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

To: Dan3 who wrote (82600)	6/16/2002 12:08:54 AM
From: hmaly	Read Replies (1) \| Respond to of 275872

Dan3 Re...Intel's capex costs during the past few years have been higher by more than $1 Billion per quarter than the depreciation they included on their income statement e.g. assuming Intel will remain a going concern, and that they will continue in the capital intensive CPU business, they will probably have to continue to spend as much (or more) in the future on capex as they have in the past, so they should be taking that much as a depreciation charge (as AMD does). Instead, Intel has been taking much lower costs for their plant, as though they were going to stop upgrading their FABs very soon.< If all of the money was spent on equipment, you might have a point. However, CAPEX includes the FABS and land, which don't depreciate in reality near as fast, and do add to Intel's assets. Intel spends $1.75 to $2 Billion each quarter on its plant, but includes only (about) half that when calculating its profits. However, the machines they replaced cost more now than 5 or ten yrs ago, and would be listed as worth more on the balance sheet. Also, Intel isn't just replacing machines, but adding to the list, which would also bolster the equity side of the balance sheet. Now do you see how it works and why a number of AMD longs think Intel has been misleading on their claims of profits? Intel may be cheating on their balance sheet; however your example isn't a clear cut example. It takes far more examination than we are able to give it, to define it as cheating. In addition, depreciation many times is a tax thing, and has little to do with reality. For instance, land rarely depreciates, and certain equipment can go up in value. Farm tractors for instance. Apartments a lot of times are built solely for the tax breaks, mainly through depreciation, when in fact they normally appreciate for 20 yrs.

To: Dan3 who wrote (82600)	6/16/2002 10:25:51 AM
From: niceguy767	Read Replies (1) \| Respond to of 275872

Dan3: "The bottom line is that Intel has been spending quite a bit more on capital equipment than it has been including in its costs when it calculates quarterly profits, while AMD has been including as much in capital costs, each quarter, as it has been spending on plant and equipment each quarter." You are absolutely correct...Since FY99, INTC's net PPE (property,plant and equip)has risen by $6.4 billion from $11.7 b to $18.1 b compared to AMD's net PPE which has risen by $0.2 b from $2.5 b to $2.7 b over the same period... Comment 1: INTC's PPE has risen over 50% since FY99 while AMD's PPE has risen 8%. Comment 2: Astoundingly, even with INTC's "puffed up" PPE, AMD's total assets in this same period have increased by $0.6 b more than INTC's. Comment 3: A higher rate of dep'n by INTC over this period would have resulted a significantly lower eps than that which has been posted by INTC over this period... not to mention a wider total absolute dollar asset discrepancy in AMD's favour...(I won't, at this time, get into the implications of the $5 billion in virtually valueless GW that is sitting on INTC's balance sheet.) Comment 4: The accounting monster being created by INTC since FY99 may return before long to devour its creators.