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Technology Stocks : Advanced Micro Devices - Moderated (AMD)

AMD 210.00

-2.0%

Jan 7 3:59 PM EST

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To: Pravin Kamdar who wrote (35345)	4/10/2001 1:07:18 PM
From: Dan3	of 275872

Re: With Intel pricing the 1.4 Ghz P4 at $193, they are playing their "Mhz sells" trump card... Judging by current Athlon pricing, Intel is being successful with this. Just to reiterate: Intel appears to have given up on trying to sell PIII as a competitor to Athlon - that strategy has failed and delivered a chunk of marketshare to AMD in the process. As a WAG, Intel has capacity for about 60 million PIII (or Celeron) chips per quarter or 12 million P4s. If they limit themselves to 22 million PIIIs and 8 million specialty (server and notebook) chips, they can make 6 million P4s. If they price P4 to sell 6 million of them, they'll probably have a P4 ASP of no more than $200. The specialty chips probably also have an ASP of around $200 (notebook chips have been coming down). AMD will have to settle for no more than $130 for Athlons (higher performing or not) and $60 for GHZ and near GHZ Durons. Intel will have to settle for no more than $100 for desktop PIII/Celeron. If AMD sells 4 million Athlons and 5 million Durons, they'll have an ASP of $91. AMD is going to be making a lot less from flash for awhile, but ASPs of $90+ on rising sales would be a bonanza for them. Don't forget that 7 million at $81 resulted in great numbers for AMD (though this was when flash was also doing well). 9 million parts at an ASP of $90 next quarter would be just great. The estimates above would have Intel at an ASP of $104 (compared to their Q4 $180+). This would represent a revenue drop of about $2.2 Billion for Intel for the IAG, on top of their trading losses and the ongoing losses from their dot.bomb efforts. The existence of AMD's Dresden plant combined with the size of P4 is forcing Intel to replace $10 Billion worth of plant way ahead of schedule - and it's coming out of that cash cushion that would have made it possible for them to wage a price war without feeling any serious pain. An accurate accounting from Intel would reflect greatly increased depreciation of their plant. Whatever numbers they may report, Intel is going to be coming out of 2001 with a real loss of $5 to $10 Billion for the year. I don't think Intel is going to be looking for a scorched earth price war this year, I don't think they can badly damage AMD even if they do. Regards, Dan PS - If AMD ever ships mobile or sever parts, things get a little bit better for AMD and much worse for Intel. AMD will get a little more for a server or notebook chip than it is getting now, while Intel will have to slash prices to avoid losing too large a share of these key markets.

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