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Technology Stocks : Micron Only Forum
MU 344.97+5.5%Jan 9 9:30 AM EST
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To: Skeeter Bug who wrote (34082)5/31/1998 12:18:00 PM
From: mike iles  Read Replies (3) of 53903
 
Skeeter,

Yep they spent the money on Lehi, that's done and it's reflected in their financial position. They haven't used the plant yet so they haven't been depreciating it .. this can only go on for so long before the accountants start raising their eyebrows ... imagine there have been interesting discussions over the last couple of years between MU management and the accountants over this issue ... the decision not to go ahead with testing at Lehi may make it tougher for the accountants to swallow management's malarkey come the August audit). But it is just an accounting issue. Writing off Lehi won't change MU's cash position one iota. The money's been long spent. However it will raise other issues. For one thing MU has a pile of debt and whenever you start writing off assets it makes the bankers nervous (the fact is they never should have looked at Lehi as an 'asset' but hey, we're talking about bankers here). The other is the stock market often does care about this sort of writeoff ... must be a wakeup call!!

So writing down Lehi and writing down inventories are just accounting issues, belated recognition that something isn't worth what you said it was worth. No effect on cash. But there is a psychological effect and when your net cash position is -$223 million at latest report (and more now ... say -$450 million) and you're losing cash with every chip you make and you don't have the dough-re-me to ante up for the next round ... well sometimes the market has a negative reaction.

regards, Mike
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