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

To: wanna_bmw who wrote (51688)	8/19/2001 7:00:33 PM
From: fyodor_	Respond to of 275872

Wanna: And how much is "a lot less"? Are you in the neighborhood of 10%, or are you suggesting among the other conspirators about Intel giving away Pentium 4 CPUs for $100? 1.3GHz P4s probably go for around that to major OEMs, but I seriously doubt the 1.7-1.8GHz chips go for anything near $100 ;-). No, Intel subsidizes their chips by paying for a good portion of OEM's advertising. (Which I think is a smart thing to do, in many ways!) This allows Intel to get OEMs to promote systems based on their chips, and to use their logo in the commercials, but how would this affect why these OEMs are not showcasing AMD's high end offerings? I directly affects the profit on the system, given a fixed price point and marketing level. AMD system --------------------------------- System cost to OEM: 100 arbitrary currency units Marketing cost to OEM: 10 arbitrary currency units Cost to consumer: 150 acu Other fixed costs: 20 acu PROFIT: 20 acu Intel system --------------------------------- System cost to OEM: 100 arbitrary currency units Marketing cost to OEM: 0 Cost to consumer: 150 acu Other fixed costs: 20 acu PROFIT: 30 acu The numbers chosen are fairly random and I don't pretend they reflect reality in any way, shape or form. The example merely serves to illustrate the point that when Intel picks up part of the tab for an OEM, this impacts the (relative) value of AMD systems. An additional effect is that Intel places certain requirements on the OEM, restricting the appearance of competing products in both advertising and stores. This is completely understandable and one of the major benefits to Intel's strategy (along with increasing the barriers to entry for competitors). -fyo