Re: AMD claims they spent about $900,000,000 in capital equipment in 2001 - the last year of their profits - and will spend about $900,000,000 in capital equipment again this year
Monica, you just don't know how this stuff works. Profits are calculated after depreciation costs. Depreciation is how capex costs are included in the income statement. AMD's capex and depreciation are always very close e.g. AMD deducts their capital costs from their gross revenues before calculating profits each quarter.
Intel's capex costs during the past few years have been higher by more than $1 Billion per quarter than the depreciation they included on their income statement e.g. assuming Intel will remain a going concern, and that they will continue in the capital intensive CPU business, they will probably have to continue to spend as much (or more) in the future on capex as they have in the past, so they should be taking that much as a depreciation charge (as AMD does). Instead, Intel has been taking much lower costs for their plant, as though they were going to stop upgrading their FABs very soon.
Intel spends $1.75 to $2 Billion each quarter on its plant, but includes only (about) half that when calculating its profits. AMD spends about 1/4 of that, but includes that much on their quarterly income statement. About half of AMD's capex is in the form of $800 million in straight capex, which is depreciated at the same rate at which it is spent. Some is in the form of lease payments for steppers, etc, which again has AMD charging its capital costs at the same rate it spends. The rest is in the form of occasional capital payments to FASL.
The bottom line is that Intel has been spending quite a bit more on capital equipment than it has been including in its costs when it calculates quarterly profits, while AMD has been including as much in capital costs, each quarter, as it has been spending on plant and equipment each quarter.
Now do you see how it works and why a number of AMD longs think Intel has been misleading on their claims of profits? |
