David:
I found your post most interesting. It would be appreciated if you could provide some commentary on your assertions that:
- MU is making money on 16 Mbit........the current selling prices are well below those posted by the company as valid last quarter. In that quarter, they made $.04 and added dramatically to both inventories and payables. Even an MU bull would have to be looking for losses for the next few quarters, I would have thought.
- I'm not sure that all of MU's competition is "weakening and loosing market share". Certainly the Taiwanese, who for a variety of historical and cultural reasons have shunned the use of leverage, are not suffering the same painful debt-induced ulcers as are the S. Koreans. It should be noted that they are rather substantial and growing players in the memory game.
- I was not able to follow the logic of why spot prices will rise. The demand side of the equation is weakening (PC sales growth declining and most inexpensive computers are sold with less memory than their more expensive brethren.). The supply side must still absorb all that remarkable added capacity emanating from the 100 plus fabs that commenced construction during the last two years, as well as all those "upgrades". MU itself added rather remarkable "bit growth" over the last year......someone still has to buy all this new production, and the current production estimates do not hint at any near term relief.
What do you think MU's cost of production is? They continue to promote the idea that they are the low cost producer, but also refuse to break out the actuals. If ever this company provided proper accounting, including normal amortization, inventory control, depreciation and writedowns of white elephants, their cost of production would not compare well with many of their competitors, and $4.50 would not provide consequential profitability.
With respect to the bears, this one enjoyed today immensely. Our belief that it might prove prudent to stand back while the year-end rally played itself out has provided shorting prices that one could only have hoped and dreamed of a few weeks ago....and all this even as we enter the seasonal selling doldrums and before Q4 revelations rain on the parade. We bears should be so fortunate.
Best, Earlie |
