To: AK2004 who wrote (189358 ) 3/10/2006 8:31:25 PM From: grimes Read Replies (1) | Respond to AK re "more than usual for AMD but still limited" .. Intel's current ASP is generally thought to be about $ 150, AMD's about $ 100, so to have an impact with current products Intel will have to take about a 30 percent price reduction, assuming AMD does not respond. Intel's microprocessor revenue in the June 2005 quarter was ~ $ 6.5 billion, so a revenue hit of this order would amount to ~ $2.0 billion. Further they have added ~ 15,000 employees at an incremental quarterly cost of (say)$ 300 - 400 million, and presumably expanded their other expenses in synch. Thus a meaningful price response in combination with added other costs adds up to a pre tax income hit of perhaps $ 2.5 billion - this would have them operating at barely breakeven or perhaps at a loss. Bear in mind they are essentially committed to dividends of ~ $ 500mil quarterly and are planning 2006 capital expenditures of about $ 1 - 2 billion more than their depreciation. Then of course there is the planned $ 25 billion stock buyback. Their cash balance at the end of 2005 was ~ $11.5 billion, down about $ 2.5 billion in a reasonably good year. I suggest in the context of a serious price war the image of Intel as a financial powerhouse is something of a chimera.
