Patient Engineer - Re: " but Intel is stuck with 3M unsold chips (mostly the expensive laptop chips). "
Since you haven't bothered to analyze the siginficance of this number, I will repost my interpretation. You act as if the 3 million chips is some sort of Titanic Disaster - producing at the rate of 22.8 million CPUs/quarter, how much inventory would you expect Intel to have - ZERO?
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Re: "Intc sitting on a inventory of 3million unsold processors...."
Let's put this number into perspective.
That article and a related one (from Ashok Kumar -
news.com ) stated that Intel also has achieved a quarterly sales rate of 22. 8 Million CPUs:
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"Intel has an inventory of about 3 million in unsold processors, due to "massive cancellations of notebook chips," according to Ashok Kumar,"...
"We forecast microprocessor units to have grown about 5 percent
sequentially and 14 percent from the year-ago period to 22.8 million.
Microprocessor ASPs are expected to have recovered from the depressed level of $215 in the third quarter to about $240 in the December quarter."
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So what is 3 million processors? 3,000,000/22,800,000 = 13%. In a 13 week quarter, this represents 1.7 weeks worth of production. With Intel's two major customers - Compaq and Dell - both using BTO (Build to Order) manufacturing techniques - and HP and IBM and Gateway quickly following, Intel needs to be able to ship large amounts of CPUs FROM STOCK on a moments notice.
Does a 1.7 week's worth of inventory seem like a lot?
Let's look at it from a financial standpoint. Intel's annual report, and Investor Relations personnel, have verified that Intel values Finished Goods Inventory according to the lower of either the cost to make the goods or the current market price of these goods.
Assuming that Intel's costs are lower than the current selling price - let's assume a rather HIGH cost - $100 per unsold CPU. My own estimates are much less than this less but for now, let's use the $100/CPU cost of manufacturing.
That 3,000,000 CPUs in inventory has a value of $300,000,000.
According to Intel's Q397 earnings report, Intel had $401,000,000 in Finished Goods Inventory as of the end of September, 1997.
Thus, the $300,000,000 inventory represented by the 3,000,000 CPUs in Finished Goods Inventory represents ONLY 75% of Intel's Finished Goods Inventory as of 3 months ago!
Now for the moment, let's assume that ALL INTEL'S FGI INVENTORY is
CPUs - that means that Intel's Inventory HAS BEEN REDUCED BY 25% in the past 3 months!
Clearly, that is not a valid assumption. However, let us now assume that CPUs account for 75% of Intel's business. Would it not be valid to assume that 75% of their FGI is CPUs? And wouldn't the $300,000,000 CPU inventory in Finished Goods account for 75% of the previous quarter's $400,000,000 FGI total?
I think 3,000,000 CPUs in FGI might be a reasonable number under these circumstances and interpretations.
Paul |
