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

To: Elmer Phud who wrote (251947)	5/18/2008 9:04:50 PM
From: economaniack	Read Replies (5) \| Respond to of 275872

Ephud re: Pathetic. The only thing pathetic about it is your inability to understand it. Like many high tech products, processors are subject to increasing returns to scale, that is it costs less to produce an additional unit than the average cost of production. If a company sells its output at the marginal cost they will lose the difference between average and marginal cost on each unit sold. In the narrowest definition of short term marginal cost, the marginal cost is surely 0. After all the company has the design, the fabs, the chemicals, the employees, even the packaging materials. It is unlikely that anyone must be paid more or more materials purchased to produce just one more unit. Of course processors aren't made one at a time. If we consider the average variable cost of making say 50,000 more processors, we will have substantial costs, in materials, in labor, in transport and energy that could be saved if the extra output is foregone. Indeed at that level even some capital investment could be skipped. At the level of millions of processors, we are talking about the entire output of a fab. The marginal cost of a fab's worth of output would include the entire cost of the fab amortized over its lifetime production. The marginal cost of an entire product line includes the R&D costs of development and ramp. AMD is pointing out that in an industry with high fixed costs and low marginal costs, marginal cost pricing is tantamount to selling at a loss, and is profitable only if the firm can price discriminate (sell some product at higher prices) which is the hallmark of monopoly pricing, and which is at the heart of AMDs case against Intel. There will be much litigation about which costs are truly variable costs and which are fixed. There is nothing particularly novel about this. E

To: Elmer Phud who wrote (251947)	5/18/2008 10:32:33 PM
From: Sarmad Y. Hermiz	Read Replies (2) \| Respond to of 275872

>> Thus according to AMD, Intel should forego profitable sales of additional units because Intel's prices are allegedly below AMD's long run costs. This is exactly the EU-EC complaint. To the delight of AMD friends, the people in charge of that organization are morons.

To: Elmer Phud who wrote (251947)	5/19/2008 10:55:39 AM
From: fastpathguru	Read Replies (3) \| Respond to of 275872

An interesting reading of Intel's filing suggests that AMD is attempting an novel definition of "selling below cost". Page 11, label C "While a monopolist's prices could be above the marginal short term cost of producing an additional unit, they may be below an equally efficient competitor's long term costs of staying in business". Thus according to AMD, Intel should forego profitable sales of additional units because Intel's prices are allegedly below AMD's long run costs. It think this is AMD's main claim about selling below cost. This is just pathetic. Actually, what's pathetic is that both you and Intel don't seem to understand the concept of an "equally efficient competitor." Hint: The "equally efficient competitor" is not AMD. fpg