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Technology Stocks : Intel Corporation (INTC) -- Ignore unavailable to you. Want to Upgrade?

To: Gary Ng who wrote (63113)	8/22/1998 2:55:00 PM
From: Bill Jackson	Read Replies (1) \| Respond to of 186894

Gary, If you lack the smarts to understand what Intel has done strategically in cutting prices over the past two years in order to deny AMD the use of profits to build further gains on Intel. Obviously since intel at that time made 95% of the CPUs they could have kept the price high, to hell with AMD. However if they did that then each CPU sold by AMD would leave AMD with a good profit margin. Let us say they have the same cost as Intel for a pentium 166MMX at $35 and Intel sells it for $300 and AMD(-25%) sells for $225. In this case Intel makes $265 and AMD makes $190. In this case Intel sell 19 CPUs and AMD sells 1. At the end Intel has $5035 in the bank and AMD has $190. However that $190 can be used to make more CPUs, do research etc by AMD. So Intel says let us squeeze AMD and we will cut the price to $200 and AMD follows to $150(-25%) and so intel sells another 19 CPUs at $200 and makes $165 on each =$3135 As you can se they have made less profit on this group and are $5035-3135=$1900 lower, but still very profitable. AMD now sells 1 CPU for $150 and makes $115, far less than Intel and AMD is $75 less profitable than when the price was $300 for a 166MMX. So Intel has denied AMD $75 and in so doing has cost Intel $1900 in lost profits. Even so AMD has gained share and now the equation is around 20% AMD CPUs and 15% others CPUs and 65% Intel CPUs, in the overall unti market. In the dollar market AMD is in the 10-12% area due to a lower ASP than Intel. This was the driving force behind the slot 1, to make a private garden where AMD could not go. So think and understand befoe you comment. Intel was and remains far more profitable than AMD, however they did indeed burn money in order to deny AMD profits. If they did not do that Intel would have made billions more and AMD would have become more of a threat. Now AMD is starved for cash and trying hard to gain on Intel and is succeeding, as market shares show. Note the analysts have downgraded Intel for these reasons and for the risks of the new celeronette. The new celerone will not do very well untila socket version is available (socket 370) at which point it will become far more cost effective and will kick AMD ass, unless AMD makes a counter part to it in the K7. Bill