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[Engadget] AMD cuts wafer order by 75%, pays $320 million fine - Page 5

post #41 of 83
While I don't see them going anytime soon, it's starting, they are going to go sometime in the future.
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post #42 of 83
Another thing, it may only save amd 65mil compared to buying the wafers, but theres still a lot of work to be done and money invested in a wafer before you end up with a product that you can distribute and sell. Had they bought these wafers, binned, packaged them, shipped/stored ready products since the market is slow, theres a good chance AMD would have been out a lot more then the 320mil penalty in old stock no-one is willing to buy (saturated market), and holding back the release of the next product cycle, where AMD can't afford to get anymore behind compared to intel.
Provided the current amount can keep up to demand of course. If they drain the pipeline before the next refresh is out then its a bad decision.
Thats my take, anyways. I'm no expert in economics, so if theres a flaw in this then let me know.
Yeroon
post #43 of 83
damn why didnt they just keep with it at that point I mean they should at least break even with it now they are out even more then they started!
 
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post #44 of 83
I think the better move would to have been to complete the order, then just drop the pricing of their products down to JUST above cost, even a $1 above cost. Watch as everyone on the planet buys their products, and they come out of the situation in the black.

Any number of 0 and higher is better on the books than a negative number.....this is such an odd choice for them. Although with the way AMD has been managed, not so surprising.

EDIT: Not having their costs available, just sort of throwing a number out here...

How many of you would buy a new video card tomorrow if AMD came out and said "The 7970 is now $240, as we need to clear inventory."? I know I would get another....

7850's for $120.....

Anyways, you get the idea.
Edited by PostalTwinkie - 12/7/12 at 2:43pm
    
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post #45 of 83
Quote:
Originally Posted by PostalTwinkie View Post

I think the better move would to have been to complete the order, then just drop the pricing of their products down to JUST above cost, even a $1 above cost. Watch as everyone on the planet buys their products, and they come out of the situation in the black.
Any number of 0 and higher is better on the books than a negative number.....this is such an odd choice for them. Although with the way AMD has been managed, not so surprising.

It's true that demand is fairly elastic for electronic goods, but the fact of the matter is that the demand only really applies to the final product (i.e. a desktop or laptop). The OEMs COULD buy tons of AMD chips but why would they when they know that the final good would still incur a high enough cost and consequently a high price that would discourage buyers. The OEMs know that there isn't much demand for laptops and desktops so they have no reason to buy AMD's processors in the first place. So why would AMD complete their order when they have no viable customers, even when their processors are dirt cheap. Also, like others said, the sales would be over time, which isn't what they want. They need guaranteed money immediately. Like it or not cutting their losses may be the best option for AMD right now, even if it doesn't look good. A lot of companies fail to move forward because they're too wary over sunk costs. I mean, there must be a good reason why they did it.
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post #46 of 83
Quote:
Originally Posted by geoxile View Post

It's true that demand is fairly elastic for electronic goods, but the fact of the matter is that the demand only really applies to the final product (i.e. a desktop or laptop). The OEMs COULD buy tons of AMD chips but why would they when they know that the final good would still incur a high enough cost and consequently a high price that would discourage buyers. The OEMs know that there isn't much demand for laptops and desktops so they have no reason to buy AMD's processors in the first place. So why would AMD complete their order when they have no viable customers, even when their processors are dirt cheap. Also, like others said, the sales would be over time, which isn't what they want. They need guaranteed money immediately. Like it or not cutting their losses may be the best option for AMD right now, even if it doesn't look good. A lot of companies fail to move forward because they're too wary over sunk costs. I mean, there must be a good reason why they did it.
Quote:
Originally Posted by geoxile View Post

It's true that demand is fairly elastic for electronic goods, but the fact of the matter is that the demand only really applies to the final product (i.e. a desktop or laptop). The OEMs COULD buy tons of AMD chips but why would they when they know that the final good would still incur a high enough cost and consequently a high price that would discourage buyers. The OEMs know that there isn't much demand for laptops and desktops so they have no reason to buy AMD's processors in the first place. So why would AMD complete their order when they have no viable customers, even when their processors are dirt cheap. Also, like others said, the sales would be over time, which isn't what they want. They need guaranteed money immediately. Like it or not cutting their losses may be the best option for AMD right now, even if it doesn't look good. A lot of companies fail to move forward because they're too wary over sunk costs. I mean, there must be a good reason why they did it.

No viable customers? You are acting like Desktop and Laptop sales have suddenly stopped. Not the case by a long shot...OEM aside, there is also a large market straight to consumers.

You are right on one account though, this was the quick way out. By doing this they are able to close their books for the end of the quarter and start "fresh" next year. Is it the best? Only time will tell....
    
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post #47 of 83
When isn't 65 Million in Savings a good thing when your cashed strapped and waiting to make that next big move. You gotta stay afloat til you can make that move.
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post #48 of 83
Quote:
Originally Posted by Vagrant Storm View Post

65 million? I say they should just stick to the order...if they have so much stock sitting around that it is causing them trouble on their financials they could start donating them to schools in Africa or something and then use the donation as a write off on their US taxes. They could then recoup some of the money with the donation and also get some publicity.
heh...I feel their stock price is dropping below $2 again...I bought 50 shares at $2.55. Heh, I am still sure they'll hit the $5+ mark again...but it might take longer than I thought it would.

Don't forget the costs of not only placing the order, but the logistics, management, production etc of the received wafers. I don't think the report takes into account the actual cost of not selling all the end-of-line stock off at reduced value in comparison to the original expected value
post #49 of 83
this isnt a fine. this is a breach of contract settlement.
post #50 of 83
They did not and will not be paying this fine all at once, you can rest assured. In my experience these types of things are usually paid in installments, or, the insurer/company refuses to pay and ultimately settles for far less in a litigation.
    
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