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Technology Stocks : Advanced Micro Devices - Moderated (AMD)
AMD 217.53+1.5%Nov 28 9:30 AM EST
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To: Sarmad Y. Hermiz who wrote (200325)6/4/2006 9:37:02 AM
From: pgerassiRead Replies (1) of 275872
 
Dear Sarmad:

Channel inventories are higher than that. IDC and Mercury state that Intel has over 8 weeks of inventory in the channel. That is far longer than it would be at the end of Q1. That is why it is called channel stuffing. And you do channel stuff to returnable because you can't immediately recognize that revenue, only to supposedly non returnable. Now add in the effect of Osbourning you current stuff. Now its 2-3 weeks longer, if sales proceeded normally. But now you sell only 79% of what you do normally. Suddenly 3-4 weeks becomes 5-8 weeks and then pushes to 7-10 weeks at lower prices. So Intel is getting much less revenue in plus they have to pay either by making nearly free shipments or cash to make those stuffed OEMs whole. Either way, its a double whammy.

And if you think its (channel inventory) that low, think of how long it takes a OEM to put a CPU into a PC, ship it out to a distributor, shipped to a warehouse, to a store and be bought by a customer. Hint even at Dell, it takes a few weeks and a normal OEM twice that. Another hint, sales to WB makers are only recognized when the customer buys them. Hint 3, Dell does do channel stuffing deals with Intel. They can do them by taking inventory from Intel before the end of Intel's quarter and selling it back before its end of quarter. So that inventory doesn't show up anywhere. And it only works because Intel is on a different set of months for each quarter than Dell. Its still Intel inventory no matter whose books its currently on. 3-4 weeks of Intel's whole output can be here alone.

This puts a monkey wrench into your calculations.

Pete
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