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

To: Monica Detwiler who wrote (159887)	2/23/2002 1:46:03 PM
From: Dan3	Read Replies (1) \| Respond to of 186894

Re: The bulk of .18u capex was spent in 1999 and 2000... I think Intel only built one wafer fab during that time period - Fab 18 Well they spent over $10 Billion on CAPEX in the period - if you want to think that was for building one plant - go ahead. In that period, their undepreciated capital expense went up by $3.5 Billion. In the following single year, they spent $7.3 Billion on capital equipment - do you figure that as the cost of 2/3 of one plant? - just kidding :-) In that one year, their undepreciated capital expense went up by an additional $3.1 Billion. I took these numbers, and selected the period, from the spreadsheet that Intel had available for download at its site that was linked to their last earnings release - they seem to have since removed it from their site. It covers the period Q1 1999 to the present (Q4 2001) - including the period which you brought up. By the way, Kudos to Intel for making such a spreadsheet available - I had to hunt down the equivalent values for AMD from a combination of their press release at amd.com and Free Edgar info at: freeedgar.com Intel is now depreciating $6.6 Billion more than they were at the beginning of the period you selected. That's a cost increase of 57%! ($18.1 Billion vs. $11.5 Billion) while their revenue is slightly lower $7 Billion vs. $7.1 Billion - and looks to continue dropping with a new price war looking more and more likely. In the same period, AMD's undepreciated CAPEX has gone from $2.57 Billion (Q1 1999) to $2.74 Billion (latest) an increase of 7%. But that capital now supports sales 50% higher for the same period $952 Million vs. $632 Million Q4 2001 vs. Q1 1999. We can see that, even at the new, much higher number, Intel and AMD are getting roughly similar revenue from their CAPEX - with Intel actually doing a little better (which makes sense since their ASPs are 50% higher (though they used to be 100% higher). But the Intel earnings from the past 3 years, that looked so much better than AMD's, would not have been so if Intel had been taking depreciation charges consistent with the cost of their plant. Which is why I think that Intel's recent earnings are substantially overstated - their earnings haven't been reflecting the costs they've had to incur to keep up with AMD. With AMD pushing hard to make SOI and 64-bit processors mainstream on the desktop, Intel isn't going to be able to slow down its CAPEX spending any time soon. AMD's costs have reflected what it has cost them to go from being way behind Intel (in 1988) to being quite competitive with them. We can argue performance from here to eternity, but AMD has gone from having a single desktop product that ran on Intel's platform to having Mobile, Desktop, Workstation, and Server products that use a series of new AMD developed platforms. Intel is now following AMD's platform lead in some areas such as DDR memory and Hypertransport while AMD continues to follow Intel's lead in such things as the PCI card bus. This is a far cry from the way it used to be. AMD's market share has also roughly doubled in the period. Unfortunately for both companies, there will probably be a pretty rough price war this spring and summer, as Intel tries to keep AMD from maintaining the resources it needs to launch the Hammer chips. Intel, as a stock, would look like the better buy except that it is already priced at $199 Billion in the market while AMD is priced at $4 Billion. AMD is between 1/5 and 1/10 Intel's size, but may close much of that gap next year if hammer does well. Meanwhile Intel the stock now costs 50 times as much as AMD.