THE RUMOURED INTEL flat pricing was confirmed to us by multiple sources at Computex, but the funniest part is the supposed reason why Intel is doing it.
It is moving to the same flat pricing for the channel as for the large OEMs, a business model sure to anger their largest and most lucrative accounts.
Now, why would Intel do this? Officially, sit down and don't be drinking when you read this, the reason is to end the grey market, making a one price fits all strategy so you don't have any incentive to dump because it is all the same price. I know it makes no sense, and does not address the actual grey market problem, but that is what our sources were told.
Official reasons holding as much water as a sieve, there has to be a little more to it than that. Off the top of my head, I speculate there are two reasons - the pesky AMD lawsuit and the need to pump up margins for the next six rather bleak months for the company.
If it did this for lawsuit reasons, it is bordering on the tin foil hat crowd set's conspiracies. I can see it doing it to reduce paperwork, and to streamline the supply chain, but not all that much else makes sense from this angle.
What does is that Intel is facing a hugely tough rest of 2006. The brilliant planners at Intel went out of their way to obsolete their entire line, and then went on a PR blitz to make sure everyone in the world knew how bad their Pentium 4s really are. Rational observers may want to point out that the newer parts are two or so weeks from launch, and it is problem solved, right?
Ummm, not, not really. Looking at Intel's ramp numbers, it is going to be at about 20% volume with the new cores by the last day of Q4/06, leaving 80% of its line very vulnerable to AMD. So what does it do? Cut prices to the bone and point out how bad the parts are, so they are probably worth that low cost.
Except that it actually may not be cutting average prices at all. Remember, this is about flat pricing, and what you and I pay is probably a lot more than what Dell pays. One look at a price sheet versus a Dell circular shows that you can't make a box that cheaply, or inexpensively, if you wanted to. Anyone want to bet that Dell paid less than half of what you can get that same CPU for?
So, with the introduction of the flat pricing model it actually raised the numbers on the largest of their customers while lowering it for less than half the buyers. When the sneaky maths is summed up, it's probable Intel will end up making more money than it did before the price cuts.
