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Technology Stocks : Rambus (RMBS) - Eagle or Penguin -- Ignore unavailable to you. Want to Upgrade?

To: Bilow who wrote (77002)	8/8/2001 6:15:27 PM
From: Win Smith	Read Replies (1) \| Respond to of 93625

Carl, there's something funny about memory makers "losing" money on chips. I very much doubt anybody loses money in the sense of spending more to run the plant than they make selling the chips. If you count fixed costs, e.g. plant depreciation, then yes, it may look like they're losing money. But they can't cut their losses by cutting production in a competitive market; they'd just lose more money by raising the fixed cost per unit. Of course, if they all agreed to cut production, they might all make more money, but there's some problems with that too. It's a tough game. The bus people seem to thing that the memory maker's losses will somehow turn into an advantage for Rambus. The logic in that particular line of thought is elusive.

To: Bilow who wrote (77002)	8/8/2001 6:52:13 PM
From: Skeeter Bug	Read Replies (2) \| Respond to of 93625

>>So of course Micron is going to pump out as much chips as possible. Here's a prediction: Micron won't ever reduce production, no matter how much money they lose per chip.<< bilow, i'd like to add a little resolution here. micron may reduce production if the marginal cost to produce a chip outweighs the marginal revenue it brings. that is until the marginal cost and marginal revenue equate then they start again. the key word is marginal. micron will report billions in sunk cost losses when marginal cost = marginal revenues. however, the sunk costs are already spent, the canon has already been shot. micron won't stop producing chips (mcost <= mrevs) until the equity markets stop subsidizing their grossly negative cash flow. in fact, micron hopes the asian players cut back so they can sell more. the reality is that the only REAL way to reduce per unit cost is to drastically increase unit output. it is really a marvelous thing to watch - a dram death match, if you will, that requires billions in annual antes.