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so Jobs gets screwed by IBM over game consoles, thus Apple-Intel ?

Discussion in 'Intel' started by Guest, Jun 10, 2005.

  1. Guest

    Yousuf Khan Guest

    This is what I was talking about:

    AMD Lifts Its Veil - Forbes.com
    http://www.forbes.com/home/intellig.../14/amd-semiconductor-ruiz_cx_ah_0613amd.html

    Yousuf Khan
     
    Yousuf Khan, Jun 18, 2005
    #61
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  2. Guest

    Robert Myers Guest

    http://www.forbes.com/home/intellig.../14/amd-semiconductor-ruiz_cx_ah_0613amd.html

    A fascinating article.

    <quote>

    Nor can AMD afford to make mistakes. Intel's PC chip unit turned in
    gross margins above 49% in 2004, while AMD's gross margins for its PC
    chips were just shy of 12% in the same period.

    </quote>

    You don't have to go any further to understand why big vendors are
    reluctant to depend on AMD. A manufacturing gross margin of
    _Twelve_percent_?

    Little wonder that Intel isn't too flustered.

    RM
     
    Robert Myers, Jun 19, 2005
    #62
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  3. Guest

    Travelinman Guest

    Maybe you should show that to all the AMDtrolls who insist that AMD is a
    much more worthy partner for Apple.
     
    Travelinman, Jun 19, 2005
    #63
  4. Guest

    Yousuf Khan Guest

    Actually, Forbes made a mistake there. Somebody in one of the investors
    boards pointed out that the 12% figure is only AMD's operating margin,
    not its gross margin. I don't remember what it's actual gross margin is.

    Yousuf Khan
     
    Yousuf Khan, Jun 19, 2005
    #64
  5. Guest

    Yousuf Khan Guest

    Forbes got it wrong, 12% is its operating margin.

    Besides, you cannot know the world of x86 unless you know about what AMD
    is doing.

    Yousuf Khan
     
    Yousuf Khan, Jun 19, 2005
    #65
  6. Guest

    Del Cecchi Guest

    If you have been following the Forbes articles about SCO and Linux and so
    on, you would be somewhat more sceptical of what they write about
    technology.

    del
     
    Del Cecchi, Jun 19, 2005
    #66
  7. Guest

    Yousuf Khan Guest

    There's nothing I take at face value from anyone, including Forbes. I
    only pointed that article out to demonstrate what I was talking about in
    relation to AMD's APM technology and why it's different from many other
    people's APM technologies. Forbes wasn't the first time I read about it,
    I've been hearing about for a long time; Forbes just happened to be the
    most recent I read about it and it's article was the most handy.

    Then people took quotes from the same article about gross margins which
    were unrelated to the original subject of the matter, the APM.

    Yousuf Khan
     
    Yousuf Khan, Jun 19, 2005
    #67
  8. Guest

    Robert Myers Guest

    http://moneycentral.msn.com/investor/research/profile.asp?Symbol=AMD

    gross margin = 63.7%

    http://moneycentral.msn.com/investor/research/profile.asp?Symbol=intc

    gross margin = 71%

    But neither one of those numbers is a quote on the gross margin for
    _PC_Chips_. Quoting an "operating margin" for a single product that
    didn't correspond to a separate entity would be silly.

    Del's urging toward skepticism duly noted, I'd be expecting a
    retraction or some kind of explosion out of AMD for such a gross error.
    I'll take Forbes over the comment from the investment boards. If it's
    an error, it's a big one, and we shouldn't be looking to investor
    boards for a correction.

    RM
     
    Robert Myers, Jun 19, 2005
    #68
  9. Guest

    Robert Myers Guest

    http://moneycentral.msn.com/investor/research/profile.asp?Symbol=AMD

    gross margin = 63.7%

    http://moneycentral.msn.com/investor/research/profile.asp?Symbol=intc

    gross margin = 71%

    But neither one of those numbers is a quote on the gross margin for
    _PC_Chips_. Quoting an "operating margin" for a single product that
    didn't correspond to a separate entity would be silly.

    Del's urging toward skepticism duly noted, I'd be expecting a
    retraction or some kind of explosion out of AMD for such a gross error.
    I'll take Forbes over the comment from the investment boards. If it's
    an error, it's a big one, and we shouldn't be looking to investor
    boards for a correction.

    RM
     
    Robert Myers, Jun 19, 2005
    #69
  10. Guest

    Robert Myers Guest

    Does anyone in the financial press write about open source in an
    impartial way?

