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Technology Stocks : Xicor ? -- Ignore unavailable to you. Want to Upgrade?

To: steve olivier who wrote (2768)	1/1/2000 11:28:00 AM
From: jeffbas	Read Replies (1) \| Respond to of 2920

Steve, as far as the fab goes, as it is no longer a strategic asset or business of the company and apparently can't be sold (the best solution), I would spin it off as a separate company owning the fab assets that now belong to Xicor - with equity in the fab company distributed to Xicor shareholders, and fab management having generous options. You do not want to do an LBO by fab mgmt with a note payable to Xicor for several reasons. The note burdens the balance sheet of the fab company - which should never be done to a highly cyclical business. Ownership of the note would add little to the Xicor balance sheet except the issue of a future potential writedown. The strategy outlined gives Xicor and its employees and shareholders the best of all worlds. No major fourth quarter writedown is required, although I would still write down the fab assets BEFORE spinoff in order to start the fab company off with the best chance for profitability (without depreciation charges), and to retain the tax (NOL) value of the writedown for the benefit of the parent company (which has the best chance of realizing its value). Earnings of the core company benefit from the elimination of depreciation charges. If in this strong semiconductor environment the separate fab company can make a go of it, Xicor's shareholders who have suffered so much because of the fab would see something out of it. The fab employees retain their jobs AND XICOR DOES NOT HAVE TO PAY SEVERANCE (although would initially have to start the spinoff out with working capital). We don't differ too much except that I have never thought any LBO in a cyclical business burdened with debt made any sense.