Skeeter and All Earnings Watchers,
This TER warning is interesting in its implications. A few months back,
MU mgmt was guiding analysts lower due to a testing bottleneck, which
arose presumably due to the added production volume. The spin then
went on that testing equipment was in short supply and that companies
like TER had their production on allocation, with availability going to
preferred customers. Now we hear via this warning that MU has in effect
not taken any delivery of this much-needed equipment.
Could it be that independently of DRAM pricing, SEA cutbacks, capitol
hill hearings on IMF, Commerce Dept. announcements on tariffs, the
Goldman promotion machine, and the rest of the soap-opera-inspired
tribulations of the past few months, that MU has spent the last quarter
unable to extract many finished goods out of the manufacturing pipeline?
If that is the case, it stands to reason that the output growth this quarter
would be near-nil, that cost declines per unit would be near-nil (to lower
costs per unit, they 've been heretofore relying on unit growth) and that
their operating earnings would be very highly correlated to finished
goods prices (more so than most quarters of the recent past since the
quarter to quarter pattern of progressively lower costs and progressively
higher finished goods output would in effect be neutralized this quarter).
Thoughts anyone? Any other implications? and to those of you who
maintain models of MU's Income Statement, what results do you get
when this scenario is taken into consideration?
J. |
