phb, as I have explained in a prior post, Mu was "forced" to trade off $200 MM in cash for TXN reassuming responsibility of the $196 debt to Italy. The deal has the same "face value" but if MU needs these additional $200 MM in cash they will have to find someone else (not Italy) to loan it to them. In any event, I would love to buy an ongoing outfit (the TXN DRAM business) for my paper (stock and convertible debt at prices much above current market prices) and on top of it, get the present wrapped with a $550 MM cash injection on top of it. Whatever Appleton critics want to say, he engineered this deal better then KKK engineered their RJR deal.
Appletong critics may have a valid point in stating the DRAM business is lousy and why add another losing operation on top of its own losing operations. On the other side, as I have said in June immediately after the transaction was announced, if MU plans to stay in the DRAM business until (and if) it turns around, then this acquisition is a life saver providing not only capacity, but access to markets that MU had very little participation in.
Unfortunately, I do not have sufficiently good vision to see whether in three years profit margins will return to this business. However, if MU survives and the margins are acceptable, MU could have sales pretty close to $5 billions and be either the largest or second largest participant. That would kind of put this youngster, Appleton in the category of "Visionaries".
If the DRAM business stays "cut throat" as it has been for the last three years, Appleton will recognized together with Merriwether and few Nobel Lauriates as a "Grand Gambler", forced to fold in a poker game which was "too big for his breeches". Time will tell.
Zeev |
