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Concerns mount over shipments of processors

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Analysis Chip giant Intel is not making things any easier for itself following the series of disasters that beset it last year during its annus horribilis. When it launched its Coppermine processors in both desktop and mobile versions last October 25th, only a day later it antagonised a vast swathe of its customers by telling them just the next day that there would be a big shortage of some parts at least until the end of Q1 this year. Even loyal tier one customers, like Toshiba, were irritated by the treatement they received at Intel's hands. It then totally misjudged its market by alerting its distributors worldwide in the middle of last month that their allocation of processors was going to be really tight - and in some cases non-existent - during the month of February. Result? Loss of money. Dealers and system builders, faced with orders for PCs, found themselves in dire straits because of a lack of processors for their customers. Result? Loss of money. And now second tier vendors, particularly in Europe, are beginning to complain vociferously at their treatment at the hands of Intel, which is now unable to guarantee shipment of processors apart from flavours that their customers don't particularly want. Result? Loss of money again. Further, all these sets of people are now beginning to relay worrying information that while they can't source Intel processors, the Big Five - in particular Dell, IBM, Fujitsu Siemens, Compaq and HP - appear to be having no problems whatever getting supplies from the chip giant. One European system vendor, responding to a story we published yesterday complaining about new shortages of microprocessors, has hit out at Intel for undermining sales and told The Register this morning: "All of this goes against their [Intel's] 'we want to support the little guys because it's good for us' line they spin every time we raise such concerns." He said that the contender, AMD, is "really showing these guys what competition is. The way AMD does business is so much better than Intel you would not believe. Friendly, responsive sales and technical staff that can get things done - not puppets on a centralised European based string that repeat the Intel line at every point." Intel has consistently told The Register that shortages on its microprocessors are a result of additional demand, and nothing to do with yield or other production issues. At last month's Intel Developer Forum, senior VP Pat Gelsinger told us that most of the problems with supply-demand would be fixed by the end of the quarter. We understand that Michael Dell, whose company forecast a fall of demand, partly citing chip shortages, at the end of last year, has made his own representations to Intel. It's obvious that these talks have borne fruit, as only a few days ago, the Dell Corporation said that it anticipated good results from PC sales in this quarter. So Dell, at least, is getting enough processors to satisfy demand. An Intel representative commented today that while supply was still tight, the company hoped the situation would become better during this quarter and next. He said that Intel did not differentiate between larger and smaller customers, and instead took each order on its own merit. While some individual orders, both from the channel and direct, had slipped because of the demands, people like Dell or the other Big Four did not get preferential treatment over smaller players. So what are we to make of all of this? It seems like Intel's problems are driving quite a few of its loyal but perhaps smaller customers straight into the arms of its enemy, AMD. We know it has five fabs producing .18 micron Coppermines, and we also know that compared to AMD, its market share on the high end desktop is high. It seems that Intel has only a narrow window of opportunity to prevent this being Annus Horribilis II. Intel (ticker: INTC) rose by $3.437 yesterday to close at $118.375. Earlier in this week, it reached a 52 week high of $120. ®

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