<Let me say that I have seen companies that have gone on for years with far worst cash flow positions than AMD (in the biotech industry). They always seem to find more capital.>
Again, biotechs don't consume nearly as much capital as semi's.
<There is really no shortage of capital for investment even in a company that is taking AMD's risks. If the Fed were to clamp down and the cost of capital went up, then AMD might suffer.>
I never said there would be a shortage of capital, just a shortage of capital at a practical price. AMD's cost of equity capital has already gone up due to its extreme share price volatility. Debt would be out of the question with thier prolonged negative cash flows.
<If the market for chips collapsed in a recession then AMD might suffer. >
The market is facing a compression right now. Believe me, if it hurts INTC, it is killing AMD.
<But right now AMD has the benefits of a booming economy working against arguments based on cash flow.>
The cash flow thing is not an argument, it is a matter of being able to pay your bills and keep your doors open. All the bill collectors want is the cash and they are not sending arguments in the mail, they are sending invoices.
<With regard to cost cutting and Celeron, the question is can you sell a less powerful chip from INTC against a more powerful chip from AMD and get your customers to go for it.>
If I am not mistaken, teh 266 mHz Celeron drops to $75 Monday, and the 300MhZ and 333Mhz Celeron chips with 128 mb caches are being released below the price points of equivalent AMD chips within a month or two. INTC will also increase the rate at which they decrease prices which will cause an even greater decompression due to lowered demand. If AMD cannot pull positive cash flow at these levels, how are they going to do it at significantly lower price levels amidst lower processor demands. The last thing AMD needs is to have inventory build up.
<The K6-2 will have 3D extensions and a 100MHZ bus and fit onto a non proprietary MotherBoard. The K-7 is a screamer. Its covering a lot of bases. I also take AMD seriously when they claim they will offer more CPU at less price.>
These chips are not out yet, and when they do come out INTC has more than enough in the line-up to offer superior performance and they have the cash flow to outprice them again.
<But the final argument for me in the discussion about the dynamics of operation in the industry is IBM's support of AMD. IBM bought a chunk of Intel to get the next generation processors out the door when Intel needed capital. IBM has to have a viable AMD to gain a price advantage over the DELLs etc. in the corporate box wars.>
IBM may have the money, but I doubt they have the expertise that INTC has to compete and win. Time will tell if I am wrong. |
