MB and the Gang:
Tomorrow, my beloved MU will favour us with their numbers. No matter what accounting gimmickry they choose to employ, it is going to be a mess. It is very difficult to produce acceptable earnings when one's product is sold for about half of what it costs to make. I know David G will take me to task for not differentiating between all-up costs (as both Skeeter Bug and I detailed months ago) as opposed to his more refined version, but we were dead on accurate and he was in dream-land.
The analysts have been busily pulling back their estimates at a most amazing rate during the last two weeks, to the point where some of them have raised their loss estimate close to mine, which is a dollar per share. The company will report a smaller number, but the actual loss will show up in the balance sheet this time around as cash takes a hit.
I expect the main bit of camouflage will occur within the inventory writedown, which will of necessity be very large. The company will likely dump a good part of THIS QUARTER'S production into inventory just before taking the writedown, thus masking a part of this quarter's real loss. Watch for it. I would also not be surprised if the writedown also masks some big donations of product to the company's sub, MUEI. The latest numbers from that sorry little pig just don't add up. Of course MUEI's own bit of inventory crunching last year created some of this quarter's nonsensical "profit" (doesn't every company manage to make a profit when its revenues are crushed, and its unit sales plummet?......what a total farce). I also think the parent "chipped" in a bit to help out. From the parent company's point of view, it makes sense to toss a bunch of chips to the sub at, how shall we say it ,....."reduced prices", to bonus up the reported quarter of the sub. This gets buried in the writedown anyway, so no one will either notice or care. Better to have a bit of good news somewhere.
Sooner or later, the market will begin to see through all the accounting slime. MU may well aid this process this quarter as it enters a new stage in its existence,.....survival mode. Even dumb New York analysts (with the exception perhaps of Goldman's resident rodent) should be able to spot an approaching bankruptcy of this size and scale. It only takes two or three quarters like this one and all the cash is gone. The short position is rising and for good reason. Pass me the formaldehyde.
Best, Earlie |
