MB, Herb Greenberg had an interesting take from Drew Peck in today's TSC:
thestreet.com
"Basically, TI is taking advantage of an odd quirk on Wall Street -- that investors seem to be oblivious to the size of the charges that are being taken," says Cowen's Drew Peck, one of the few chip analysts who hasn't lauded the deal. Instead, he says, investors are focused on future earnings (sounds good in principle, right?) and from that standpoint, it's quite a story. "It is that fact," he adds, "that made this deal a miracle of modern accounting."...According to Peck, investors are "totally ignorant" of the return on invested capital for each company, "which remains awful." What's more, he says, "There's no net increase in productive capabilities for each company. Yet on paper, it looks golden.''
Sometimes I wonder if investors (some investors) aren't the only one's ignorant of ROIC.
Appleton lauds his company for being "focused". Well, fine. If things work out as expected, they'll do alright in terms of becoming profitable, but I'd love to know how (or if) they manage to derive their cost of capital and internal hurdle rate and justify them. Is it "since we're a DRAM company, anything we do will pay off down the road when things turn, so - let's do it!"? That would tend to solve calculating the beta for projects dependent on DRAM prices <g>
Good trading,
Tom |
