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Technology Stocks : Advanced Micro Devices - Moderated (AMD)
AMD 215.32-0.2%Dec 30 3:59 PM EST
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To: wbmw who wrote (247761)2/13/2008 6:47:31 PM
From: pgerassiRead Replies (1) of 275872
 
Wbmw:

History has proven the CPU market as price inelastic. Most of the demand still comes from the corporate world. There a $100 price change doesn't alter demand much, if at all. Especially since most go for $500 to $1000. The effect is even smaller in servers and laptops.

The argument isn't whether $10K PCs versus $1K PCs, but between $1K PCs and $1.1K PCs. How much units does Intel sell of the cheap stuff? Wouldn't they rather sell the same units in more expensive stuff? So with AMD gone, they could lose 25% of their cheap stuff and sell 25% more into the expensive stuff. Sure you might not buy, but will 80% of the world wide market buy the higher prices? Especially since there would be no where else to get them.

Another way is to look at the market as what percentage goes to the corporate world and what goes to the retail one. If its 33% retail and 67% corporate, losing half of the retail still wouldn't drop demand to 80%, yet that would double prices even at 1:1 elasticity. Going to 67% corporate and 13% retail would increase prices by 150%. That would take a $130 ASP to $325 ASP.

Given the above, AMD could make POS CPUs and yet people would buy it just to make sure they don't pay too much for Intel CPUs. The trouble is that AMD makes good CPUs and plenty of them.

Pete
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