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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: Time Traveler who wrote (34606)	7/16/1998 6:00:00 PM
From: Petz	Read Replies (2) \| Respond to of 1576973

Time Traveler, U R mistaken about gross margin calculation. My statement was If CPU's are 3/4 of Intel's revenue, then the theoretical highest gross margin for CPU's is 65%. (0% gross margin on 1/4 of sales, 65% gm on 3/4 of sales) This is based on fact that Intel overall gross margin was 0.49. Your math: 60% / 75% != 65%! In fact 60% / 75% = 80% I never claimed that 60% / 75% is 65%. Where did this come from? Intel gross margin is 49%. That means that for every $100 in sales, there is $51 of expense. Now assume that, for the $25 of sales in the non-CPU business, the gross margin is ZERO, that means the costs in the non-CPU business are $25. Since total costs are $51, there must be $26 of cost in the CPU business. By the definition of gross margin = 1 - cost/sales, for the CPU business, CPU_gross_margin = 1 - 26/75 = 0.653333 I will copy the conclusion of my original post: It would be a stretch to estimate gross margin on CPU's as high as 60%. What this means is that Intel does not build CPU's for $50, but for at least 0.4ASP = 0.4$233 = $93 $50 is a totally impossible estimate. $50 is probably about the cost if we exclude depreciation. My estimates were based on the following assumptions: 19M CPU's in 2nd quarter (if higher, cost per CPU would be lower) 25% of revenue from non-CPU lines (if higher, cost per CPU would be higher) Gross margin in non-CPU business around 16% (if higher, cost per CPU would be higher) Petz