Was thinking about Intel's pricing choices, how they have lowered prices more than needed to gain some market share and do well, just in order to "regain" the market share (from the recent 75% back up to 80%?) that they had.

Normally a business tries to maximize profits over time, but Intel seems to have a different motivation for now, best as I can gauge.

It's as if the difference between a 78% market share and a 80% market share is *more* important than a big chunk of their entire profits!

That's unusual, in the business world. Even more than unusual.

It's as if Coke choose to forego a big chunk of it's profits just to get a bit of extra share on Pepsi, and overall losing a lot of profits to do it, with little chance of regaining that money over time. This would be shooting itself in the foot.

I was trying to imagine why Intel chose to do this, and none of the possibilities I can think of make a lot of sense to me.

A) Ego. Intel somehow feels that less than 80% is very serious loss of prestige somehow. (This seems unlikely to me).

B) Fear. Intel hopes to prevent AMD from being able to be a stong competitor say 4 years from now by reducing AMD's profits now. (This seems unlikely, since it won't actually work. AMD doesn't need huge profits in order to innovate and progress).

C) Philosophy? I vaugely remember an Intel CEO wrote some book about Only the Paranoid Survive or somesuch. This could be behind it, but again, it seems less smart than you'd expect at this level of corporate size. In the longer run Intel will do well precisely depending on it's innovation, not on AMD.

D) Some better reason that I can't think of.

Does anyone have better insight?

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Edit:
Some Interesting discussion, especially in page 2 of the posts. Finally I think it's more the difficultly in planning than an intentional price war.

Also re the votes on this OP, you'd think it was an evaluation of advice, but of course this post has no advice! It's exactly as it appears: asking an interesting question, and soliciting, finally, some interesting discussion (in page 2). So the thread became in time a 5 star thread for me, through the discussion and insights.

Are You in the right Forum old chap? 8O

They were trying to dump their last gen stuff that no one wanted?

The basis of Intel's strategy is volume. The more CPU's they can pack on a wafer the more money they make per CPU. They aggressively shrink the die size, improve their manufacturing process, increase the size of their wafers, and generally produce more good chips. It is about efficiency. Intel can make them cheaper so they can sell them cheaper. AMD cannot compete with that strategy.

At this point, my take on it is that Intel is looking at AMD and saying, "We're tired of your hot air, put up or shut up." They're smearing them on every front, why not volume too? Think of this as WWII, where AMD is Japan and Intel is the USA. You figure out the rest.

So you're saying the answer is:

Animosity.

?

No, I'm saying that Intel hasn't changed their strategy on this front, except now they're doing it with a better architecture. As long as Intel aggressively improves their architecture instead of sitting on it like they did with Netburst, they will be nearly unstoppable.

No, that's what you're trying to say.

Intel is lowering the prices on it's old processor architecture because it is in competition not only with AMD, but also with Intel's new Core 2 Duo line.

What year did Intel not make a profit?

Intel is selling off inventory, and trying to push it's Core uArch to the mainstream, hence the lower prices. Combine that with the fact that it's 65nm process has matured, and as someone has mentioned, more efficient and cheaper, means that it can sell it's newer products a little lower than previous products when first released. Yes, a company would like to maximize their profits, but Intel is trying to show the channel, and the market that they are the better choice, both in performance and price.

As for your point B of Fear. No, it's not fear, but realization that AMD is a threat, and is being seen as one. If you don't believe that having profits will not affect any innovation or progress, you're mistaken. A loss in profits (not a decline, but showing a loss) will affect R&D, since there will be less to commit to any new technologies.

As long as Intel has to show a good return to it's shareholders, it will do what it has to do just that.

No, that's what you're trying to say.

Intel is lowering the prices on it's old processor architecture because it is in competition not only with AMD, but also with Intel's new Core 2 Duo line.

If I was "trying to say" that, I would have said it!

Frankly, I don't think "animosity" is the reason, but....if everyone else thinks so, then perhaps it is.

In the meantime, I'll hope to find a more rational reason.

Btw, I didn't say that Intel only lowered prices on netburst chips. They have lowered prices on all chips, and have publicly stated it's important to regain all that marketshare, and that's the part that doesn't make to sense to me yet.

Perhaps if you re-read the OP and respond.

In the meanwhile you've pointed out similar reasons to what I mentioned for why it doens't make sense, except you think AMD needs large profits to innovate. They didn't before, and don't now, of course.

Intel obviously cannot sell every last chip that they can possibly manufacture without selling chips at a loss. So with the obvious discounted, why are they foregoing the profits a normal business would prefer?

Intel doens't need 80% market to make profit, that 78% share doesn't allow. Selling price is much more important.

Perhaps if you re-read the OP and respond it would be nice.

In the meanwhile you've stated exactly the reasons I mentioned for why it doens't make sense. Intel obviously cannot sell every last chip that they can possibly manufacture without selling chips at a loss. So with the obvious discounted, why are they foregoing the profits a normal business would prefer?

They are still making a profit, even with lower prices. Where's the problem?

Are you trying to say that they should raise their prices just to gain more profits, over gaining back market share that they lost? Or are you trying to convince people that Intel doesn't know what they are doing, as a company, since they only gained $1.9B USD last quarter over $3.9B the year previous? It's their strategy, to regain market share, in all areas. To do that, they are discounting their old inventory, and introduced the Core uARch at a price that would be reasonable for someone to afford to upgrade to. I don't see a problem, and I am a shareholder.

Do you have any proof that Intel is manufactuering CPUs at a loss? Do you have the price of each CPU per wafer? Or even a chipset per wafer?

Sounds almost like you're upset that Intel's pricing is a stiff competition for AMD's product line, something that helped AMD gain it's foot hold in the CPU market. I frankly like the price war. Lower prices for top notch items. Why don't you like it?

All very good points.

Besides, Intel raising prices just because it could doesn't exactly look good to the anti-trust folks, you know?

I didn't state all the obvious things in my OP, but perhaps it would be good to put a few here after all.

Intel can't possibily sell every last chip it can possibly manufacture without lowering the selling prices so much that they make little or no profit, since AMD would just match the price/performance ratios in the middle and low ends.

The low prices are nice for us all, and might even have a good effect of causing customers to upgrade their computers more often, instead of only once in a long time.

Low prices are fine if the big volume (many customers) show up.

Etc. all the obvious things.