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Technology Stocks : Intel Corporation (INTC) -- Ignore unavailable to you. Want to Upgrade?

To: Dan3 who wrote (153867)	1/5/2002 2:07:46 PM
From: Craig M. Newmark	Read Replies (1) \| Respond to of 186894

Re: "They invest in their FABs at a rate that loads them with $7,500 million in new CAPEX costs each year and produce parts at a rate of 100 million per year (a nice round number) - that's a $75 per chip capex cost . . ." It sure is. This is a devastating display of arithmetic. One small question, though: what is the economic lifetime of those capex expenditures? Might they be, oh I don't know, six years, say? Then you get a capex/chip of roughly $12.50 (not allowing for time value of money and a possible reduction in chips/$ over the economic lifetime). Then with the 50% reduction you come up with later in your post, we're down to around $6. Suddenly, Intel's costs don't look so enormous. Craig

To: Dan3 who wrote (153867)	1/5/2002 4:00:36 PM
From: wanna_bmw	Respond to of 186894

Dan, Re: "They invest in their FABs at a rate that loads them with $7,500 million in new CAPEX costs each year and produce parts at a rate of 100 million per year (a nice round number) - that's a $75 per chip capex cost" First of all, Intel never spent $7.5 billion in CapEx until this year. Spending the money doesn't create fab capacity in real time - the return on the investment comes years down the road. If you are considering Intel's current fab capacity, then consider their CapEx expenditures over the last 5 years, and then take the average. I guarantee that it will be far less than $7.5 billion. This year's CapEx will ensure ample fab capacity for the future, while AMD will be forced to rely on foundries. Second of all, however "round" the number 100 million is, this is not the number of CPUs that Intel sells each year. Intel usually sells more than 27M CPUs per quarter, and the fourth quarter is expected to sell 31M CPUs or more. This year's CPU sales should be between 110M and 120M units for Intel. Rounding down changes your result. Third, Intel's fab capacity includes tons of products besides CPUs. Add in 10s or 100s of million units of flash, millions of units of Networking and communications chips, millions of Wireless chips and StrongARM processors, and the millions that come from Intel's old embedded lines, and your "$75 per chip cost" result is thrown completely out the window. wbmw

To: Dan3 who wrote (153867)	1/5/2002 5:46:16 PM
From: Dave	Respond to of 186894

You continually try to expense Capital Expenditures. Under GAAP, Capital Expenditures are considered to be investments in Plant and Equipment (I didn't include Property or land since Land is not a "depreciable" asset). Capital Expenditures are not expensed, instead the costs are capitalized and the plant and equipment is depreciated over its useful life.