Re: Intel used to take a page from IBM's old book and maintain a price umbrella in order to assure rich profits for their shareholders. I think the technological success of AMD in recent years really spooked them, and they are defending market share with blinders.
Sgolds, Intel's products used to maintain a price umbrella because they were fundamentally superior to AMD's. As Intel lost this over the years, they grew the risk of market share loss, and when AMD finally started ramping capacity, the result was a substantial hits to margins and revenues.
Intel may have a superior product today, but the market doesn't begin to realize this overnight. It takes time to build back a reputation of technology leadership, and until that happens, they can't create their own pricing umbrella by raising prices haphazardly.
I think Intel will aim to distance themselves from AMD technologically, and as they do so, pricing will level off. In the mean time, it makes sense to leverage their pricing power and their manufacturing capacity to win back market share. Intel already started gaining back server share in Q4, and I think Q1 will be a better time to gain in desktop and mobile, since Core 2 will have been ramped and ready to supply volumes.
You might then say: alright, so while Intel is ramping Core 2, shouldn't they price them at sky's the limit, and allow the performance to speak for itself? Mas believes this, but I think it's wrong. Pricing Core 2 high would only slow down the ramp and make it take longer to replace Pentium 4. Many people forget that the Pentium brand has huge amounts of equity in some markets, and in some places in the world. If Intel offered Core 2 at a high starting price, many people would either settle for Pentium 4, or go to AMD.
I think the pricing that Intel has fixed on their product lines today are both fair for consumers, and worth enough to make >$1.0B per quarter in earnings. Once you consider the cost cutting that Intel is implementing, their earnings will be back to 2005 levels in no time.
I believe this as an investor, and if you're still not convinced, then we'll just have to agree to disagree. It's not like there is any data to prove that one set of pricing would be any more successful than Intel's current pricing, which leaves the debate open to speculation and opinion. Well, I've stated my opinion, and I feel it accurately reflects the current situation. And over time, I expect things to only get better for Intel.
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