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

To: BUGGI-WO who wrote (3191)	1/25/2008 11:38:27 AM
From: Joe NYC	Respond to of 4590

Buggi, I agree with your analysis and conclusion that inventories should go down in Q1. Sales from inventory reduction will be a net positive for cash. BTW, even though spansion does not get credit for anything (judging by the stock price), the management did a good job managing shifting capacity and demand situation. Spansion sales team gradually ramped up demand to roughly 120%-125% of Spansion capacity, and management used TSMC to bridge this gap. Now, when SP1 comes online, the demand for a chunk of its output is in place. There are 2 other facts to consider to get the good pricture of what the management is doing - and that it is doing a great job (obviously in a difficult environment). 1. What is the profitability of selling TSMC fabbed parts vs. inhouse production? It must be marginal, barely profitable, barely above breakeven. 2. Bertrand said that Spansion declined some business in Q3 and Q4 that was not very profitable. So Spansion ramped up the demand, by accepting additional business based on maginal cost of production (TSMC cost being the marginal cost). But did not take orders where Spansion would sell below TSMC cost. Now, lets move forward to 2008 when production costs go down substantially vs. using foundry. 25%? So in 2008, Spansion sales team has a lot of additional room to maneuver, and can resume going after market share, by accepting some of the more marginal business (which will become profitable with 300mm 65nm production). So I think we will see a substantial unit shipment growth, and ASP willing, substantial revenue increases starting in Q2 going into H2 2008. Joe