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

To: Petz who wrote (37866)	4/30/2001 3:02:37 PM
From: Road Walker	Respond to of 275872

John, In your post you stated: "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." This is clearly wrong, since you did not subtract the $1B "other" loss to the microprocessor "average production cost". You then argue that Intel will run out of cash before AMD if they both sell at cost. The problem is that if Intel were to sell microprocessors at cost, AMD would have to compete at well below cost. This is proven out by the relative operating margins of AMD and Intel, even with Intel's higher SG&A. Don't get me wrong, I think both companies are looking at a world of hurt this quarter. AMD has higher production cost, Intel has the other business albatross, and business is lousy. When we come out of this cycle, both companies will do well, neither will do well before then. John