    I take it for granted they don't like and probably would say even
    harsher things about it if IBM weren't a potential source of
    advertising revenues.

    SCO/Linux is a special case, of course. Anybody who doesn't want a
    lecture about intellectual property goes to groklaw.

    RM
     
    Robert Myers, Jun 19, 2005
    #70
  11. Guest

    Yousuf Khan Guest

    Hard to say what exactly they make on processors alone, because I don't
    think either company breaks down their margins based on products. So
    it's not clear how Forbes came up with the gross margin numbers for
    processors alone. But as you yourself researched, the overall gross
    margins for AMD & Intel are 64% vs. 71%, so it's not that far apart.

    Yousuf Khan
     
    Yousuf Khan, Jun 19, 2005
    #71
  12. Guest

    Robert Myers Guest

    Manufacturers have a bogey cost for every product they make, or at
    least they should. I wouldn't want to guess what Forbes used as a
    source for those numbers. If the gross margin numbers reported by
    Forbes are correct, then the PC chips business is a marginal enterprise
    for AMD--probably even a losing proposition in the operating profit
    sense. That's not the solidest proposition to be counting on if you're
    thinking of AMD as a long term supplier of PC chips. What happens when
    Wall Street puts pressure on the company to improve profitability?

    RM
     
    Robert Myers, Jun 19, 2005
    #72
  13. It's kinda simple you know Robert and you've certainly demonstrated on many
    occasions that you are not stupid enough to believe this Forbes number
    so... WHY are you insisting on pretending? Uhh, there can be only one
    reason! "Innocuous"??<guffaw>
     
    George Macdonald, Jun 20, 2005
    #73
  14. Guest

    Robert Myers Guest

    I wish somebody would explain it to me. Where did that number come
    from and what does it mean? Even inside a mnufacturer, manufacturing
    cost can be pretty arbitrary. Did Forbes manipulate the number?
    What's the motive?

    If nothing else, George, if Forbes can put that number out there and
    expect not to get blown out of the water, it explains a great deal
    about AMD's credibility problems. Don't blame it on me. I don't
    publish any widely-read financial publications.

    RM
     
    Robert Myers, Jun 20, 2005
    #74
  15. Guest

    Del Cecchi Guest

    So far as I know, AMD only makes two things. Microprocessor chips,
    including peripherials, and flash memory. They average 68 percent gross
    margin it said above. Which one do you think has bigger margins,
    Processors or flash memory? Flash memory is sold for digital cameras,
    portable mass storage, and music players.

    As I said, sometimes I wonder about forbes and technology. They
    certainly don't seem to be the magazine they were in Malcolm's day.

    del cecchi
     
    Del Cecchi, Jun 20, 2005
    #75
  16. What is a "bogey" cost? Bogus? There are many.

    Cost accounting is a serious discipline, and determining a
    valid cost of a manufactured good depends entirely on what
    the number will be used for.

    The biggest distinction is between marginal cost (the increase
    in costs due to producing one more) versus "average" cost,
    total costs divided by total number produced. Byproduct credits
    (up/down binning) and IP use complicate an already difficult calc.
    Some anal_yst. Guaranteed bogus.

    -- Robert
     
    Robert Redelmeier, Jun 20, 2005
    #76
  17. Guest

    websnarf Guest

    That's a good question actually; remembering that margin = profit/cost
    and profit = revenue - cost. AMD doesn't pay for the fab twice, but
    the value of the fab has clearly depreciated quite a bit by the time
    its used for flash. So there is a question of how to assess the fab
    cost. Presumably in the books they "sell it to themselves at a
    depreciated cost", but they could practically make up any number (up to
    the original cost of the fab) I would think.

    Other than that, flash costs are much lower. They don't have on-going
    design costs related to "cranking the frequency"; flash is a kind of
    memory array, so via proper redundancy in the design, there is no
    reason their yeilds couldn't be as high as they want; they don't have
    to pay for a "compatibility lab" with anywhere near the complexity of
    those for their x86 CPUs. They are not paying retail marketing costs,
    etc.

    But Flash is a strangely cyclical market. Or at least it was. In some
    quarters when Palm Pilots didn't sell well, AMD wasn't able to sell
    them flash. Flash is a kind of market where you make big volume
    deals with fewer customers -- so you can be either on the gravy train
    or shut out very easily. Perhaps with more digital camera, cellphone
    and mp3 player manufacturers, this is less of a problem these days.
    But who knows -- Intel plays in the market too, remember.

