f$%king amazing.

If you don't think that's a deal worth buying, you are not smart enough to own a computer.

In the longer term, AMD adapts and lives, or they die.

If they die, another will take their place.

listen when intel was 18 and nobody said a word in summer with C2D coming out the stock went to 21 - now that amd is at 14 from 35 they all say how bad it is!

do the opposite - when the cnbc guys all slam amd you should be buying calls 2-3 months out!


intel would have gone to 30-35 if they would not have buried amd for market share - intel is putting the hurt on dell for jumping to amd

expect higher prices if amd does not deliver on what they said for this fall



intel owns the high end = amd can't sell a fx-74 or fx-72 and they getting $300 for a fx-62 while intel owns the $900 chip market

intel will own the mid market with qx6600 at $600 when supply catches up


[quote="The_Vorlon"][quote="sillywabbit"]Quoting JJ,

i do not beleive the above rummor its totally against share holder value - why give the chips away, e6850 $400 i would guess - qx6400 $500 and qx6600 at $600

the x6800 will become the x6900 and the qx6700 stays as is for 1 yr