Originally Posted by andrews2547
But profit is how much you (or don't) end up with after all costs, including R&D, loan payments, salaries, etc.
Dropping their profits from 40% to 10% is better for everyone except Intel. I'm sure thousands of people would rather spend $160 on an AMD CPU that performs almost as well as an Intel CPU (8700K) that sells for $370. If they drop their profits to 10%, they'll likely end up making even more profit in the long run.
At 10% margins, AMD would be bankrupt very soon.
Looking at their latest financial quarter, 40% gross margin leaves them with 106 million dollars which represents a net margin of only 6-7% on 1.65 billion in revenue. That's nothing.
A 10% gross margin on the same quarter, or 160 million dollars after paying for the products themselves leaves only a 340 million dollar loss after paying for R and D and administration expenses.
As we know, AMD currently cannot property fund both sides of the company and the GPU side has been taking a beating.
As a result, they need to spend more on R and D and drastically more considering their competitors.
I would say AMD needs to raise their margins up to 50% while increasing revenue to 2 billion dollars. Why?
Because this would allow them to double their R and D expense, hopefully start hiring again in North America rather than China, while still making any sort of money.
E.g 2 billion revenue, 50 percent gross margin = 1 billion in gross profit.
720 million in R and D expense + 140 administration = 140 million in profit which is 100 million after interest expense.
I want better products to come as a result of R and D. Not cheaper products because the lack of it.
Dropping their 350 dollar product to 160 dollars would simply lead to a price war with Intel where both companies start to hemorrhage money with the company with the deepest pockets being the surviving one.
Volume would not make up for it because the PC market is mature and volume has stopped growing for a while now. Do not say things like better in the long run and broad statements like you have been saying if you do not understand what you are talking about which you clearly have shown with your margin statement.