Sridhar, what worries me is the difference between having a plan and having the resources to execute the plan.
When Gen. Schwartzkopf drew up the VII Corps' "Hail Mary" flanking maneuver in the Gulf War, it was a great plan. But what would have happened if while moving through Southern Iraq the VII Corps Commander suddenly placed a call to HQ and said, "uh...General...um...we seem to have run out of diesel fuel." That would have been a problem.
I was looking at some of the 5-year ratios on MU today and there's one ratio that looks really out of whack in comparison to the others - price-to-cash flow. Their 1995 price-to-cash flow high (from Baseline) was 19.4, that was before the DRAM meltdown. A current share price of about 48 1/2 puts them at 19.4 times cash flow. So their stock price is half of what it was in Sept. 1995, but if you use the price-to-cash flow ratio as a gauge (given that this is a very capital intensive business) the P-CF at the recent high of 50 is higher than it was when the company was "on top of the world" back in the Fall of '95.
Of the $500 million they just floated, you could argue that about $137 million already went to the A.S.M. Lithography order. The equipment won't exactly be delivered and running next month.
Their underwriters are so confident in their ability to meet their debt obligations that they worked a 2-year "no payment, no problem" clause into the offering.
Under the terms of the offering, if memory serves me correct, they can't issue more common so the only other alternatives appear to be either future debt or selling assets, the most prominent being MUEI.
I think KC looked at the cash flow numbers a while back on this thread. Back out the cash flow from MUEI and you're not exactly talking a "cash cow".
To execute their strategy, they need the resources.
Some see the MU gas tank as half-full (possibily even overflowing)
IMHO, it's closer to half-empty with a number of real gas-guzzling hurdles coming up.
Being "bearish", to me, doesn't mean rubbing one's hands in glee hoping for a company to go belly up. I don't want to see that happen. Somewhere underneath all the trading and analyst touts there are 11,000 real families whose lives are tied to the success of this company and they're counting on upper management to not only lay out the right strategy, but to make sure there's enough diesel in the tanks. My bearishness comes from my assumption that, given what I see laying ahead regarding their own internal needs and the DRAM market over the next several quarters, the needle will swing closer to empty than full and the stock price will reflect that. Obviously, I could very well be wrong.
Good trading,
Tom |
