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Politics : Formerly About Advanced Micro Devices
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To: Elmer who wrote (47945)1/31/1999 12:57:00 AM
From: RDM  Read Replies (1) of 1580442
 
Some further "back of the envelope" analysis:

Intel earned $6 Billion in 1998, but this was almost $1 Billion less than 1997 ($6,068M vs $6,945M) despite an increase in sales of $1 Billion. They sold more and had less profits primarily due to AMD.

Intel is an extraordinary company with extraordinary profits. While they may be able to have a low manufacturing cost for DIXON they must keep the profits coming in to preserve shareholder value. $6 Billion in profits does not happen without selling lots of parts 100,000,000) and making a lot of profit on each one ($60).

It will be interesting to look at the results of 1999. Will Intel continue to maintain the $60 after tax profit per chip?

In addition to profits Intel has $5.1B per year in expenses not associatedd with manufacturing (R&D, Marketing, G&A, etc). We must not forgfet the $3B in income taxes. This $8.1B amounts to another $81 per chip or a total of $141 "fixed costs" per chip that they must average to maintain shareholder value. These costs I describe as fixed becuase they do not change with die size or manufacturing efficiency.

AMD has only roughly $45 per chip similiar costs and these would grow to only $68 per chip if these costs included a very healthy (for AMD) $4.00 per share annual profits.

This difference in non-production, "fixed costs", amount to $73 per chip in favor of AMD. This is a round about way of saying that Intel has a hard time to price bomb products in their mainstream business without hurting their own shareholder value more than Intels.
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