Intel Corp (INTC)

[wbmw]

DewDiligence, per your request

http://www.investorshub.com/boards/read_msg.asp?message_id=553538

I have posted and re-posted my comments suggesting that wbmw’s estimates of INTC’s production costs for Banias may be too high.

Does anyone here believe that INTC is planning to sell any flavor of Banias at a gross margin that is way, WAY above the gross margin of any other chip in the microprocessor industry?

I do not, and that’s why I consider wbmw’s assertions that INTC can sell Banias profitably for less than $100 to be highly suspect. FWIW. Dew

First, you exaggerate about the asking price. Banias will certainly not be "WAY above the gross margin of any other chip in the microprocessor industry" (ever see what Intel charges for their Itanium and Xeon MP?). Even in terms of the mobile market, Banias prices are not much higher than where the Pentium 4-M was only several months ago. Compare Intel's pricelist with what the Inquirer says about Banias pricing. The premium ranges from $11 on the low end sku, to $75 on the high end sku.

http://www.intel.com/intel/finance/pricelist/
http://www.theinquirer.net/?article=5902

Having said that, I, for one, believe that Intel will sell Banias with the intentions of higher margins. Why would you believe this is not the case? The mobile market has traditionally enjoyed higher ASPs than desktop. Also, Banias represents for Intel a new paradigm in mobile computing. While Transmeta pioneered low power and long battery life, Intel is taking a step further, and promoting wireless connectivity as well, which is why they are bundling their 802.11a/b chips with certain Banias configurations.

Given the higher performance that Intel has delivered above their competitors, along with the low power, small form factors, and long battery life that Transmeta has pioneered, and with wireless connectivity, I think Banias laptops are more apt to draw a higher premium than even Pentium 4-M. The tricky part for Intel is convincing people that they should not buy based on megahertz, but based on name brand instead. For their corporate customers, that it not so much of a challenge. For the consumer, however, you might as well convince them that smoking is bad for their health. Some people may not "get it", even with a string of well delivered advertising campaigns. But we'll see.

If Intel doesn't get the premiums from Banias, I think they will lower the prices. I'm fairly convinced that Banias will be cheaper to produce than Pentium 4-M, and although the micro-architecture required more R&D than a Pentium proliferation, I think it will be amortized amongst enough volumes for the R&D to be a trivial piece of the processor cost.

wbmw