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

To: Bill Jackson who wrote (37801)	4/29/2001 7:34:53 PM
From: bacchus_ii	Read Replies (2) \| Respond to of 275872

It's foolish to see Intel cash rich and AMD debt loaded. Per share AMD Cash (mrq*) $5.08 INTC Cash (mrq) $1.50 Gottfried

To: Bill Jackson who wrote (37801)	4/30/2001 2:16:21 AM
From: Jim McMannis	Read Replies (2) \| Respond to of 275872

I think AMD is hurt "majorly" here because they have dropped prices without adding a speed grade. That's a true price cut. The Mhz difference between T-bird and P4 has expanded and P4 boxes are available. Blows my mind that after a great Athlon launch, AMD has fumbled the ball for the last 5 months. Losing the Mhz lead results in all the AMDs faults becoming self evident. Their only response is to drop prices. Not good. Jim

To: Bill Jackson who wrote (37801)	4/30/2001 3:54:31 AM
From: Petz	Read Replies (3) \| Respond to of 275872

Which company has the biggest cash horde, AMD or Intel? At first glance, it appears Intel has far more -- about 12.8 billion of cash + trading assets + equity investments, and AMD only 1.6 billion, a ratio of 8:1. But a better definition of "cash," in terms of how well a company could survive is to look at current assets minus current liabilities minus inventories, and, in the case of Intel adding their "marketable strategic equity securities." By that definition, Intel has 18,739M - 7,387M - 2,652M + 1,159M, a total of $9.86 billion of "useable cash." AMD "useable cash" is 2,882 - 1,162 - 355, or 1.365 billion. So now the ratio is 7.2. But consider this: the breakeven ASP for AMD is about $77.35, because, with an ASP of $90, AMD still had operating profit equal to 14% of sales. Thus the production cost of a microprocessor at AMD is $77.35. (There's an assumption here that operating margins in flash and microprocessors were equal.) So, AMD with their "useable cash" of $1.365 billion could produce 17.6 million microprocessors. This is about 2.4 quarters-worth of CPU production. If they gave away their CPU's, their cash would last for 2.4 quarters. If they sold them at 90% of cost, their cash would last for EIGHT YEARS. Now, Intel had an ASP of about $180 in Q1, and their operating profit was only 9.6% of their sales. [Question: If Intel supposedly has higher gross margins than AMD, how come their operating profit is a smaller percentage of sales? One reason is Intel's HUGE marketing, general and administrative expense equal to 17.3% of sales, while AMD only has MG&A of 12.6%.] Therefore, their average production cost per microprocessor is $162.72. With their useable cash of 9.86 billion, they could produce 60.6 million microprocessors. At a current rate of 27M microprocessors per quarter, their cash horde would be gone in 2.2 quarters. If Intel sold their CPU's at 90% of cost, their cash would last 7.5 years. Now, obviously, neither AMD nor Intel is going to sell microprocessors at an ASP of $0, but 1)If ASP is cut by an equal percentage at both companies, Intel will have larger losses than AMD because their operating profit margin was smaller 2)Even if both companies sold microprocessors at 90% of cost (note: this would mean a bigger % drop in ASP for AMD because of their higher operating profit margin) - the percentage drop in Intel's available cash will be larger than the percentage drop in AMD's available cash. IN OTHER WORDS, A PRICE WAR HURTS INTEL'S CASH LEVELS MORE NOT LESS THAN AMD. It's actually a lot worse than this! Because Intel's cash flow for the remainder of 2001 is decidedly more negative than AMD's. If both companies only "break even" in the profit department, Intel has net negative cash flow of $1.65 billion because capital expenditures will exceed depreciation by that amount. They have been spending $1B of cash buying their stock every quarter, so that is another $3B. Just these two items will reduce their "available cash" by 47% by the end of the year! And then there are Intel's "investments" which were nearly a $1B last quarter. Some might quibble with the fact that I did not include AMD's long term debt in my calculations, but 1/3 of it will soon be gone, and the rest of it is not due for a long time and is on very favorable terms. Obviously, if the government of Saxony had any ability to call the debt, they would have done so when AMD had 4 consecutive quarters of losses and there were very few German employees working. At the end of Q1, AMD was stronger financially than Intel, had a higher operating profit margin, and was gaining market share from its rival. The only question is, to what extent will Intel's price war make AMD's financial position even stronger relative to Intel's than it is now? How much will Intel's cash DROP this quarter and how much will AMD's RISE? Petz