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To: gvatty who wrote (260177)	5/14/2009 1:15:28 PM
From: Tenchusatsu	Read Replies (3) \| Respond to of 275872

Gvatty, > If AMD goes out of business and Intel has a virtual monopoly Intel's pricing policies would change and harm the consumer. Then why doesn't Neelie the Terrible just come out and say it? "AMD must survive or else Intel will have too much pricing power." Instead she claims that Intel has to "abide the law." Of course, SHE'S the law ... Tenchusatsu

To: gvatty who wrote (260177)	5/14/2009 1:21:10 PM
From: fastpathguru	Read Replies (1) \| Respond to of 275872

gvatty, First off, consumers were harmed directly by Intel's actions. Don't fall for the "rebates lower prices for consumers" trap; exclusionary loyalty rebates RAISE consumer prices... The rebates are just the cost of maintaining their artificially high monopoly profits. (Intel folk who say that's impossible Just Don't Get It.) And by preventing or delaying the release of competitors' products, the market was denied the benefits of competition. Re: News Corp/WSJ: And they wonder why print news is dying rapidly? fpg

To: gvatty who wrote (260177)	5/14/2009 4:44:24 PM
From: pgerassi	Respond to of 275872

Dear Gvatty: The customer was always hurt by the rebates. Take a CPU company the biggest in its market of 60 million CPUs. It sells the first 70-80% were at monopoly pricing. So if the ASP of all CPUs (to OEMs) is say $140, the first 70-80% were at an average of $170 or so. The next 10-20% (to 90% of a company's historical sales (say like HP at 20% of 60 million or 12 million CPUs a quarter) plus a number market fudge factors) were sold at $153 (a 10% discount). When 90% was achieved, all CPU sold that period had a 10% discount or an average ASP of $153. Here is where the CPU to meet 90% target had a marginal price of $17 * 70-80% of 12 million or about negative $143 to $163 million. The ASP at that point is still $153, still $13 higher than the company's competitors who toe the CPU maker's line. The next 10% is sold at $136, a 20% discount. At 100% or 12 million sold, all CPUs sold that period get a 20% rebate from the $170 price. That 12,000,000th CPU gets a marginal discount of a negative $184 million. So all CPUs, but two, have a marginal ASP significantly above cost of production. Two out of 12,000,000 is hardly worth considering, so the CPU maker claims that CPUs are sold above the cost of production. But those two CPUs have huge payoffs. Until that last CPU is sold, The customer is overpaying for CPUs at that OEM. It gets more interesting when the second largest CPU maker sells CPUs for an ASP of $70. Even if it sold CPUs for nothing, it would have to give away at least 2.27 million of them to make the OEM even with the rebates lost on those two CPUs. NO COMPETITOR COULD DO THAT, NOT EVEN A COPY OF THE LARGEST CPU MAKER! If the CPU maker sold CPUs to everyone at $170, he gets a higher price per CPU than, if everyone toes the line. He also gets more revenue. But the second biggest CPU maker sells out their $70 CPUs and takes market share, as they should be in an level playing field. And the average ASP of 80% of $170 + 20% of $70 equals a market ASP of $150. So the biggest maker says that is more than they sell it for with everyone taking the rebates and they getting the whole market. So while it may be true for this period, the next period, the smaller one would make 25% of all of them and the market ASP falls to $145. The smaller CPU company has got more revenue and builds up their production facilities, thus the next period they sell 30% and the market ASP drops to $140 and so on, so after three periods, the customer is ahead and getting more ahead until they are selling all of the CPUs. But everyone knows that the first CPU maker would drop his prices a lot and the smaller would raise theirs a bit. And the customer is still ahead because the average drops. The other trouble with the above is the need to use different break points for each OEM or retailer. That is illegal because the above is enabled. Its even against the antitrust laws in the US. You must have one discount schedule and any deviations from it in either direction must be economically justified (shipping is a typical example, monopolies generally remove it from affecting the schedule by making it FOB their plant). What is not allowed is moving the breaks based on company size or historical sales. And the two breaks above are not allowed either as it makes it a first dollar rebate. Those aren't allowed for monopolies or near monopolies. Lastly there is the advertising rebate. The more an OEM avails itself of this rebate, the higher the cost to the consumer. All that advertising is paid for by the ultimate customer. That is why a web based site is cheaper than a bricks and mortar store that has to advertise in expensive media. Since the big CPU maker is paying half or more of the cost, more advertising is made. The OEM pays for it by charging the customer and the CPU maker by raising the prices on each CPU which is then paid for by the ultimate customer with suitable margin boosts. The big CPU maker messes with the rebates and pays them late or not at all, for something it doesn't like (against the law really, but hard to prove). Like buying CPUs from one of its competitors. And that isn't allowed either, especially for a monopoly. So a rebate, can hurt the customer. Its just like a 50% going out of business sale (rebate) isn't, when you see that they increased the prices 150% the evening prior to the sale's start. Pete