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Technology Stocks : Advanced Micro Devices - Moderated (AMD)
AMD 216.09-0.7%10:20 AM EST
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To: Charles R who wrote (12696)10/11/2000 1:47:20 AM
From: PetzRead Replies (2) of 275872
 
The bottom line on a price war is this -- AMD is perfectly willing to receive 70% of Intel's ASP by selling at a price 30% below iNTEL at every speed grade.

Will Intel lower their desktop ASP from $175 to $150? Great! AMD's ASP will rise to $105 for an extra $90M of pre-tax profits, not counting the increased sales in Q4 vs. Q3. Intel will lose 30Mx$25 or $750M of pretax profits -- that's nearly a third of their operating income!

Will Intel lower their ASP from $175 to $135? Great! AMD's ASP still rises slightly to $94.50, still grows sales and profits. Intel loses $1.2B of their profit, a cool 50%.

And none of the above considers the fact that Intel can't do a blessed thing about prices above 1 GHz. AMD is free to pick whatever price they want to sell at. $250 would be about right to match demand, and that will raise AMD's ASP and profits even more.

Petz
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