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: Bharat H. Barai who wrote (47426)	7/31/1999 7:15:00 PM
From: Skeeter Bug	Respond to of 53903

>>Each $ 1 increase in DRAM price will mean $ 1 per share more in Micron profits.<< and each samsung fab to implodes will lead to more profits for mu. dram prices don't rise longer term. they ALWAYS fall. garbage in, garbage out.

To: Bharat H. Barai who wrote (47426)	8/1/1999 12:48:00 PM
From: Thomas G. Busillo	Read Replies (2) \| Respond to of 53903

Bharat, I can draw up a scenario where ceretis paribus MU makes an additional $1/share on a $0.25 ASP increase. I can also draw up a scenario where MU loses $1/share on a $1 increase. Lazlo is right, But where he's right is in his own model, which includes assumptions. Assumptions are important. Sometimes the assumptions these characters use are pretty suspect. Case in point, here are the estimated quarterly depreciation expenses for MU appearing in a recent model by a major firm: Q499 Q100 Q200 Q300 Q400 Q101 Q201 Q301 Q401 238 243 248 253 258 263 268 273 278 It's pretty amazing that additions to GPPE, retirements, and associated depreciation items all add up to exactly a $5 mil. increase in depreciation expenses per quarter. What an incredible alignment of the stars! Forecasting for this purpose, the general rule of thumb is to use a depreciation rate that's a percentage of the prior periods GPPE. Historically: Q396 Q496 Q197 Q297 Q397 Q497 Q198 Q298 Q398 Q498 Q199 Q299 Q399 3.2% 3.0% 3.1% 3.2% 3.3% 2.9% 3.4% 3.5% 3.6% 3.8% 4.0% 4.1% 3.7% So you could back out the analyst's "GPPE assumptions" (or what the dep. exp. seems to imply) using an etimated depreciation rate. Go with with 3.9%. Q399 Q499 Q100 Q200 Q300 Q400 Q101 Q201 Q301 Q401 logical dep(0)/GPPE(-1) 204 238 243 248 253 258 263 268 273 278 283 GPPE 5,748A 6230.76 6358.97 6487.17 6615.38 6743.5 6871.79 7000 7128.20 7256.41 implied CAPX 482.46 128.205 128.205 128.205 128.205 128.205 128.205 128.205 128.205 implied FY CAPX 512.82 512.82 Is $512 mil. in CAPX over each of the next FY's realistic? Lowering the dep. rate to 3.4%, puts it @ $588. Is that realistic (what the assumption does to GPPE Q3 to Q4 isn't, but I'm trying to illustrate something about CAPX for the next two FY's). Are the fixed asset turnover ratios using the above + his revenue estimates realistic? Is it a good idea to do pro forma income statements without also working up balance sheets and cash flows? The above doesn't deal with adjustments for retirements or consider the effects of Lehi because I'd argue they're captured in the historical quarterly rates. I guess what I'm getting at is that it frustrating to see these characters get off with statements that end up going unexamined, but become gospel. Good trading, Tom