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

To: hmaly who wrote (75498)	3/25/2002 9:08:05 PM
From: pgerassi	Read Replies (1) \| Respond to of 275872

Dear Hmaly: Re: "The gov. allows expensing of equipment that has a lifetime of less than 1 yr. In our business, that would be saw blades, cords, drill bits, etc. If a piece of machinery lasts longer than 1 yr. it must be depreciated, over the lifetime, and there are different schedules for different types of equipment. I would bet that overall, the depreciation schedules are generous. Also, of the 7.5 bil. CAPEX, while I haven't seem a breakdown, my guess is that the fab and land would at least be 40% of the cost. Just a guess though." THe government depreciation schedules are always less lenient for cutting edge technology. I remember that PCs had to be depreciated for 5 years when they were horribly obsolete in 3 years. Would you like to run on a P133 as your primary computer? According to the government it would still have worth left even though Duron 900's sell for less than $500 brand new and P133s sold for $3000 5 years ago. So you should really check your depreciation schedules. Production equipment typically has longer depreciation schedules. Of course the way to take the rest of the undepreciated portion is to sell it or scrap it. Then you can take the difference as depreciation in the year it was gotten rid of. Besides the cost of the land for a $1 billion fab is less than a few percent and the building just a few more. The greatest costs are in the equipment, the people and the consumables to make it run. Re: "Take out the word "much" and I have no problem with that. And while Intel has higher fixed costs in equipment, Intel could have less costs/chip in other areas, such as engineering, because of Intels 4x volume." Yet they have far more than 4x the people and management. They are both top heavy and overloaded given their volumes. And salaried people are a fixed cost as well. Their pay does not change that much wrt volume output. Variable costs are usually defined as the costs that scale nearly 1 to 1 with production. That includes materials, energy uses, hourly wage force, shipping, etc. Marginal costs which are used for dumping and other such things is defined as the cost to produce one more, in this case, CPU. This is usually somewhat less than variable costs and far less than total costs per unit, CPU. Many here have tried to estimate marginal cost per CPU for both AMD and Intel and come somewhere around $30 to $50 per P4. Thus the fixed costs per P4 are around $150. As AMDs cost per Athlon XP is somewhere between $20 and $30, their fixed costs are more like $70. This quickie estimate shows that Intel's fixed costs are more than double AMD's. I think that in the world of pricing 2x deserves a "much". Re: "That is a stretch, and I certainly didn't see any proof of that." Xeon prices are coming down and customers are beginning to balk at the new pricing of NW Xeons. In fact, I do not see the "new" NW Xeon CPUs on PW. And AMD is seeing an upsurge in use in servers. Thus, Intel marketshare in this area is beginning to slip. Re: "From what I have seen at Aces's, the 1.7 MP is comparable to the 2 ghz NW Zeon; however in price/performance, AMD has a big lead." Do you realize that most of those tests skewed to P4 friendly apps. Using older ones, ones that also have Athlon opts or the Anand's type of server loads, NW Xeons do worse. Besides, you do know that 2.0 MPs are out there and being sold in great numbers. Re: "Or Intel could forego a price war, and by limiting demand, keep prices up until Intel can compete in price/performance arena. AMD doesn't have enough production to seriously hurt Intel yet." This is what is puzzling. They are forgoing a lot of money to attempt to starve AMD of resources. And the attempt is failing. It was successful before on others but, perhaps Intel doesn't see any other option with their current mindset. This is a big reason to shake up management to get rid of this hidebound thinking. Intel shareholders would be better off in the long run. To play on words, "The tighter you strangle the marketplace with your hands, the more customers will slip through your fingers" and "Once you set down the dark path of control, forever will it hold your destiny and you will become nothing." Pete