Being the low-cost producer is no guarantee of profits if
1. Your market share is low. Many marketing tools are not available and your larger competitor can lower prices only in the markets that you compete in and raise them in other markets
2. Your competitor occasionally (most of 2001 and 2002) has superior products
3. Your competitor has superior marketing
As for wbmw's objection that marketing isn't part of the cost of the CPU, true enough. But it is part of the cost of doing business Intel's way.
The numbers show that AMD would need an ASP of $83.50 to break even instead of have a 140M loss.
If Intel had an ASP of $83.50, its revenue would go down by 30M CPUs * ($174 - $83.50) Sales/CPU, or $2,715M.
Intel had an IAG profit of $1,843M. That leaves a net loss of $872M.
OK, Intel had total marketing, general and administrative costs of $1,079 last quarter.
Do you really think more than 872M of that is marketing? I think not, especially since some of that marketing goes towards product lines other than CPUs.
So, if Intel didn't spend one penny on marketing, it would still have a loss selling CPUs for the same price at which AMD would be breakeven.
So, even if you make the following magical assumptions
1. Intel stops losing money on all of its non-CPU businesses, that had combined losses of $569M in Q2.
2. Intel cuts its CPU marketing budget to zero
...even with these assumptions, Intel would lose money selling CPUs for $83.50 while AMD would be breakeven.
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