    Of course AMD is able to play a lot of games with CPU prices via market
    segmentation, but all this has to be counted against higher costs and
    intense competitive pressure from Intel.

    So which unit has actually higher *margins* is not clear to me. Flash
    may be lower revenues and lower cost at the same time, versus CPUs
    which have higher revenues and costs at the same time.

    Either way, figuring out the "margins" of the CPUs seperated from the
    flash seems like a silly kind of exercise, since AMD's goal clearly is
    to maximize net profits, not individual margins. I.e., without other
    factors, such as total product shipped for each unit, and full
    disclosure of costs, and without knowing how AMD is "dividing up the
    fab costs" (or other shared costs), some of which I am sure are
    available from the SEC filings, its both hard to put "margins for each
    product" into perspective or even know what they are.

    A Forbes article obsessing over its estimations of such margins -- I
    don't know if I would take that as anything particularly meaningful
    even if it got its numbers correct. Personally, I think both markets
    are dominated by short term uncertainties that make this kind of
    attempt at detailed analysis kind of useless.
     
    websnarf, Jun 20, 2005
    #77
  18. Guest

    Robert Myers Guest

    But so what? Manufacturers rely on cost of goods numbers because they
    have to. So do analysts. Knowing how the number was made is at least
    as important as the number, but so what? Unless you can get inside AMD
    and examine the books, you, and I, and nearly everyone else, is going
    to have to take what appears in the media.

    RM
     
    Robert Myers, Jun 20, 2005
    #78
  19. Guest

    Robert Myers Guest

    wrote:


    "PC Chips" would not include processors for embedded applications,
    which AMD also makes.
    There _is_ a great deal of arbitrariness in cost of goods sold figures,
    just like there is a great deal of arbitrariness in earnings and
    profits. That doesn't mean the numbers are irrelevant.
    Frustrating it may be, but not silly. Manufacturers and investors want
    to know which products are carrying their weight and which are not.
    Should the product be continued, should more investment or advertising
    be put into the product, is the selling price right...all kinds of
    issues.

    The numbers in Forbes certainly look suspicious, but that doesn't mean
    that knowing one manufacturer's gross margin for a particular product
    line versus another manufacturer's isn't something investors would and
    should be interested in.

    AMD is doing okay right now. If they keep doing okay, maybe we'll
    never find out what those numbers mean. If there is trouble, we'll
    hear more. Intel's gross margin numbers, as I'm sure you know, are
    constantly under scrutiny, as is the profitability of its different
    product lines. Managers and investors _do_ look at whether individual
    products make money and how much. That seems so obvious that it
    doesn't seem as if I should have to write it.
    If you've got serious money to spend, you can buy a report with all
    that stuff worked out for you and with the methodology documented.
    We're talking about an article in a mass market magazine here. You get
    what you pay for.

    RM
     
    Robert Myers, Jun 20, 2005
    #79
  20. Guest

    Travelinman Guest

    Actually, no.

    Let's go through this again. The following is simplified, but if people
    posting here would learn it, it would eliminate about 95% of the
    pseudo-economics that appears here so frequently.

    Revenue is the amount of money you receive for your product or service.

    Cost of sales is the cost that can be DIRECTLY attributed to each unit.
    That is, in principle, if you don't ship anything, cost of sales would
    be zero. This usually includes direct labor and direct materials. A
    small amount of manufacturing costs (electricity, for example) also goes
    here.

    Overheads are your fixed costs. That is, costs that you have whether you
    ship anything that month or not. Typically, this includes selling costs,
    R&D costs, plant depreciation, and admin costs.

    There are a very few items that can be included in a couple of different
    places. As long as you're consistent, you get a good bit of leeway. For
    example, commissions are often included in the overhead bucket, although
    I think they should really be in COS. SEC doesn't care which one you use
    - as long as you're consistent. This is one of the reasons that you have
    to be very careful in comparing gross margins from different companies.
    They may be accounting for some overheads differently. That problem
    doesn't occur if you're looking at net income.

    OK, now for the math:

    Gross margin = revenue - cost of sales

    Gross margin percentage = gross margin / revenue

    Net income (or pre tax profit) = gross margin - overheads
    or
    Net income (or pre tax profit) = revenue - cost of sales - overheads


    It's really not that hard, but people constantly insist on getting it
    wrong - like Nasty's confusion between gross margin and profit.
     
    Travelinman, Jun 20, 2005
    #80
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