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Technology Stocks : Disk Drive Sector Discussion Forum -- Ignore unavailable to you. Want to Upgrade?

To: Frodo Baxter who wrote (1562)	11/15/1997 1:40:00 PM
From: John Wang	Respond to of 9256

New connection for high performance drives: infoseek.com John

To: Frodo Baxter who wrote (1562)	11/15/1997 3:07:00 PM
From: T Bowl	Read Replies (1) \| Respond to of 9256

Lawrence - Correct me if I'm wrong, but GMR should allow an increase in BPI rather than TPI right? TPI is more a function of the mechanics? The IBM 16GB drive is WAY ahead in TPI, but not necessarily BPI. I find that strange todd

To: Frodo Baxter who wrote (1562)	11/15/1997 4:47:00 PM
From: Gus	Read Replies (1) \| Respond to of 9256

Okay, Lawrence, since you want to run a hedge fund when you grow up and leave school - not necessarily in that order - maybe it's time you learn a little about derivatives accounting, which btw is in a major transition. Ignorance can always be helped. I don't know about alcohol-induced stupidity. Like this statement for example. These hedges were almost definitely constructed to hedge against RISING SE Asian currencies, not (FREE)FALLING currencies. DUH! You're assuming that these are trading hedges designed to take advantage of rising or falling currencies. No wonder you continue to flail away in confusion. Did it ever occur to you that there are other kinds of hedges requiring different accounting treatments? SEG's derivatives portfolio consists of two kinds of hedges: 1) Hedges vs firm commitments 2) Hedges vs forecasted commitments fasb.org Hedges vs firm commitments qualify as accounting hedges while Hedges vs forecasted commitments (e.g., "...local currency cash flows for payroll, inventory, other operating expenditures and fixed asset purchases in Singapore, Thailand and Malaysia....) are marked to market with accounting gains or losses booked in the quarter when those forward contracts and options expire (read: when the US Dollars are exchanged for the contracted Ringgit, S$ or Baht). For example, in the September quarter the following forward contracts and options matured: Forward contracts - $221 million Currency options - $ 94 million SEG booked an accounting loss of $63 million (other expenses) related to the portion of those derivatives that DO NOT qualify as accounting hedges and must therefore be marked to market since the contracted exchange rates continued to be lower than the prevailing exchange rates on the days the currencies were delivered during the quarter. But they are still delivering the same amount of dollars, right? Those dollars were converted to foreign currencies that were then used to cover items like "...payroll, inventory, other operating expenditures and fixed asset purchases in Singapore, Thailand and Malaysia..." As those items were expensed and converted to SEG's functional currency, the US$, guess which exchange rate was used? The higher exchange rate prevailing at that time, right? Follow the bouncing ball now. Because of the devaluations, you need more of those foreign currencies to get the equivalent US$ so as those expenses (in Baht, ringgit or S$) are converted to SEG's functional currency you end up with lower expenses in US dollar terms, no? You can replay the same scenario each of the next three quarters, including this one. As those contracts/options mature and the currencies are swapped, accounting losses will be booked in Other Expenses and SEG will continue to post lower expenses. But what happens when the entire derivatives position winds down in June 1998? Doesn't SEG still continue to convert its foreign currency expenses to its functional currency at favorable rates for so long as the foreign currencies remain depressed? "...you can persist in the fiction that this is a hedge in which the only downside was that SEG conservatively gave up an undeserved windfall. If so, then you should treat the hedging losses as operating expenses and not as one-time charges. How do SEG's margins look in that context? Also, you should wonder why SEG is no longer playing the futures market. Volatility? Silly me, I thought that was why people hedged in the first place..." Pay attention now. The FASB requires that a company must define its hedging program goals in order to determine the kind of accounting treatments to use. Trading hedges are treated differently from Cash Flow hedges and Fixed Commitment hedges. "...The goal of this hedging program is to economically guarantee or lock in the exchange rates on the Company's foreign currency cash outflows rather than to eliminate the possibility of short-term earnings volatility. The Company does not use foreign currency forward exchange contracts or purchased currency options for trading purposes." Your posts have generally been a waste of my time, dude. You don't bring too many useful facts to the table. You're either blasting away indiscriminately at SEG/WDC or fixating on retail pricing without an appreciation of the price-protection schemes in place or gushing over QNTM's technology leadership on the desktop (see declining desktop unit volumes before the September quarter) or making goo-goo eyes at QNTM's "superior" vertical integration model (see how WDC and even Maxtor picked apart QNTM's relatively rigid and non-cancellable purchase ordering scheme with MKE to gain some market share points last year and continuing into most of this year). And will you please stop kissing Andrew Neff's ass in public?