A Conroe Con Job

I read the strangest thing this morning. David Tuhy, manager of Intel (Nasdaq: INTC  ) desktop marketing, told Investor's Business Daily that "a lot of enthusiasts will go quickly to Conroe." Really? I've my doubts. But I'll get to that in a minute.

First, for those who don't know, Conroe is Intel's newest desktop chip, and is about to be released through new PC models built by Dell (Nasdaq: DELL  ) and others. It boasts big advantages over existing chips, including a 40% improvement in performance and power usage over Intel's Pentium 4.

Conroe also shows signs of sticking it to rival Advanced Micro Devices (NYSE: AMD  ) . For example, a head-to-head test performed by Computer Reseller News, which caters to retailers such as Dell, Hewlett-Packard (NYSE: HPQ  ) , and Lenovo, suggests that Conroe will outperform AMD's best desktop chips by roughly 28%.

OK, now for the problems. First, chip architectures often vary and that's certainly true in the case of Intel and AMD. Because of the differences, says In-Stat analyst Jim McGregor, Conroe and AMD's top of the line won't always compare perfectly.

What's more, chip architectures have almost never driven desktop sales and aren't likely to again. Instead, says McGregor, consumers tend to buy new PCs for specific applications or functions. Conroe may be attractive for someone running software that demands a dual core, but such applications aren't the domain of common users who hunt and peck their way through email, making an immediate pilgrimage to Conroe-based PCs a remote possibility, at best.

Nevertheless, Conroe is an impressive achievement for the chipmaker, which has struggled versus AMD recently. Says McGregor, "[Conroe] puts Intel back in play. Intel has been behind AMD in performance and power consumption." Now, the playing field is once again level.

Just don't let that technical reality small-f fool you into thinking Intel's business will improve materially over the short term. It took AMD two years from the time it introduced 64-bit chips to earn enough momentum to get where it is today. Conroe, Woodcrest (i.e., Intel's new server chip), and others like it will probably need just as much time, if not more. Invest accordingly.

Allow us to chip in with related Foolishness:

Intel and Dell are Motley Fool Inside Value selections. Ask us for anall-access passto the service and you'll be privy to chief advisor Philip Durell's best picks, which are collectively beating the market by more than 2%. You'll also receive instructive lessons on valuation and company analysis. Give Inside Value a try. It's free for 30 days.

Dell is also a Motley Fool Stock Advisor recommendation.

Fool contributor Tim Beyers didn't own shares in any of the companies mentioned in this story at the time of publication. You can find out what stocks are in his portfolio by checking Tim's Fool profile. The Motley Fool has an ironclad disclosure policy.


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