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Politics : Ask Michael Burke

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To: Don Lloyd who wrote (70944)	11/23/1999 7:52:00 PM
From: Freedom Fighter	Read Replies (1) of 132070

Don, "When AMAT produces a new piece of equipment that produces twice as many ICs per wafer and sells it to all comers, all the DRAM manufacturers must buy it to survive and prices are driven lower by competition. While nominal unit profits may increase OR decrease, the destruction of the economic value of the older equipment and the requirement of new investment in the new equipment is as likely as not to drive the DRAM manufacturers to a cash flow negative position. AMAT will continue to make new equipment and stress its customers up to the point where it kills them off." I believe your example is one where the existing investment capital is becoming more efficient. I'll have to give this scenario some more thought but I think in the end the ROC should revert to "some" required rate depending on the business. I don't think this is typical for much of the economy. Usually, companies in aggregate add to their invested capital and produce progressively higher profits without much change in the real return on that capital over time. Wayne

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