Formerly About Advanced Micro Devices Message Board

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Politics : Formerly About Advanced Micro Devices

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To: Paul Engel who wrote (34524)	7/16/1998 1:35:00 PM
From: Petz	Read Replies (2) of 1576551

Paul, you estimate $50 for the cost of the average Pentium II, including packaging. If Intel sold 19M CPU's in the 2nd quarter and had revenues of $5.9B, lets assume 3/4 of that revenue was CPU's. That would imply an average selling price (ASP) of $233. Intel said their gross margin was 49% Definition of gross margin is 1 - cost/price (where "cost" includes direct costs and depreciation but excludes R&D and excludes "general and administrative" overhead) So 1-cost/233=0.49, cost= 0.51*$233 = $119 Even if I assume the gross margin on the CPU's was better than 49%, say, 55%, I still come up with a cost per CPU of $105 So, how do you say that costs are closer to $50? Are you excluding depreciation or other "fixed" costs? Petz

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