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Politics : Formerly About Advanced Micro Devices
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To: tejek who wrote (108296)4/29/2000 2:53:00 AM
From: pgerassi  Read Replies (3) of 1575384
 
Dear Tejek:

Intel's gross margins are irrelevant. It is their net margin that is at stake. Their Computing Products Group's Gross margin does not take into account the various other groups. All of the other groups lost more than $400 Million last quarter. Now take their earnings, 2.6 Billion, and divide that by the number of processors they claim to have sold, 32 Million, and you get about $81 in ASP. They claim their current ASP is about 190. Therefore at an ASP of about 100, they will lose about $300 Million a quarter. AMD made 175 Million at an ASP of 87. They would start to lose money at an ASP of 61. When AMD starts to lose money, Intel will lose about 1.5 Billion a quarter. At that rate, Intel will eat up its book value in about 20 quarters. At that rate, Intel would be valued at about 1.3 times book value or $13 dollars. There would be a shareholder revolt at Intel, employees would leave in droves, etc.

Now I know this is very rough, but Intel is at a high evaluation. I believe it to be too high. Someone said that Intel used to never exceed a PE of 22. Given this reference on current earnings, Intel should trade at 69 and AMD at 100. Thus AMD is at 88% of this limit where Intel is at 181%. Thus Intel can not afford to have investors take a hard look at it. A big price war would initiate that.

Pete
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