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To: Skeeter Bug who wrote (26789)	1/18/1998 11:07:00 PM
From: Earlie	Read Replies (2) \| Respond to of 53903

SB: Wow. I go on the road for a couple of days, and miss all the fun. Delighted to see that you have inserted a lengthy, grade three thorn into the "MU-is-the-low-cost-producer" balloon....that little unsupported bubble floating around in our respective visions has enjoyed far too lengthy a lifespan for so bloated a concept. As you point out, it isn't difficult to derive a reasonable net cost figure for MU, and with the ASP's now also apparent, (example....how about a large sale by MU at $2.90 last week), deriving a probable profit expectation for the quarter also does not require rocket science. Again, as you point out, the difficulty is deriving cost figures for the competitors, given their accounting practices, although it strikes me that when one finds a "shipping-below-cost" scenario, it really doesn't matter all that much what the competitor's costs are, so much as what his prices are, and whether he can sustain them. Irrespective of what bulls or bears would wish, there are certain very brittle facts that suggest the price wars are nowhere near an end, but are in fact just getting underway. - show me any actual casualties.....several will be required before the supply side will have a chance of falling. The fab building spree that commenced two years ago must run its course. The several scale-backs announced so far represent the opening salvo only. - where is the demand GROWTH to come from to soak up all this new supply? Any imbecile who checks out the actual memory needs of automobiles (both current and projected), appliances , DVD's etc., will recognize that this demand is minuscule now and for the expected future in comparison with PC's - PC growth has been slowing and will probably exhibit actual decline this year (already evident in some Asian countries). Asia's priorities have fallen well down the Maslovian Hierarchy of Needs scale. The so-called ramp-up in European PC purchases is a crock, and N. American markets are effectively saturated. Perhaps new Martian exports? - Where are the new software applications that will drive expanded PC sales? or greater memory requirements?...these are the key missing ingredients, and they are not in evidence. A simple fact....MU will lose money for the next few quarters. Will the market look across this valley to future possible earnings? Perhaps, but probably not without a bit of visibility, and perhaps even less as the Asian contagion proves a very communicable disease. As noted earlier, when shorting, it is the risk/reward ratio that counts, and MU's is now exceptional. Best, Earlie