you:
Spansion Reduces Reliance on Manufacturing Services
me:
Yeah, kind of a recap of what was said in the 4q CC, but still nice to hear repeated. From my point of view there are 3 principal factors affecting q1 earnings. Those are seasonality, the additional non cash expenses related to SP1, and the OEM price reductions.
In the q4 CC they said normal seasonality for CSID would be about 10% to 15% down, but that they expected increases in WSD sales to make up the difference. Secondly, they said that improvements in production processing(fab25 mostly) would compensate for normal q1 price reductions. Thirdly, as far as I can tell they expect non cash layouts related to bringing up SP1 to increase to about $38M of which about $25 would be depreciation expenses, mostly not offset by production as yet.
Offsetting these increased costs will be reductions in foundry expenses and increases in SP1 production(500 WSPW in q1). GM should stay about at 20% as cost reductions/production(SP1) will offset the additional costs on about the same volume as q4. The result should be increases in cash flow, though not as big as later in the year(no inventory build up as last year). CAPEX in q1 should still be about 250M , but in q2 that should drop to $100M and drop to about $90m for all of H208.
The real kicker in all this is how fast SPSN can reduce those $50m foundry costs. If most of that $50m shows up in q1 things could be very nice. As I said the other day, I'm expecting another big reduction of at least 25% in the loss in q1, and am expecting at least BE in q2.
If you read the q4CC and everything else management has been saying for awhile, unless management is deliberately misstating the situation, there's no way that things aren't going to get a lot better soon. Even if the macro markets go to hell I still expect SPSN to do very well.
Again, I've been buying lately and expect to continue to do so. |
