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The Intel Succession Crisis Continues

Why should Google (GOOG), Amazon.com (AMZN) or any other cloud player buy these new high-end chips, at their high-end prices? When low-end commodity chips can be virtualized to provide the same effective power for less?

Companies that build cloud are constantly arbitraging, seeking the best price-performance, the most bang for the buck. Google builds its own servers for the same reason you called Dell (DELL) for your PC in 1995, to get the very best component prices, today's prices. That's what Just In Time production means. As chip production ramps up and yields increase, prices naturally fall with costs, and a cloud builder can afford to wait this process out.


Now it's possible that Intel will succeed in getting more of its new chips into phones and tablets. But that's speculative. It's also possible that server sales will increase this coming quarter, but that's speculative, too.

If you're buying Intel stock today, with a time horizon of less than a month, you're betting that it can defy the market's gravity and power through while on autopilot. Or that it will appoint a wizard as CEO who will create a vast reality distortion field around the stock and cause it to zoom higher.

That's not a bet I'd like to make. Elvis has left the building. Marissa Mayer already has a job, at Yahoo! (YHOO). Gordon Moore is not coming out of retirement. Steve Jobs is still dead. But if it's a bet you'd like to make then, please, proceed.

At the time of publication, the author was long YHOO.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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