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Technology Stocks : Applied Magnetics Corp -- Ignore unavailable to you. Want to Upgrade?

To: Think4Yourself who wrote (10816)	12/8/1997 5:27:00 PM
From: Brian Lempel	Read Replies (1) \| Respond to of 12298

Ken, also note that last quarter's profit margins were low because of poor yields on 1.7 TFI heads and MR in general. Agreed that they will get worse because of lower ASPs, but FWIW, yields are likely to improve over last quarter. Brian

To: Think4Yourself who wrote (10816)	12/8/1997 6:07:00 PM
From: Rational	Read Replies (1) \| Respond to of 12298

Ken and everyone else: I have a question. In the last quarter, APM had EPS = (REV - VC - FC)/31 = .6, (fully diluted, 31 mil shares) where VC is variable cost and FC the fixed cost. This quarter (with a 30% reduction in revenue) EPS should be: EPS(new) = [.7(REV - VC) - FC]/31 = .4 This means the FC is (solving the above two equations) FC = .7(REV-VC) - .431 = (REV-VC) - .631 Or (REV-VC) = .231/.3 = 20.66 mil Thus, FC = 20.66 - 18.6 = 2.06 mil. For the APM's projection to be correct, the fixed cost has to be $2.06 mil which appears to be low. The reason I have worked this out is that 30% of 60c is ~40c = new EPS. This new EPS looks correct if the fixed cost also is reduced by 30%? The charge of 4 mil may not be enough to cover this discrepancy, IMO. Please let me have your thoughts. Sankar