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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: pgerassi who wrote (108269)	4/28/2000 3:15:00 PM
From: tejek	Read Replies (2) \| Respond to of 1575608

Pete Intel will be even more badly hurt in the stock price. If price war in high performance segment happens, Intel will have to lower prices of its CPUs by 50%. This will cause their ASP to drop to less than 80 to 90. At those prices, Intel will lose .5 to 1.5 Billion a quarter. At those rates, what would their stock price be? I would say around $5 to $10. AMD would have the same ASP and may lose $75 Million remembering the long term Flash contracts. Thus AMD stock price would be about $12 to $16 about where it was last year. Last quarter Intel's gross margins were at approx. 61% while AMD's was at 40%. At the lowered ASP's you suggest above, AMD will lose 1/3 more than Intel based on the current margins. If that were to happen, Intel's stock would be about $30-50 and AMD's would be about $5. Why so much higher? Because of the Intel name. Intel could outproduce AMD, but that would not result in the same price reductions since AMD's ASP would tend towards Intel's ASP. Intel's ASP would shrink to AMD's ASP. AMD has shown that it makes money at this ASP. Intel will lose money BIG TIME at AMD's current ASP. Again I refer you to the margins differential above...how can Intel not make money at ASP's at which AMD can make $. Your comments completely ignore the issue that Intel has had and continues to have excellent margins....and AMD's are improving but still suck. Its not in our best interest as AMD investors to delude ourselves (like some of the Intel longs). Thus the price war is no longer in Intel's best interest. That is true only because Intel has mud on its corporate face and can not afford to screw up at the earnings level. ted