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Technology Stocks : AMD:News, Press Releases and Information Only!
AMD 222.13-3.5%12:48 PM EST
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To: Paul Engel who wrote (3697)1/13/1998 1:41:00 AM
From: greg nus  Read Replies (4) of 6843
 
Paul your accounting is faluty. First the cost or makret rule inturpretation is incoreect. Here is a better example. Theoritically speaking... since you say Intel's cost to bulid a chip is $40.00 and the count is 3mill then Intel carrys them in inventory at. $120 mill. If they had them sold against shipment or if the order cancelled after shipemnt or were returned due to non payment, and lets say they sold them for an ASP of $150.00 then Intel would have booked a Credit Sales of $450,000,000, to the current period income statement with a corresponding debit to receivables. They would also charge a debit to cost of good sold for $120mill and a credit to cost of good sold for $120mill to the current period income statement. Assuming the transactions all took place during the current reporting period. If not a restatment of earings to appilcable to the prior period would have to be make assuming the amount material in scope. Now if upon reversing the sale Intel determined or more likly Intel's auditors determined that the current market value of the chip's which were origionally valued at $40 could only fetch $20.00 if dumped on the open market under quick sale conditions Intel would have to wirte down the inventory account $20.00 per chip and take a current period charge anaingst earnings of $60 mill. This is what is ment by lower of cost or market. The rule forces companies from burying oblosete or unslaeable inventory on the books. This is exactly what happpended to 3-Coms when it merged with US Robotics. so you see the total net effect could be much larger than your explaniation depending on how far the inventory got up the distrubtion channel and how far it had to come back in. This is not an isolated case. Many US companies selling volital goods to Asia are holding there breath hoping leters of credit don't bounce or the banks that worte them don't go bust before the letteers get cashed or the currency dosen't hit 0 they can change it into US bucks. This is just one reason for Analyists lowering earnings expectations and why PE ratio are colapsing. And this is why Intel stock goes to $50.00 before is goes to $100.00 irrespective of a good earnigns number... a poor numbers just gets you therer sooner and the sooner the better going forward. It has nothing to do with how good the company is. and everything to do with selling under distressed conditions. You seeing evidence of it showing up like...the chips sold to Asia showing up dumped on the US market forcing prices on pentiums below Intel published prices. As Intel customers turn Intel competitors they unload what they perceive to be volital or surplus they bang it out the door before it drops. One thing you have to remember Asian's invented trade with Europeans. Asians are much better traders than Americans will ever be they have been practicing for 8000 years against our 200, No contest. Hope this puts some of the implications into perspective for you. Intel goes to $50.00 and there is nothing all the Kings Hoarses and all the Kings men can do about it. The Asian currency crisis eventually becomes a credit crisis eventually becomes an economic slowdown and makes much tuffer neogtiators of the survivers. The solution is simple lower prices to move the goods or don't make as many or keep buliding them and let them build up in Inventory if you have the money to build them and hope you can sell them sooner rather than later. Since you profess to know Intel pretty good tell us which alternative you think Intel will choose. These are the times when being a Mean,Lean AMD Junk Yard Dog is an advantage to being a 800 pound Intel Gorilla. Don't wait too long to give us your answer because were all holding our breath hoping Japan does'nt fall befoe we get yur answer. If it does Intel goes to $20.00. From the Nus News Desk, That is all!
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