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Technology Stocks : Micron Only Forum
MU 243.96-5.6%12:03 PM EST
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To: DavidG who wrote (37517)8/16/1998 3:59:00 PM
From: Dave Gahm  Read Replies (3) of 53903
 
I think you are both a little confused, but at least Fabeyes is reaching the correct conclusion. Forget about earnings and focus on cash flow to get a clearer picture. MU had $227 million less cash at the end of the 3rd quarter than at the beginning. Of the cash on the books at quarter end $360 million was available to the semi business (conference call), with the rest being MUEI. This quarter may be a little better, but they will still burn around $150 million, based on management statements that capex would be about the same, and assuming a bit higher DRAM revenue. If so they will end the fiscal year with only about $200 million in cash, a dangerously low level if they expect to continue to upgrade.

If the TXN deal closes they will have additional fabs that generated an operating loss of $222 million for TXN in the most recent quarter. We know that the fabs are currently producing 16mb chips on a .30 or .35 process, we also know that MU says they will upgrade them to a .21 DUV process and make 64mb chips. This will take at least a year and about $1 billion to accomplish. During that period MU's losses and cash burn will rise dramatically. At current DRAM pricing a total per quarter cash burn of $400 million would be a reasonable SWAG. That $750 million from TXN is not going to last long...unless of course DRAM prices continue up and stay there.

Regards, Dave
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