Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Micron Only Forum -- Ignore unavailable to you. Want to Upgrade?

To: TREND1 who wrote (47259)	7/21/1999 5:54:00 PM
From: Thomas G. Busillo	Read Replies (1) \| Respond to of 53903

Larry, enough to drive a "fumblementalist" crazy. From CBSMarketwatch: Micron Technology (MU: news, msgs) is trading up 3 3/8 to 52 3/4. Micron Electronics (MUEI: news, msgs) said late Tuesday that it would buy the ISP unit of Micron Technology. Micron Electronics' shares are off by 1/8 to 10 7/8. Is it the sale of a small ISP unit they don't even mention in their 10-Q... ...or the MOU re: SpecTek? IMHO, the "hot money" saw the words "sale" and "Internet" and went off to the races. But what's the serious money seeing? On the surface, it would seem to raise the cost to MUEI of nonstandard memory components bought from MU from what's now generally "one-half the pre-tax net income" on the goods to a "maximum" cost derived as % of pre-tax net income of 50%, 62.5%, 75% and 87.5% Q100 through Q400 respecively. From MUEI's 10-Q some Spectek stats ($ mil.): 3Q99 45.07 revs.; 17.496 gross profit; 38.8% gross margin V. 3Q98 23.106 revs; 4.120 GP; 17.8% GM If their gross profit was 17.496 mil. and SpecTek pays "generally one-half of pre-tax net income", then would it be fair to say that MU derived under $8.7 in revs from sales to SpecTek and probably not even that? At the beginning of Q200, MUEI will now "have an option to require the [MU] to purchase all the assets of SpecTek for a purchase price of equal to net book value." At the beginning of FY2001, MU would have an option to force MUEI to sell SpeckTek for the same terms. It makes sense. I guess one could ask why MU didn't have the foresight to capture 100% of whatever value has been created to date on the operations. Why are they at the point where they will possibly have to buy an operation that would seem to have been an obvious fit (the Crucial Technology biz, notwithstanding) with their own memory operations from their PC-sudsidiary? Is it simply that it lacked some sort of internal definition of "critical mass" in the early stages? Or is it a case of getting the right assets under the right headings for a sale down the road? Good trading, Tom