<THE DRIP PORTFOLIO>
Intel and Y2K
Will December be slow?
by Jeff Fischer (TMFJeff)
PARIS, FRANCE (June 28, 1999) -- In the recent frenzy of news following word from Intel (Nasdaq: INTC) that it will delay its Coppermine Pentium III chip by two months, to November, one comment was made more than a few times: Well, this delay is bad news all around for Intel, because now it won't get the new chip into PCs until after the year 2000. Plus, it doesn't help Intel that the Y2K scare is expected to keep computers on the shelves this holiday season.
I had to read the above comment a few times, in a few places, stated that same way, before I could make sense of it. And I still can't. Not quite, anyway. There is a disconnect in the comment. The delay of the Coppermine chip is bad news, and it is even worse news because people won't buy many PCs this season anyway.
Okay. I got that. I think.
But actually, you could just as easily argue that the delay couldn't happen at a better time, if it had to happen, because it will be a slow season anyway. In my opinion, that is a more logical conclusion to draw than the statement being widely made. The statement being made is arguably being made for dramatic effect. When you want to paint a colorful story, you use all of the crayons in the box. "Oh, delay! Woe is me. Oh, it is already going to be a bad season because of Y2K! Woe are we. This delay couldn't come at a worse time. Doubly woe!"
The point meant by the general media was this: Intel will already face a slower than normal holiday season because many PC buyers might wait until after the New Year to buy that shiny new PC. That is understandable enough. Sales of PCs will be less than stellar this November and December and, on top of that, Intel's new chip won't likely be in PCs until January, so sales might be even slower than they would have already been. Now that makes perfect sense.
However, there is still some potential good news for Intel hidden in such statements that no one has mentioned.
If consumers are indeed leery to buy PCs before the year 2000 -- demonstrating a lack of education or just plain fear, and hey, everyone has insecurities -- then Intel's delay shouldn't give Advanced Micro Devices (NYSE: AMD) quite the leap on the consumer market that people are assuming. If it is a slow PC market to begin with, then having the latest chip isn't of such vital importance. On the other hand, if this holiday season was expected to be the largest blowout PC event of the century, then the need to have the latest chip on the shelf would come to the forefront.
You know, maybe this winter will be strong for PC sales. To combat fear, retailers will fly banners everywhere proclaiming, "Y2K Compliant! No Need to Worry!" and they will offer slashed prices to compete with online sellers. Right now, however, the prediction is for a slow PC holiday season and a stronger January. If people wait for the Coppermine Pentium III, this predicted outcome could become even more realized than it otherwise might have been.
Whatever happens in the next seven months, years from now the chip leader will still be determined by just a few things: the strongest brand name and PC presence, and the ability to make money on every chip sold. AMD has recently lost PC clients due to an inability to deliver enough chips, and it is losing money on every chip sold. I like an underdog as much as the next soft-heart, and I hope that AMD can find a niche and succeed; but while AMD is the industry wildcard, Intel is industry dominator, and therefore it can transcend mistakes, including delays. Perhaps Intel has just been hanging around Microsoft (Nasdaq: MSFT) too long.
Our company, which is becoming Internet-centric even later than Microsoft did (for obvious reasons), today announced a $48 million investment in an Internet server center in London. This is Intel's first e-commerce hub outside of North America, representing an important step in a strategy announced early this year.
Intel's facility will have as many as 5,000 computer servers managing computer networks and channeling millions of Web pages to readers every day. It will be built in the next 12 months.
As previously announced, the Drip Port will buy $100 worth of Intel on July 1.
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