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Technology Stocks : Micron Only Forum

MU 223.79

+7.9%

3:59 PM EST

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To: Jerry Denkera who wrote (27343)	1/29/1998 9:25:00 AM
From: Skeeter Bug	Read Replies (1) of 53903

first off, thanks for all the pricing information you give the thread. it is much appreciated. >>Skeeter the .04 figure your using is difficult to back into the actual net or gross costs of 16megs since the company has salaried employees engaged in other business and expenses incurred by other products.<< muei being the big one and they broke even for all intents and purposes. dram is the dog. all the other stuff is the tail. >>It is one thing to sell off dead inventory at a loss and another to keep mfgering knowing every piece you make means losing more money.<< think this through. it is very possible that selling near marginal gross cost is more cost effective than not selling as much and selling at higher prices (assuming an mu doesn't come in and steal the market share and keep the price low). especially in a capital intensive business where overhead is HUGE. economic analysis does not factor in "sunk" costs. overhead is essentially "sunk." decisions are made on the margin. if i produce 1 more chip and the marginal benefit (read sales price) is higher than the marginal cost (read gross - not net - cost) then you make the chip without regard to what your sunk cost is. >>Therefore I believe they are making money on 16meg at 3.25-4.00 but may be losing money in other areas of their business.<< if they were making money at $3.25 then the "tail" would be losing nearly $100 million, per q, on a net basis - because that is how much their dram operation is making. the tail just isn't that big. in fact, i doubt it is 10% of that amount amount which makes it minor noise in this calculation and not the big obstruction that you are claiming. >>I also suspect we will find out with next quarters earnings a much clearer picture.<< agreed.

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