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Politics : Formerly About Advanced Micro Devices
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To: kash johal who wrote (109178)5/3/2000 2:56:00 AM
From: ptanner  Read Replies (1) of 1579466
 
Kash - Re: server class chips

<They probably make $800 net on each one they sell or close to 50% of Intels operating profits.

Until AMD plays in this arena Intel has a major profit source to subsidize its desktop offerings. And this is critical on building a long term viable biz that is somewhat impervious to Intel attack.>

I agree fully with (1) server chips can provide great margins and (2) AMD needs to broaden the front.

However, some quick math reduces the %profits for Intel's server class to below 50% but still very significant. None of these numbers are for certain but should be close enough for the illustration:

Total MPU/QTR [GM=Gross Margin]
32M * $190 (ASP) * 0.62 (GM) = $3,534M

Server MPU/QTR
1M * $1,000 * 0.8 = $800M, (3% units, 22.6% gross profit)

Other MPU/QTR (values implied by Server assumptions)
31M * $164 * 0.54 = $2,734M

An old data point I saw was Xeons were 4% of units and 15% of revenues in 1999 which is close to the values above (3% units, 16.4% revenues, 22.6% gross profits). And as you noted, this is a very rapidly growing market segment. The server chips make a big impact in ASP and gross margins. The GM for non-server above is much closer to AMD's 1Q00 gross margin (44.5%?).

PT
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