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To: tejek who wrote (52118)	8/23/2001 12:47:00 AM
From: Saturn V	Respond to of 275872

Ref <How can they show a profit and still be burning their cash-on-hand? > Increase in Cash = Profits + Depreciation + GodwillWriteOFF - Capital Expenditure - Acquisition Cost -StockBuyback - Investments - Dividends. Cash is consumed by Acquisitions, Capital expansion, Stock Buybacks and Investments. Obviously if times are bad, most of the cash outflows are discretionary and can easily be curtailed. Historically Intel has generated more cash than it could handle, and has thus spent it on stock buybacks and acquisitions. But if the price war hurts its profitability, there are lots of ways to eliminate the cash burn. It will be foolish to assume that Intel will run out of cash in the forseable future.

To: tejek who wrote (52118)	8/23/2001 2:05:25 AM
From: Dan3	Read Replies (1) \| Respond to of 275872

Re: How can they show a profit and still be burning their cash-on-hand? Cash expended on plant doesn't count as an expense when calculating profit or loss. The assumption is that the plant or acquisition is worth almost as much as was paid for it. But a percentage of these accumulated capital expenditures are deducted in each reporting period, (depreciated or amortized) to account for the fact that plant and the assets from the acquisition are slowly wearing out, effectively being "used up." A growing company in a capital intensive industry can be expected to have growing plant, growing sales, and spend more than it expenses each period, since the amount expensed (depreciated) is basically a moving average of what was spent over the past X number of years (where X is some period, often 5 years for semi plant & equipment). Note the difference between spent and expensed, where spent is how much money is gone while expensed is how much of that is "recognized" as spending when profits (or loss) is calculated. AMD's undepreciated plant has been staying fairly constant - they take as deprecation an expense roughly equal to what they spend each period on plant and equipment. At the same time the book value of its plant stays constant, AMD's capacity and market share have increased. Obviously, there are enormous opportunities for gaming earnings results here by changing depreciation rates and excluding some depreciation and/or amortization charges from "pro forma" earnings news releases. Some of that is unintentional - exactly how much less is a stepper worth this year than it was when it was bought last year? On the open market? Installed at a running plant? There are also legal restrictions on what can be depreciated for tax purposes. There's a lot of judgment involved and mistakes are inevitably made. Intel has plant & equipment which according to its asset statement is worth much more than it was last year, but that higher valued plant has been supplying a smaller share of the market than it did a year ago. It's possible that they will be forced to writedown some of the value of that plant, at some point. NT had a $19 Billion writedown recently, Intel probably faces, at most, half of that, perhaps a quarter, perhaps none at all.