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

To: Elmer who wrote (34789)	7/18/1998 10:14:00 PM
From: Paul Engel	Read Replies (3) \| Respond to of 1573004

Elmer - Re: " Because of the law of supply and demand, AMD must make the product more attractive to bring the 2 factors into balance. Whata ya think?" You have a struck on a most excellent point ! AMD increased their K6 shipments to 2.7 million this past quarter. During the Conference Call, Sanders was hedging his answers, stating that AMD was no longer SUPPLY LIMITED, but now they may be DEMAND LIMITED. And, it would appear that they had to LOWER THEIR ASPs to $85 to make this SUPPLY-DEMAND curve come in to balance. Now, look at the near term implications of this. If AMD is DEMAND limited at 3 ± million K6's per quarter, they may have limited their market share increases - and head for a decline. Further, they will be bringing on IBM production real soon - creating a huge OVERSUPPLY of K6's - they will have to DROP THEIR ASPs real fast and real deep to keep these chips from piling up in their warehouses. Add on top of this their INCREASED EXPENDITURES to bring up Fab 30/DRESDEN - which will (if successful - a real problem, actually !) create an enormous glut of K6s that the market cannot absorb! And the FAB 30 depreciation will begin to escalate AMD's cost structure as their ASP's collapse due to excessive production capacity for devices (K6's) for which the market has limited appetite. I'd say that Q3 may be rocky for AMD but Q498 and H199 are going to be earth shattering - financially speaking - for AMD. Paul