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

To: rsi_boy who wrote (138192)	10/29/2004 7:46:28 PM
From: grimes	Respond to of 275872

rsi boy re 'demand elasticity. if intel dropped prices 40% they might sell a lot more units.' Recent history suggests otherwise. Intel's CFO stated (during the Q3 mid quarter update IIRC) that price reductions had had little impact on demand, hence the (then) continuing inventory problem

To: rsi_boy who wrote (138192)	10/29/2004 7:55:01 PM
From: niceguy767	Respond to of 275872

"you're forgetting demand elasticity. if intel dropped prices 40% they might sell a lot more units. this would change the math. they could be almost as profitable, just with a different price/volume. depends on the marginal cost. which is the number we don't know." if intel dropped prices 40% they might sell a lot more units. this would change the math. they could be almost as profitable, just with a different price/volume. Now you are sounding silly! Maybe if AMD raised prices their profit margins would double? Maybe, maybe, maybe!!! INTC is currently doing all it can to stem its margin declines. If there was a reasonable as opposed to absurb alternative, INTC would have done it by now! AMD's 90nm process has levelled the playing field. AMD's "Opteron-family" product concept has tipped the playing field in AMD's favour! No longer with world-leading innovation and now at a price/performance disadvantage, INTC's grip on market share is at risk! INTC can bluster and stumble and elmo can concoct all the cost equations in the world, but the fact remains that INTC without competitive product is an accident waiting to happen in terms of protecting its market share. INTC has all these fabs but can produce only inferior product...INTC's fixed costs are not decreasing and unless INTC comes up with a competitive "core" soon, these fixed costs, not unlike a boa constrictor, are going to continue to squeeze margins! Just not a pretty sight for INTC down the road apiece unless they come up with something that can compete with the Opteron core!

To: rsi_boy who wrote (138192)	10/30/2004 3:09:56 AM
From: Petz	Read Replies (1) \| Respond to of 275872

<<So if [Intel's] ASP dropped by 40%, they would be losing money. (100*2373/5928=40) That's an ASP of about $90, maybe $95.>> rsi:<you're forgetting demand elasticity. if intel dropped prices 40% they might sell a lot more units> Not enough additional units to make much of a difference. First, if they did this tomorrow, AMD would STILL gain market share in Q4 and have flat market share in Q1. It takes time for OEMs to change their SKUs and design in Intel instead of AMD. The top 20% of AMD's $ sales is untouchable because Intel can't produce fast enough chips. If Intel did this, it would take them at least a year to take away 1/4th of AMD's unit sales. AMD has about 10% of CPU revenue share, so 1/4th of that is 2.5%, or about 3% of Intel's current CPU sales. And even this 3% of additional CPU $ sales would have some costs associated with it. So Intel's net profit margin would be at most 1.5%. In short, as Intel themselves said, there is not much demand elasticity since AMD's current share is only 16%, some of that is beyond Intel's performance level and inertia puts a 3 to 6 month lag on the results of price cuts. Intel's price curve would also have to be exceedingly flat because they are prohibited by US law from selling below cost even at the bottom of their line. This would mean that customers would all want 3.2 GHz and faster product, which Intel could not deliver. Petz