Replies to post #133120 on Intel Corp (INTC)

[wbmw]

......if these prices are correct, how can Intel lose any money at all selling either....even with substantial contra revenue payments?....

Because David's made the mistake of assuming the pricing reflects contra-revenue, when in fact it does not. It cannot.

Keep in mind that contra-revenue is against the BOM differential between a Bay Trail system, and the equivalent ARM based system - whereas pricing is a flat number. If an OEM can show that they are using best available parts and their Bay Trail system costs $15 more than a comparable ARM based system, then they will get a $15 credit (think of it as a rebate after the sale). So that OEM pays $27 for the SOC, and then gets $15 back at a later time.

A different OEM may have a system build that costs only $5 for Bay Trail relative to ARM. They will pay the same $27, and only get a $5 credit. This levels the playing field in terms of BOM. It does not undercut competitive pricing, because they only get a credit in the amount of the disadvantage in Intel's Bill of Materials. Once the BOM's are "equalized", Intel still charges $27 for Bay Trail. Thus, the final "margin" that Intel gets on a Bay Trail will differ from customer to customer - but in no such case are they actually undercutting the pricing of one of their competitors.

It's also why David has to be wrong. If he is quoting a price listing, then it has to be without the contra-revenue.