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Politics : Formerly About Advanced Micro Devices
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To: kapkan4u who wrote (80447)11/19/1999 12:38:00 AM
From: Charles R  Read Replies (2) of 1581110
 
Kap,

<Since AMD has a loss for the year, no taxes should be paid from the $100 difference.>

That's my understanding too. AMD should have plenty of tax credits to take it for the next 2 or 3 quarters (if not more).

<I think there is a big hole in my understanding of corporate accounting. Can you explain what is the <50% incremental margins yield> which you used to cut what I assumed to be profit in half?>

Basically you are saying AMD will sell $100M worth of product above the breakeven point. Now, we need to know what the margins are on those revenues. For example, if AMD were selling just K6s and they cost $30 to make and sell for $55, that would give it 45% margin ((55-30)/55). Unfortunately this gets complex in real life because AMD sells K6s, K7s, chipsets, FLASH, Networking chips at varying margins. IMHO, incremental margins in the range of 30-60% is entirely possible.

That's why I was using the 50% number in my last post and saying it was pretty generous. To be sure it is generous but not out of line - especially if the shipments are 600MHz and above. A lot also depends on the amount of 0.18u product that gets shipped this Q. The more they ship 0.18 the better their cost structure would be. I can even see an outside shot that the incremental margins could be as high as 70% if the 0.18 yields are good. On the otherhand, the number could be significantly worse if most of the upside is coming from selling mostly 500 or 550 grade Athlons manufactured in 0.25u process.

Does that make sense?

Chuck
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