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

To: Yousef who wrote (75361)	3/22/2002 7:25:20 PM
From: Tony Viola	Respond to of 275872

Yousef, Albert is WRONG on this one ... One can think of wafer cost as being made up of a "fixed" and "variable" cost. Albert is very confused and doesn't seem to understand this. Even using Albert's "contorted logic" of "1) The bottom line is (cash inflow - cash outflow) / number of shares" Even Albert would have to agree that higher yield leads to fewer wafers needed and thus lower variable cost. This means "cash outflow" goes down. Totally agree. I was trying to get Albert to say what you did, or something like it. Tony

To: Yousef who wrote (75361)	3/22/2002 11:06:06 PM
From: Joe NYC	Read Replies (1) \| Respond to of 275872

Yousef, 1) The bottom line is (cash inflow - cash outflow) / number of shares" Even Albert would have to agree that higher yield leads to fewer wafers needed and thus lower variable cost. This means "cash outflow" goes Good point, The higher the better. The same applies to a lesser extend to paper towels the cleaning people use, and the efficiency of how they use paper towels. If the cleaning people are efficient, maybe they will use up paper towels more efficiently, and less cashflow goes to purchase of paper towels. But you have to wonder about the impact of these efficiencies on the bottom line. If you are a DRAM maker, you are making a commodity product (with razor thin margins), and if the capital, labor costs and factory utilization are roughly equivalent, the one with the highest yields will rule. The yield is a supreme measure of success. On the CPU side of the product is very high margin, yield loses some of it's significance. There are scenarios where it is very important. For example, in supply limited situation. Higher yield allows you to make more, sell more (of the high margin product) and make more money in the end. In a demand limited environment, yield amounts to less, as other variables outweigh it. What percentage of total cost is the cost of the wafer, if the demand is for only 25% of your total production, depreciation is on 100% of the capacity, cost to manage the facility is at 100% of the capacity, and labor costs are inflexible? We are in a demand limited environment right now so the AMD's clearly superior yields compared to Intel's don't amount to very much. <g> Joe