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

To: tejek who wrote (108698)	5/1/2000 10:04:00 AM
From: pgerassi	Read Replies (1) \| Respond to of 1575542

Dear Tejek: Intel ASPs are from SI BBS. Intels gross margins are missing all of the fixed overhead that Intel must have to be a real working company. If the 2.6 Billion was broken down to sources, 600 Million was to a tax adjustment, 750 Million was to Capital Gains which we know may not be there in the future, leaving just 1.25 Billion after taxes. Dividing by .69 to get pretax earnings, we get 1.8 Billion. Now add back the 400 Million in losses in the other divisions including Flash (which is why this is probably worse than we are being led to believe), we should get the real operating profits of the Computing Group, 2.2 Billion. Thus, it is apparent that Intel has a net margin of about 33% for the Computing group. The gross margin appears to be in their Computing group only. This is needed to be high to overcome the high expenses of Overhead and the losses by all the other divisions. This overhead is missing from AMD. All of the divisions in AMD seem to make some money or at worst, lose a little in net margins. Now Intels distribution of profits may be taken in two ways, they have a lot of Bad divisions that should be spun off or sold, or they are moving profits to their core division and costs from their core division are being spread to the other divisions. I suspect that their high gross margin is due to the later. I also suspect that the common tech practice of capitalizing some employee bonuses of stock options is also at work. AMD is just as susceptible as Intel, but Intel has had the profits to cover it better although it just makes it much worse. Much of Intels Book Value is lost to the employees through stock options when times are really good. That is why, I suspect Intels real earnings are much lower than the statements suggest. I believe that a GAP (I think thats the right acronym) change is being made to show stock option benefits as either a liability or an expense. This will cause another earnings restatement that will hit Intel much harder than AMD in the current situation. Thus Intels "real" gross margin is about equal to AMDs. And since AMD has much lower overhead than Intel relative to Revenue, AMDs future net margins will be higher than Intels. The better mix of CPUs that compete against the whole range of Intel, will finally allow an "Apples to Apples" comparison of the two companies. This, I think, will be good for AMD. Pete