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Technology Stocks : Advanced Micro Devices - Moderated (AMD) -- Ignore unavailable to you. Want to Upgrade?

To: f.simons who wrote (18537)	11/10/2000 2:16:55 PM
From: Petz	Read Replies (1) \| Respond to of 275872

frank, <as long as Intel sells all it can make, seems like Intel gets an ASP twice as high as AMD's if their selling price is twice AMD's.> If demand is weak, such as we are hearing, then the only way to sell "all it can make" is to lower the price. And how many new CPU products has Intel brought out in the last 3 months? Once a speed grade or product is introduced, prices go in only one direction -- DOWN. The other way of looking at it is from a supply/demand perspective. AMD previously announced that they would be making 9 million units in Q4, a 30% increase over the 6.9M they sold in Q3. Yesterday, AMD said they would sell everything they made. But lets me conservative and assume that they only sell 25% more microprocessors and the ASP drops 2% to $90, as AMD said yesterday. Now, whether Intel's ASP drops depends on how much market share they are willing to lose to AMD. The demand for microprocessors in Q4 is not even close to being 25% higher than Q3. If Intel is willing to give AMD a 25% larger market share, they can maintain the same production levels and probably maintain ASP. AMD's market share would grow from 18% to 22%. AMD predicted yesterday that they would have 20% or more market share in Q4. Now, if AMD increases sales between 25 and 30%, and their market share only increases 11%, it implies that Intel is increasing sales by something on the order of 14% to 19%. That is far larger than the market can bear without lowering prices. Of course, Mr. Sanders might have been sandbagging a little on the 20% number (it could really be higher). In that case, Intel could have increased production by less than 14% or elected to put CPU's in inventory rather than depressing the price. Petz