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

To: Monica Detwiler who wrote (79407)	5/5/2002 4:42:47 PM
From: Dan3	Read Replies (2) \| Respond to of 275872

Re: Intel's Monday release of the 2.53 chip. It's been something of a surprise to me that Intel's stock price has dropped ahead of this release. Given the overclocking results we've seen, I take it to be a matter of marketing when parts up to 2.8GHZ or even 3GHZ are released. But maybe I'm wrong. Maybe it's words like this that have the market spooked: With the 2.53GHz Pentium 4 announcement Monday, a cadre of PC makers will also announce new high-end desktops. ...The machines will be available for order Monday. Which kind of sounds like they won't be available for sale for a while. Maybe "available for order" and "available for sale" mean the same thing, this time. But those have often been the code words of a paper launch. And Intel shouldn't need to be making paper launches at this point. Not unless things aren't quite as rosy as they've been intimating as far as yields and binsplits are concerned. Pricewatch shows 4 pages of P4 2.4, 4 pages of P4 2.2, 10 pages of P4 2.0, and 11 pages of 1.8. Athlon XP has 8 pages of 2100, 9 pages of 2000, and 11 pages of 1800. Considering that Intel sells 4 times as many processors as AMD overall, this is.... puzzling. Or maybe it's the sudden surge in ads for AMD powered systems. This Sunday, Best Buy, Circuit City, Sears, Office Depot, and Comp USA all included both desktop and notebook AMD systems in their Sunday circulars. I can't remember the last time that happened. It may never have happened before. The promised deluge of P4's from a mix of 8" and 12" .12 FABs isn't materializing. And that seems to have the markets worried. AMD is clearly scrambling to ramp their .13 process, but they don't have $18 Billion in costs to cover, and they can afford to price their chips low. Given Intel's $18+ Billion spent over the past 3 years on their FABs, it can't be that Intel doesn't have enough capacity, so it's more likely that demand too inelastic to support increased revenue at any lower prices. In other words, if Intel cuts prices enough to take share away from AMD and increase units, they'll wind up substantially reducing total revenue. Let's say they cut their ASP from $175 to $140. They'd probably take 1.5 million units from AMD, and grow the market by another 2.5 million units for a total increase of 4 million units. Their choice may be something like between 30M parts at $175 = $5,250 and 34M parts at $140 = 4760. Variable costs on the extra 4M chips wouldn't be too much (Most of Intel and AMD's costs are fixed: R&D, FAB equipment, Administrative), but even if variable costs are only $25 per chip (about half of which would probably be co-op and unit marketing costs) that's still an extra $100M in costs to get $490M less in revenue. And, this may be what has the markets cutting Intel's stock price. It this week was buy the rumor, I hate to think about next week's sell the new for Intel's 2.53 release