John, thanks for comments. I agree with you that the demand for masks will continue to increase -- because of shrinking geometries, the continued growth in custom chips, and the increasing complexity of chips (more metal/poly layers) which require more mask steps. I think that this industry is a good one; I hope that management shows good judgment. I also agree that DPMI is a buy.
BTW, if photomask prices become too high in the future, it is not unimaginable that the vertically-integrated semi manufacturers will continue to outsource photomask production. For now, it is apparently cheaper for them to do so.
I have some comments about accounting practices as they apply to the press release:
<<First, capital expenditures are not charged against current earnings; instead, they are
capitalized over the useful life of the asset being placed in service. Operating
expenses that are increased by reason of capital activities, however, may be
expensed and therefore charged against current earnings.>>
I know that capaital expenditures are capitalized over the useful life. That does not mean that there is no flexibility in deciding what is or isn't a capital expenditure, or how you amortize those expenses. Even more important, the accounting explanation does not explain why these expenses should be a "surpise" to management or to the CFO in this quarter. Indeed, your explanation of accounting tells me that these expenses should not be a surprise, and that something else is going on here.
Like most things, I suspect the that the reasons for the pre-announcement are not simple, and that there are a number of factors in play.
Regards,
BillyG |
