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

To: AK2004 who wrote (189522)	3/13/2006 1:44:07 PM
From: Sarmad Y. Hermiz	Read Replies (4) \| Respond to of 275872

The issue that needs addressing is the question of what is the actual ratio of Intel prices relative to AMD prices. I see posts here talking of the AMD ASP of $100 vs Intel ASP of $150 as though that means Intel's prices are 50% higher (like-for-like), and therefor Intel needs to reduce its prices by 30 0r 40% to be below AMD. That is just plain nonsense. So what is needed is some sense of how much will Intel need to reduce prices to sell all of its chips ? In my opinion 5-10% across the board will be more than enough. But that is just a guess at this time. Can Intel afford a 10% reduction if it clears out its inventory and gives it good capacity utilization ? I think so. And it is already priced into the guidance and INTC stock price. The next question is whether AMD will accept a static or slightly reduced market share, or whether it will under-cut, daring Intel to drop prices another 10%, etc.... until they are both in the red ? I suppose this latter scenario is what is causing the sell-off.

To: AK2004 who wrote (189522)	3/13/2006 2:20:06 PM
From: eracer	Read Replies (2) \| Respond to of 275872

clearly price war is form of intel's damage control - what is your take on actual damage to intel? As I said earlier, I would hestitate to even consider it a price war but a case of Intel responding to market forces. Here is how I view Intel's choices: 1) Doesn't cut prices. -Intel accumulates millions of unsold CPUs over the next couple quarters even as more attractive CPUs from Intel and AMD are ready to be introduced. They have to be sold for massive discounts later on. -AMD gets more socket wins and maintains ASPs even as AMD processor volumes increase due to FAB36 contributions. 2) Cuts prices. -Intel keeps inventory lower relative to point 1 at an even greater cost to short term revenues, but... -Intel slows AMD's marketshare growth and raise worries about AMD's profitability. -Intel doesn't accumulate as many CPUs that will be greatly devalued once NGA arrives, helping future profitability. -Any extra short term losses now will make any future gains (at least a few quarters out) look all that much better. Intel will get credit for a "spectacular turnaround", and in effect get praise for solving a problem that they themselves created. Given the choice between scenario #1 or #2 I felt that #2 made the most sense for Intel. I feel choice #2 means short term losses of hundreds of millions of dollars per quarter for the next few quarters. I don't think big cuts will be made to every produce line, otherwise the revenue drop would be unbearable. The focus will probably be on mainstream to high-end desktops. Mobiles as a group might be more stable than mainstream desktops because the higher ASPs of Core Duo CPUs can offset some ASP erosion and market share losses of Pentium M to Turion. As Celerons are already budget CPUs I don't think Intel could go much lower on pricing as a group. They also have room to introduce faster clocked Celerons or Celerons with 512KB L2 cache to offset price cuts on current models. Perhaps pricing the high-end relatively low will encourage some customers to spend a little extra rather than settling for a budget model.