The San Diego 16G plant is estimated to be ready for occupancy in "mid-June". This means the third quarter, if we are lucky, shakes down the plant, still losing a little money on 16G. Fourth quarter is the first time I optimistically expect 16G seats to show profit (including the expensed costs of getting ready to produce---not just the direct unit costs of production). Got to make it up somewhere else. AND, the 16G losses may cumulate to the level that it takes all of 1999 production to break even to date on the program.
I have been through this plant thing six times in other companies, including ones where I was a director. It NEVER works out just like projected.....and, this management is a little bit optimistic by nature. Again, we got to make it up somewhere else.
Would someone smarter than me compare and post the gross and net margin percentages (net of extraordinary items, if any) for each quarter of 1997 ??? By product category, if available ??? These yield the answer to the ultimate question (buy, sell or hold???).
If margins are increasing, on increasing revenue (and that continues), then we will be fine and the company will succeed.
If margins are decreasing or unchanged, on increasing revenue, even if we are netting more dollars, management has not figured out what to do (and if that continues, we will all lose money).
All other things being equal, increased revenues SHOULD yield increasing margins, and lead to a "virtuous circle" (in the words of those wonderful people at the Sloan School of Management).
Absolute dollars of revenue and gross margin are part, but not the most important part, of the puzzle. What is critical is the direction and extent of movement of the PERCENTAGES of margin. This is, usually, somewhat a function of revenue levels.
So, what is the reality to date ???
(I can do this homework, certainly, but feel complacent in having posed the seminal question.) <G> |
