To: Dan3 who wrote (55158 ) 9/25/2000 11:23:12 PM From: Zeev Hed Read Replies (1) | Respond to Dan, depreciation would have to be taken whether or not Dresden was built. In this industry, the average Cap ex runs between 15% to 25% (when it get above the 20%, you start to look at the exit as far as the stocks are concerned). If you do not spend that, you are out of business. MU would have made money last year if they did not have to depreciate either, but the losses during the years of build ups would simply be larger. Depreciation charges should average (in the chip business) in the 15% to 20% of sales if the companies are to stay in the business. One reason for the growth of the fabless chip outfits is the desire to be less capital intensive. One reason (of many) Cyrix could not survive was the lack of capital to build their own fab and their constant dependence on other fabs' (IBM) favors. I think that one of the errors AMD committed when it decided to get into the CPU business in a big way was that they also kept a lot of the other businesses (they may have had to to survive). They left INTC to reap years of "excessive profits" which still make them, despite occasional errors (and AMD had its share as well) a formidable and very dangerous competitor to AMD. INTC can afford mistakes much more than AMD can because of their financial strength, they can also afford to engage in bleeding price wars, which AMD may not be able to weather as well. The only reason INTC is not going that route is the fear of antitrust and monopoly charges.
