Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: tejek who wrote (108293)	4/28/2000 3:30:00 PM
From: Goutam	Read Replies (2) \| Respond to of 1580052

ted, < I don't have the numbers or link to prove it but Intel consistently has been referred to as the low cost chip maker. I don't think that is something that AMD can ignore if there is a price war. A pricewar will definitely hurt AMD. But the point is, it will hurt Intel even more. To look at how viable or effective the price is going to be, you have to look at the cost of the price war and the goal behind it. In the past, Intel was able to push AMD into red at a reasonable cost to them. This cost is fast becoming prohibitive. When AMD was barely able to make sales close to its break even point, any amount of lost revenue due to a price war did put it in a very defensive and dangerous situation while costing only a few hundreds of millions of dollars for Intel. Now, AMD made $150M above the break even point in Q2. This numbers has no way to go but up. Let's look at the cost of the price war and a reasonable goal behind it. Let's assume, Intel would lower the prices so as to drive AMD revenues to its break even level. This means that, Q3 AMD has to incur revenue loss of about $180M. The cost of this to Intel would be at least $180 * 6 ~ $1B !!! It could be even higher if you take into consideration of Intel's current pricing of high MHZ PIIIs. If we consider Q4, AMD has to incur a revenue loss of about $250M. The cost of this to Intel from the current levels would be about $1.5B !!! The numbers I picked may not be accurate but close enough to illustrate the ever increasing cost component of the price war. It's not going to be a free lunch anymore for Intel to do this. Goutama