RE: "I am perplexed how a leading supplier with a dominant market share sitting on $20 billion...[cash] and marketable investments could fail to invest enough to provide adequate supply to meet what has to be viewed as very modest demand growth," LaFountain wrote.
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Thread,
LaFountain is implying unit growth is "moderate?" But was it? I think he's wrong. Let's run some numbers.
Last year, ASPs declined, then they held steady per a previous CC.
Revenue = Units * ASP
R = U * ASP. Plug any ASP YOY reduction into the formula, say -25%. Let's select -25% since consumer PC prices probably dropped at least 25% YOY (PC$2500-$1875). (Maybe someone could look this up). The CC said R grew by 3%, so that's a coefficient of 1.03 on R:
Thus, if 1.03R = U * .75ASP, this implies U's coefficient changed to ~28%. U's coefficient is approx 1.00-.75/1.03 (or, one could estimate approx 1.25*1.03-1).
Plugging this in, if ASP YOY was -25%, then 28% YOY unit growth.
A 28% increase in units is not "moderate."
Let's try some other numbers - plug in any ASP delta:
If ASP YOY was -10%, then 13% YOY unit growth. That's moderate. But, we all know the PC dropped more than 10% in price. So, skip this. i.e. Looks like LaFountian could be very wrong (on this one point, and that bugs me because I would expect accuracy in an analyst on all points - otherwise, how would I know which statements to believe? But kudos to him for going up to bat for asking some of the harder/important questions about production. I liked how he poked on the good & hard questions (and hope for more of this in the CC).
Another way to do this calculation is: take processor unit estimates from the analyst reports or the market research firms.
I would venture a guess that he accidently was thinking/using revenue or profit growth, when he should have been using "unit growth" relative to "supply."
Amy J |
