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

To: Elmer who wrote (45221)	1/9/1999 5:45:00 AM
From: Craig Freeman	Respond to of 1581339

Elmer, you can't make a "decent" profit on a $65 item with a $42 cost of materials. By the time you add marketing, sales, admin, R&D, and other overhead ... its a losing proposition. Craig re: "No wonder Intel can afford to drop the price and still make decent margins."

To: Elmer who wrote (45221)	1/10/1999 1:53:00 AM
From: Petz	Read Replies (1) \| Respond to of 1581339

Elmer, re:Celeron die cost of 21.25 and total cost of $42. Exactly how did you arrive at total cost? Did you divide R&D + Depreciation by the total number of chips Intel shipped? Supposedly Intel shipped 8M Celeron's last quarter, about a third of total production, so you are saying that Intel's depreciation + R&D was 3(42-21.25)8,000,000. That comes to a little less than $500,000,000. Unfortunately for you, Intel's R&D alone (they don't break down depreciation) in last quarter's 10Q was $617M! You really should apportion at least 25% of "marketing, general, administrative" to the Celeron also. That was $766M. So if we take 25% of M.G.A. and 33% of R&D, the "non-die" costs of the Celeron, assuming 8,000,000 were sold, is 0.25766M+0.33617M=$395M. Divide that by 8,000,000 Celerons and the "non-die" cost per chip was $50, not $20. And yes, I didn't even count depreciation! The true cost of each Celeron chip is at least $70, not $42. The lower numbers seen in analysts reports are marginal costs to produce additional chips, and assume that MG&A, Depreciation and R&D don't rise with higher volume. Petz