Bryan Buys Intel

AltCPU Guy Buys Intel

Price/performance is what I preach. I am a rational consumer and I am interested in finding the best bang for my buck. Brand awareness is a wee factor in my economic decision making, but I don’t give a lot of weight to whose name is on the product. I support competition, I am not anti-Intel, and I shop at Wal-Mart.

After Cyrix realized that they couldn’t sell their product for more than Intel’s and corrected their blunder, I did the price/performance math and I bought a 6×86. Over the years, I upgraded my system many times and on each occasion the price/performance equation dictated I utilize a microprocessor from Cyrix or AMD. However, something changed in January of this year. After building systems based on the 6×86, 6x86MX, K6, K6-2, I bought an Intel CeleronA.

Honestly, I was surprised. Considering my last Intel microprocessor was an 80486, I thought of myself as an AltCPU kind of guy. What was different? Why were conditions ripe for my return to the Intel camp? First, a little background is necessary.

Intel’s Indifference

Andy Grove obviously wasn’t paranoid about the sub-$1000 PC phenomenon because Intel was unprepared for it when it arrived. The Web became the “killer app” and the Web browser and email don’t require the serious CPU horsepower generated by Intel’s flagship lineup of Pentium II processors. I know many of you won’t believe me, but most PC owners don’t wage Frame Rate wars with their friends.

As the low cost PC phenomenon ballooned and PC prices continued to fall, Intel didn’t have a solution. The Pentium II was too costly and the cacheless Celeron was a kludge. Intel also conceded, until recently, a 25% price advantage to AMD, which AMD religiously maintained and promoted to their advantage. Intel didn’t care about being the cheapest or the fastest in the low cost PC sandbox. Their success was built on high speed and expensive processors. They didn’t see how a VolksCPU could benefit them.

Intel eventually realized they made a gross error and strengthened a competitor in the process. Consumers demanded cheaper PCs, which AMD delivered and Intel did not. Cyrix created the madness with their MediaGX, but ultimately failed. PC makers weren’t willing to bet their livelihood on Cyrix.

AMD moved out of relatively obscurity and became the industry darling. The popular press and computer industry rallied around them. The industry wanted an alternative to Intel. It’s no coincidence that PC prices started to fall once AMD proved they could deliver. Intel has kept PC prices artificially high for years at the expense of the rest of the industry.

A Sleeping Giant Awakes

Intel needed a credible low cost solution – fast. Once again they relied on their engineering and manufacturing prowess for an answer. A healthy balance sheet also helped. Much to everyone’s surprise, Intel rapidly introduced a new and improved Celeron and dubbed it the CeleronA. The CeleronA is an incredible product. It delivers overall performance that is better than an equivalent AMD K6-2 and is comparable to a Pentium II.

Intel is now trying to make up for lost time by frantically increasing the number of price cuts and pace of new Celeron introductions. Their strategy is working. AMD halted trading on its stock Thursday afternoon of last week to make their revised earnings announcement. The following day, the stock price spiraled downward in reaction to the first quarter earnings expectation and said it would likely report a first quarter operating loss, mostly due to the accelerated price cuts by Intel in its Celeron family. A few days later, Intel announced price cuts and that they were accelerating the rollout of the Celeron 433 processor. Talk about kicking a competitor when they are down. Price wars are good for consumers but bad for stockholders. Consequently, Intel’s stock price took a beating in the process.

Much to Intel’s dismay the sub-$1000 PC is here to stay. However, Intel is now taking this segment of the market very seriously. It is simply too big to ignore. Intel has resigned themselves to only being able to price gouge Xeon, Pentium II, and Pentium III buyers. Celeron buyers have been given a reprieve.

Intel is making extremely fast processors available at price points they have never been willing to sell at. In the past, Intel discontinued a product rather than sell it at low profit margins. The Celeron is now priced through AMD’s chip rather than vice versa. Intel Celeron processors are now both cheaper and faster than AMD’s K6-2. That why this price/performance guy once again has Intel Inside.

* Note: I buy a new mainboard with a new processor. I never saw the logic behind pairing new processing technology with an older mainboard.

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