Intel Contra Revenue

[hist78]

It's amazing!! TigerDirect is selling an ASUS 7" Android Tablet for only $29.99. Intel is really working hard to send processors and dollar bills out of door.

ASUS 7 4.3 JellyBean Tablet w/ McAfee Multi-Access at TigerDirect.com

The interesting thing is that Intel is using McAfee (a wholly owned division of Intel) to do this rebate. The McAfee Multi Access package is a $49.99 product at TigerDirect (even cheaper on other online shopping sites) but Intel is giving a $70 rebate! Both Asus and TigerDirect need to make some money, probably more than the $29.99 tablet's net price. Intel must have done something to make Asus and TigerDirect happy in order to have such promotion during this shopping season. It also indicates Intel's real "Contra Revenue" amount might be much higher.

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[lefty]

It's Clover Trail, not Bay Trail. They just are clearing out old stock. At this stage Clover Trail is just land fill.

 

[hist78]

It's Clover Trail, not Bay Trail. They just are clearing out old stock. At this stage Clover Trail is just land fill.

Agree. But Asus and TigerDirect are not in charity business. They won't do such house cleaning unless Intel encouraged them with somthing. Remember, the $70 rebate is an Intel rebate, not Asus or TigerDirect's. One tihng hard to tell is when those devices were manufactured.

 

[cpuarchx]

It's a rebate, and as such it is always good to read the fine print on the terms for it. In this case, you must sign up for McAfee's service with the auto-enroll feature using your credit card, and stay enrolled for at least 10 months. I guess they are hoping you forget and at least get to zing you for another year subscription to their service. My experience with such programs linked to your credit card have not been good when it comes time to try to cancel it...Although I am not disputing they are dumping Clover Trails real cheap, but it appears they are also trying at least recover some of that contra-revenue by getting customers hooked on the AV s/w subscription service.

 

[hist78]

Actually four years after Intel bought McAfee, I still don't understand why Intel spent $7.68 billion to acquire McAfee. It sounds to me at certain point Intel ran out idea about how to grow their core business. Yes, they can afford to do it but it doesn’t mean they must/should do it. I have the same doubt about the necessity to use "Contra Revenue" for promoting their mobile products.

 

[Arthur Hanson]

I love looking at these deals. If you read the terms, you have to install McAfee and keep it installed for 10 months and be on auto renewal with your credit card for the rebate and to not get billed later. Unless I really want something without the offer, I stay away from things like this. A lot of people make the mistake and end up paying the full price. Still not a bad deal. The offer also drives traffic to Tiger Direct. It just shows Intel is desperate to unload inventory. Intel in mobile is dead, unless they want to pay a high admission fee. I don't ever think they will a foundry for many, many reasons that have been stated in the SemiWiki community. I think the attack on Intel by Nvidia and Qualcom in server chips and data centers represents a real threat to Intel's growth prospects. Intel will be with us, but if they don't reform, they could be in for a ten year dead period like Microsoft went through. In tech, you either push and innovate all the time or face mediocrity and possible extinction. I feel with Nadella the Wintel monopoly might still have some growth. MS's data centers are already driving down cloud computing costs, putting pressure on Amazon Web Services. As I have written, the phone is the new computer to be docked when additional functions are needed, It's our bank, house, keys, job, ID, health monitor/controller in short the world is mobile and higher power processors, better batteries, energy harvesting, better memory will just extend the reach. My 11K shares with 4K options show I back up my thoughts with my cash. If you have any more questions, don't hesitate to call or email.

 

[cpuarchx]

... I have the same doubt about the necessity to use "Contra Revenue" for promoting their mobile products.

I think that using the tactic of contra revenue can make some sense in order to buy your way into the market after a late start. But that presumes you have a steady stream of some compelling and competitive products that can hold the market once you are in (i.e. after customers discover and appreciate the value of your technologies). It also presumes that market is sufficient lucrative in terms of margins that align with your manufacturing and R&D cost structure. In both these cases, I do have serious doubts about Intel's position on these merits. Intel's delay of its latest process technology right now aggravates the situation and probably something they failed to factor in for this contra revenue strategy. So now you have a situation of either pouring more money in to maintain this until you can get your act together, or bail.

Another difficulty with the contra-revenue strategy becomes apparent if your products are not sticking in the market once in. As long as there are competitive alternative solutions, customers will continue to demand this discount as an offset against arguments of better solutions elsewhere. If you are faced with multiple competitors with deep pockets, you will get into a price war, with all the semiconductor manufacturers taking it in the shorts in the short term, and some bailing in the end that don't have the cash or stomach to continue. I think TI saw the writing on the wall in this regard.

 

[cpuarchx]

... As I have written, the phone is the new computer to be docked when additional functions are needed, It's our bank, house, keys, job, ID, health monitor/controller in short the world is mobile and higher power processors, better batteries, energy harvesting, better memory will just extend the reach.

This idealized docked phone would be a great solution, and seems like an opportunity that I have been surprised that companies like Apple (that control both the OS and h/w platforms for mobile and client) have yet to capitalize on. I believe for this to work properly, you will need holistic solution with the OS as a way to extend your h/w resources and device surface based on whether you are docked or not. In this way, the consumer user experience could be more seamless. Virtualization technology seems like a great fit for this. But virtualization has never been Apple's forte, and MS seems more focused on its use in the server space or as a security layer to thwart rooting.

 

[hist78]

I think that using the tactic of contra revenue can make some sense in order to buy your way into the market after a late start. But that presumes you have a steady stream of some compelling and competitive products that can hold the market once you are in (i.e. after customers discover and appreciate the value of your technologies). It also presumes that market is sufficient lucrative in terms of margins that align with your manufacturing and R&D cost structure. In both these cases, I do have serious doubts about Intel's position on these merits. Intel's delay of its latest process technology right now aggravates the situation and probably something they failed to factor in for this contra revenue strategy. So now you have a situation of either pouring more money in to maintain this until you can get your act together, or bail.

Another difficulty with the contra-revenue strategy becomes apparent if your products are not sticking in the market once in. As long as there are competitive alternative solutions, customers will continue to demand this discount as an offset against arguments of better solutions elsewhere. If you are faced with multiple competitors with deep pockets, you will get into a price war, with all the semiconductor manufacturers taking it in the shorts in the short term, and some bailing in the end that don't have the cash or stomach to continue. I think TI saw the writing on the wall in this regard.

Good analysis. A simple test is that if Intel stops offering this generous incentive, will customers continuously to buy Intel mobile product? According to ZDNET report, Intel is on track to "sell 40 million smartphone and tablet processors and lose $4 billion for the year (2014)". Using rebate/refund/whatever methods to gain market share might be necessary. But it could be a wishful thinking to use $4 billion loss without some assurance of future market share. The 2014 global mobile application processor market is about 1,500 million units (Digitimes). So $4 billion loss and 40 million units will bring Intel a "Me Too" 2.7% market share in terms of volume. Is it worth it?


Reference:

2014 global mobile application processor market forecast

Intel to hit 40 million mobile chip units with aid of subsidies | ZDNet

 

[Paul McLellan]

Want to see something more amazing. The $12 gongkai phone. This is not a tablet (so cheaper display) but it contains a Mediatek phone chip that sells in volume for $2. That's a lot less than even things like Arduino or Rasberry Pi (and they are not phones, just computers).

The $12 ?Gongkai? Phone « bunnie's blog