Jay, the inventory is enough for 3.44 quarters at the current selling rate of $52 MM, some of it will have to be written down, and who knows what commitments they have at the foundries too take wafers every month. Their sales. Their sales YOY are almost 0% down ($52 MM vs $102 MM), luckily, their royalties are growing quite nicely. They would make more profits if they stop selling and just collect royalties (g). while their sales were halved they increased expenses by a solid 30% from last year, maybe in preparation for a boom, but if that boom does not arrive, that extra $25 MM or so a year in additional overhead is going to hurt. If sales turn around, gee, they have $170 MM plus in inventories they can sell (g).
By the way, I think that they should have written off some of that inventory, but management hopes that next quarter there will be profits to write inventories against, so they probably decided to wait. I don't think that is a good approach and wonder how much of that inventory will be simply "behind the times" (obsolete) when they are ready to ship these.
Zeev |
