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Technology Stocks : Advanced Micro Devices - Moderated (AMD)

AMD 208.65

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9:57 AM EST

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To: Petz who wrote (189541)	3/13/2006 3:06:36 PM
From: eracer	Read Replies (2) of 275872

Re: Such a price cut would reduce Intel's revenues by almost as much as the price cut, without reducing expenses at all. (Some OEMs might buy the next highest speed grade, that is why revenues don't drop quite as much as this hypothetical "everything" price cut. So a 10% price cut would cause Operating Profit to drop by 7% of $9.5B. That's $650M and $0.09 of eps after taxes. Considering that the average estimate is only $0.23, that's quite a penalty to pay, don't you think? Your analysis assumes that 100% of Intel's revenues are generated from x86 CPU sales. By the time you take out flash, chipsets, non-x86 embedded CPUs and the like the contribution from x86 CPUs is more like $7 billion. A loss of $500 million in revenue could support a whole lot of targeted rebates and price cuts. In theory would be enough to support a 25% price cut across 30% of their products sold. What is interesting about the Intel price cuts is that they supposedly happened within the past several days. In other words at least two-thirds of this quarter should have been uneffected by the recent price cuts. So if Intel is expected to fall $500 million short in Q1 with only a third of a quarter of price cuts, how good could Q2 possibly look with price cuts in effect for a full quarter? Not only that but any Osborne effect Intel might have generated will also have an effect over all of Q2 instead of just a few weeks at the end of Q1. The only hope of salvaging Q2 would be if they could ship relatively large quantities of NGA parts next quarter for an early Q3 launch. A handful of NGA parts wouldn't be enough to noticeably offset any non-NGA price cuts.

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