Intel execs: we'd use price cuts to defend 486 market share

Electronic News, April 27, 1992 by Robert Ristelhueber

MOUNTAIN VIEW, CALIF. -- Intel executives made it clear following the company's recently annual meeting that they won't hesitate to use price cutting as a weapon to defend their share of the 486 market. While faced with a flurry of challenges from competitors such as Cyrix, Advanced Micro Devices and possibly Texas Instruments, Intel president Andrew Grove said he was confident Intel would retain its dominant position and its profit margins in the 486 market.

"We respond to legitimate competition to protec our market position," he said when asked if Intel would cut its 486 prices. "Whatever pricing we follow may knock our percentage margin off on those products, but hopefully will expand the market for second-wave processors in greater proportion."

Dr. Grove said the new entrants would encounter tougher sledding than they did in the 386 market. "Competition in the 386 market-place came at a time when the 386 had been out for five or six years." he said. "Making penetration into a six-year-old technology is clearly easier than into three or four-year-old product technology. The closer you get to the higher echelon, the tougher it is and the more expensive. It requires a more advanced technology in absolute terms and it requires more expensive manufacturing technology."

To date, Intel has maintained a near monopoly in the 486 market, with AMD not planning to ship in volume until the fourth quarter, and Cyrix only in the early stages of its ramp-up. Intel executives have disputed Cyrix's contention that its part is even a genuine 486, claiming it's a souped-up 386.

In other business, Intel board members were somewhat stunned by a shareholder proposal brought before the recent annual meeting. An investor group, College Retirement Enquities Fund, Introduced a resolution requiring Intel's board to seek shareholder approval before issuing "blank check" preferred stock as an anti-takeover measure.

The board recommended a vote against the resolution, saying it would hinder Intel's flexibility, but it nearly passed with 47 percent of the vote, or 74 million shares. Chairman Gordon Moore called it "a sobering result" and promised the board would take it into account before taking any future action on blank checks.

At the meeting Craig Barrett, executive vice president, said Intel's R&D would continue to grow, hitting $800 million this year, an increase of $130 million over 1991. Including capital spending, Intel plans to spend nearly $2 billion this year. Dr. Barrett also told shareholders that Intel expected to do 29,000 wafer starts per week this year, compared to 23,000 in 1990, and is on a steep ramp to 43,000 wafer starts per week by 1984.

Employment at Intel has returned to levels reached prior to the major cutbacks of the mid-1980s. The compnay's head count has grown 30 percent since 1986, to about 25,000, and revenue per employee has also expanded, to $197,000.