Applied Magnetics Corp Message Board

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Technology Stocks : Applied Magnetics Corp

APM 1.260

-3.1%

3:59 PM EST

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To: Think4Yourself who wrote (10816)	12/8/1997 6:07:00 PM
From: Rational	Read Replies (1) of 12298

Ken and everyone else: I have a question. In the last quarter, APM had EPS = (REV - VC - FC)/31 = .6, (fully diluted, 31 mil shares) where VC is variable cost and FC the fixed cost. This quarter (with a 30% reduction in revenue) EPS should be: EPS(new) = [.7(REV - VC) - FC]/31 = .4 This means the FC is (solving the above two equations) FC = .7(REV-VC) - .431 = (REV-VC) - .631 Or (REV-VC) = .231/.3 = 20.66 mil Thus, FC = 20.66 - 18.6 = 2.06 mil. For the APM's projection to be correct, the fixed cost has to be $2.06 mil which appears to be low. The reason I have worked this out is that 30% of 60c is ~40c = new EPS. This new EPS looks correct if the fixed cost also is reduced by 30%? The charge of 4 mil may not be enough to cover this discrepancy, IMO. Please let me have your thoughts. Sankar

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