Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Micron Only Forum -- Ignore unavailable to you. Want to Upgrade?

To: Skeeter Bug who wrote (24917)	12/9/1997 8:54:00 AM
From: mike iles	Read Replies (3) \| Respond to of 53903

Skeeter, Just realized we're not being negative enough. The annual report arrived in the mail yesterday and after reading it I realized I was wrong ... being way too positive in thinking that MU will carry on with 'business as usual' ... the world has changed and they have this large white elephant in Lehi. With 16 Mbit going for $3.00 now and likely to go lower, Lehi gets harder and harder to ignore. Especially with management saying they don't like the way this poker game is going and unless the Koreans et al get a lot nicer they're going to take their chips off the table. I forgot about Lehi because it's sunk cost. But they're carrying it on the books at $612M of which $576M hasn't been placed in service and isn't being depreciated. Construction of the plant was stopped almost 2 years ago ... cost to complete is estimated at $1.7 billion. Continuing to carry Lehi in suspended animation is becoming less and less tenable ... the world has changed. So I've changed my mind and expect that management will bite the bullet and nuke this quarter (Q1) when they report next week. One can only guess how much the Lehi writeoff will be ... the shell has to be worth something and they do plan to use some of the space for testing ... my guess is that they write it down by $200M ... which isn't a cash cost, merely delayed recognition that the dough they poured into it 2-3 years ago was a mistake. It also sends a signal to the market (hey Fido, wake up!) that the world has changed, and not for the better, since they built it. Assuming a Lehi writedown, I expect they will go the whole hog and kitchen sink the quarter, writing down the excess inventory they've been carrying and, if necessary, making provision for any restructuring (layoffs?) necessary to reposition the business. Who knows, perhaps $50M, most of which will be inventory writedowns. So my revised estimate for the semi business is a modest operating profit of $5M, offset by 'extraordinary' losses of ... ahem, cough ... about $250M. If they don't do something about Lehi and their inventory overhang, then Steve A and the board must be saying, yes Virginia there is a Santa Claus and Rudolf just landed on the fab!!! Christmas in Boise. regards, Mike