Advanced Micro Devices - Moderated (AMD) Message Board

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Technology Stocks : Advanced Micro Devices - Moderated (AMD)

AMD 210.93

-4.8%

3:30 PM EST

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To: AK2004 who wrote (46909)	7/10/2001 5:06:13 PM
From: Tenchusatsu	Read Replies (1) of 275872

Albert, <I will give an example of what market share would do for amd. Let say amd sells the chip for $70 at cost where $50 fixed and $20 variable. What would happened if amd would sell 2 chips at $50/chip? Well, the cost would be 2*20+50=90 which is a profit of 10 or 5/chip. Hence asp dropped from 70 to 50 but the profit went from 0 to 10.> Nice example, but it cannot go on forever. As more and more chips are sold into the market, the ASP continues to drop. Sooner or later, especially in a demand-limited market like we're currently experiencing, the ASP will go below the variable cost. At this point, AMD could increase sales volumes further, especially if they're obsessed with their long-standing goal of achieving "30% market share." But then they'd be depleting profits, maybe even going into the red. So in other words, Albert, your first point has very little to do with market share and everything to do with maximizing profits. But is AMD truly aiming for maximum profits (no matter how small), or are they flooding the market in an attempt to gain market share and clout? Seems like the latter to me. Tenchusatsu

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