John,
Recall that CRUS unloaded all but 25% interest in the Lucent fab about a year ago. The reason they kept 25% is because this fab would/is doing .25 architecture. So, if the so called rumor is true, my guess is it is not Lucent.
Now, that leaves Micrus. Micrus has been, continues to be, and albatross for Mr. Ross (Ed Ross was brought in to coordinate, run, manage, LOAD, etc the fabs). I still feel that if Cirrus had committed more product to this fab back in '96 it wouldn't be in the mess it is today. The reason they got into this JV is because they wanted to protect capacity and save money. Now, there is excess capacity on the market at lower prices. The question is can they get out of their contract with IBM without writing off a huge chunk of money?
I think the answer is in the revenue stream. Hackworth has always been one to make bad news worse. What I mean by that is, if revenue is in the red, he takes the position of "lets get all of the bad news out of the way now".
Will he do that? Will Teo make/suggest/demand that CRUS get rid of MICRUS? If getting rid of MICRUS along with any other bad news is the right thing to do why didn't he do this before? Some people in the know would say that Hack's ego got in the way of a sound business decision or that no one below him was willing to step up to the plate and admit that this venture was foolish (because they were afraid of Hack). Others would say that the risk/reward factor is such that it is a difficult decision to cut this venture off while others would argue that CRUS needs to bring more product on shore.
Some may not know that a lot of customers DEMAND that product comes from a particular fab versus another. This is why Cirrus could not bring more product into the MICRUS fab. Another factor is that each fab, because of the way they manufacture, requires a different mask from one fab to another. Of course, that requires more engineering and more resources. Also, what is the quality rate of product at MICRUS? All these questions and concerns have to be considered.
I believe strongly that Cirrus needs to maintain their Lucent (Cirent) JV but I am not so sure about MICRUS. Take the charge? I really do not have enough information whether or not this would be a good idea or not. Besides, what kind of dollars are we talking about? My guess is hundreds, not tens, of millions.
One other item. Although Teo will be on the board just how much power does everyone think he will have? Certainly he will influence decisions. But control? It still takes a majority of votes to get an action through. Let us all be realistic. Yes Teo will have some say and yes he will influence but will he control? Absolutely not.
OK, just one more item. Now that it is on record that Cirrus has spent some cash on a stock buy back, what is Teo's percentage of holdings now? Now that he will be a company director, can the board, by their own rules, invoke the poison pill takeover rule?
Hmmm, this is getting very interesting and will be one for the books when this is all over.
Calvin Scott |
