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Analysis: AMD caught by Intel's devilish pricing fork

433MHz Celeron outs on 28 Feb but Intel not sitting pretty

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"Discussion of Intel's market share is usually taboo. Quoting independent market researchers (Dataquest, Infocorp etc.) or referring the question to them is more appropriate." — from Intel's internal guidelines for working with the Euro press Intel Inside laid to rest, at last?Our sources close to Intel continue to tell us that the 433MHz Celeron will arrive on the 28th of February, and not mid-March, as other, more well-staffed wires than us, have reported. That will be followed by a 466MHz Celeron part not long afterwards and so the shuffle of prices downwards continues. AMD is in Intel's radar and Andy Grove's company is particularly merciless. Jerry Sanders III, the CEO of Advanced Micro Devices, told the world+dog last week that his company would post a Q-loss because of price competition from Intel. Readers who are somewhat long in the tooth should never forget that Intel has a number of secret and not-so-secret weapons up its capacious sleeves. Pricing is the fork of His Satanic Majesty Intel. If you're a dealer and you are constantly squeezed by margins, supermarkets giving away PCs, never mind Compaq, Dell and the other giants, your task, if you choose to accept it, is to try and squeeze an extra point or two of margin. You do that by selling the highest-specced PC you can, at a price point punters will appreciate. If Intel is offering a 433MHz Celeron at a ridiculous price, as it will do come the 28th February, you are forced to use it. AMD and Cyrix have always been frank about their inability to compete with Intel's mighty marketing machine. They simply do not have the money that the Great Stan of Microprocessors have, and so are forced to take to the hills and engage in guerilla warfare, however great and good their CPUs are. Intel is now using its mighty worldwide pricing fork to make dealers and the rest offers they cannot refuse. Nevertheless, the fact that the Great Stan is using the price fork rather than just being strident and aggressive (another trait of this particular demon), shows it is a little scared. Firstly, it cannot rely any more on its infamous Intel Inside campaign to brainwash the whole PC world+dog. That particular marketing dog has had its day. Secondly, the only way it can continue to operate the price fork is by attempting to confuse the market. The Pentium III (Katmai) will be adopted wholesale by PC manufacturers at its release later this month, despite the fact that it will give practically no performance benefits whatever at the server level, and few, if any for gamesters until those games have been built from the ground up. The Pentium II will become a dead chip extremely quickly, while Intel will continue selling cut down PIIs, that is Celerons, at low prices. The Pentium III will be a costly little number and so help Intel to maintain the high margins necessary to subsidise its all out attack on AMD, Cyrix and the rest. This pricing model cannot continue indefinitely, if Intel is to satisfy shareholders who have now come to expect gross margins of 50 per cent plus from the Great Satan of Chips. Brian Halla, CEO of NatSemi-Cyrix, famously said last year that one day all PCs will be given away free. Intel does not want that to happen. So what of AMD? It is not beyond the realms of possibility that as we speak Jerry Sanders III and his immediate cohorts are negotiating with a third party for a much needed cash injection. We have had reliable reports over the last 18 months that it has, at times, been in discussion with several major US companies with the cash to inject the miracle persistence drug into AMD. And Intel, once more, has exposed itself to the slings and arrows of the outrageous fortune it has. The FTC court case opens on March the 9th and if the investigators and researchers have not yet considered Intel's pricing fork, we'll eat our bunny suits. ®

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