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To: cruzbay who wrote (194201)	4/19/2006 4:09:09 AM
From: brushwud	Read Replies (3) \| Respond to of 275872

there is still Rivet's Q4 guidance that 2006 depreciation was to have been +10% weighted towards the first half, which now seems to have changed, unless it goes up a bunch in Q2. Rivet's comment has caused confusion on this thread and also among the analyst community. Here's what was said in the Q4 CC: "Q - Mark Edelstone "...Bob you gave depreciation for the year [$825 million]. Can you provide guidance for Q1 depreciation and ramp that how it ramps as you go through the year at this point? "A - Bob Rivet "It’s fairly linear spread. I’d say probably, you know, I’ll call it maybe 10% more in the first half of the year than the second half of the year, but not a lot of difference, Mark. We have got it between the roll off and the roll on. There’s not a lot of change in that number." chipstockblog.com Rivet's answer was given in the context of "ramp". It is the ramp which is expected to be linear, but maybe 10% more in the first half, not constant depreciation in all four quarters, except maybe 10% more in the first half. Now here's the Q1 CC, with Rivet reiterating $825 million for the year in the face of just $174 million in Q1: "Depreciation and amortization will be approximately $825 million for the year, with second quarter depreciation increasing by at least 10% from the first quarter. "...Right now the current expectation is you will see increased depreciation in the second quarter and beyond as time goes on, as we continue to install more productive capacity in Fab 36." seekingalpha.com So yeah, depreciation is going up a bunch in Q2 "and beyond". You can see that many of the questions in the Q1 CC illustrate analysts' confusion over Rivet's answer in the Q4 CC. I don't think he meant depreciation would rise in H1 and then fall in H2. It just doesn't fluctuate like that, it tends to maintain course. Rivet said Fab 30 was depreciated over five years (and Fab 36 in six years), so each Q's depreciation is an average of the previous 20 Qs of capital investment. They'd have to stop spending completely to get depreciation down 10% in 2 Qs. To paraphrase Doug Freedman, I believe that a purportedly professional analyst who can't figure that out can be viewed in one of two ways: as an idiot or an ignoramus.