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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: jeffbas who wrote (25129)	12/16/1997 10:31:00 AM
From: Skeeter Bug	Respond to of 132070

>>If Koreans do not depreciate these costs in the price they will not have the money to maintain compatitiveness and will soon be selling the last generation of product, without the wherewithal to produce the next - in other words not a multi-year contraction phase.<< mu is already at this crossroad. not good news.

To: jeffbas who wrote (25129)	12/16/1997 3:50:00 PM
From: Earlie	Read Replies (1) \| Respond to of 132070

JB: In a nutshell, the world simply has too many fabs. These plants are very expensive to put in place and are highly automated, hence very large equity and debt costs as well as very high fixed costs. Once in place, they must produce (or place untenable financial strain on their backers). In this environment, price wars are inevitable, and they will continue until some participants are chased out. This will take some time, and during that period, margins will continue to erode. Even as some go broke, the wars will continue as the new owners have a much lower cost base (bought in bankruptcy for $.10 on dollar etc.). This scenario is already under way. Most chips end up in PC's. PC demand has not kept pace with the added capacity. The margin pressure will ebb and flow with the supply/demand equation. Until that situation sorts itself out, few participants will make money. Survival in this nasty period will depend on the depths of the pockets and the pain thresholds of the various participants. MU is tier two in this regard. I'm sort of glad you brought up depreciation.....MU provides a decent example of how this item can be used to assist (artificially inflate) reported results on a short term basis. How long have they had Lehi in place? I think MU is a gift to the shorts at this juncture. Best, Earlie

To: jeffbas who wrote (25129)	12/17/1997 7:19:00 PM
From: Kerry Phineas	Respond to of 132070

JB, if nothing else for the next 1-2 years (about the length of time over which Korean co's depreciate their equipment) the Koreans will have cheap depreciation costs for the equipment they already have, and MU won't be able to afford to purchase new equipment with chips at these levels. A lot of companies will have to go out of business or merge anyways, because of changes in the economies of scale for DRAM manufacture resulting from billion dollar fabs; regardless the death twitches of companies unloading their massive inventory and pumping out chips from fabs that have already been paid for shouldn't be good for MU. Eventually, MU's going to have to come up with a few billion for the next generation fab (I'm not even convinced they've upgraded to current, because I don't exactly trust their investor relations); how in the world are they going to be able to do this? (I'll go long when/if MU goes into the single digits, don't worry).