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 : WDC/Sandisk Corporation -- Ignore unavailable to you. Want to Upgrade?

To: Art Bechhoefer who wrote (15498)	10/11/2000 4:32:41 PM
From: Steve Lee	Read Replies (4) \| Respond to of 60323

Art, my recollection is not like this. Is it not true that when USIC merged into UMC, according to accounting practices, SNDK was allowed to report a gain as if it had sold the USIC shares and wrote down the value of the new UMC shares at the price at the time of the merger? As far as I remember, SNDK did not actually sell any of its stake, and was in fact restricted from doing so until the 2nd half of this year. Thus, the "gains" from Q1 were actually unrealised and may by now have evaporated. SNDK will have to account for its holdings at the lowest of purchase or market value. So if UMC is lower now than it was at the time of the merger in January, SNDK will have to show an exceptional loss. I remember looking at this when the May 10Q came out and asking the question to the thread at the time, but did not receive any answers. I will go back and find the 10Q. Edit - Here is the relevant part from the 10Q: On January 3, 2000, the USIC foundry was merged into UMC. The Company had invested $51.2 million in USIC. In exchange for its USIC shares, the Company received 111 million UMC shares. These shares were valued at approximately $396 million at the time of the merger, resulting in a pretax gain of $344.2 million ($203.9 million after-tax). All of the UMC shares received by the Company are subject to trading restrictions imposed by UMC and the Taiwan Stock Exchange. The trading restrictions will expire on one-half of the shares on July 3, 2000. The remaining shares will become available for sale over a two year period beginning in January 2002. When the shares are ultimately sold, it is likely that the Company will report additional gains or losses. The 50% of the shares that will become unrestricted in 2000 will be treated as available-for-sale securities under FASB 115 at March 31, 2000. At March 31, 2000, these shares were adjusted to market value and the resulting unrealized net gain of $10.1 million dollars was included in other comprehensive income. The remaining 50% of the shares, that will be restricted from sale until 2002, will be accounted for at their historical cost. In April 2000, UMC announced a stock dividend of 200 shares for every 1000 shares of UMC owned, resulting in our ownership of 22 million shares additional shares of UMC. Edit 2: UMC is currently at 63.5 Taiwan dollars. So SNDK's 111 shares are valued at 225.9 million US dollars, a loss since the 10Q above of over $170 Million. This will have to be reported in the upcoming earnings release. Of course, If SNDK has managed to sell some of its UMC, the loss reported will be different but it must still be holding half, so it is reasonable to expect that SNDK will report a loss this quarter.