How Intel Will Make AMD Lower Prices

Add Your Comments

Intel is going to be ending its Intel Channel Rebate program. Rather than having resellers pay more and then have to file a lot of paperwork to get some of their own money back later on, Intel will lower the prices to distributors so resellers won’t be paying the extra money in the first place.

At first glance, this seems to be a no-brainer win-win for all. What would you rather have, a $600 item with a $50 rebate, or a $550 item?

Of course, it’s quite possible the price cuts may not equal the rebates lost, which might explain the much different reaction recorded here.

Or, rather more likely, Intel will reduce the official price along with the the reduced price to distributors. This would change the picture completely.

Why?

Let’s say Intel offers a $25 rebate on a $278 processor. Under the old system, a reseller could sell that processor for the same $278, or even a bit less, yet still get that $25 check from Intel to cover his expenses and profit.

If Intel gets rid of the $25 rebate and reduces the official price to $253, though, a reseller isn’t guaranteed that $25 anymore. He’ll have to charge something above $253, and if he charged the same old $278, odds are he’ll be undercut by those with more efficient sales mechanisms.

This will hurt the smaller, less efficient guy.

It will also hurt another little guy: AMD.

How This Can Hurt AMD

Right now, AMD’s official price is tied into Intel’s. If Intel lowers its prices, AMD will probably be forced to do the same, and for them, it’s not a paper shuffling exercise. They’ll get less money as a result.

It’s hardly a crushing blow, but AMD is not exactly making huge profits at the moment. A 5-10% reduction in their average prices could be enough to change their slight profits to a slight loss.

Sneaky, isn’t it?

Ed

Leave a Reply

Your email address will not be published. Required fields are marked *