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Technology Stocks : Texas Instruments - Good buy now or should we wait? -- Ignore unavailable to you. Want to Upgrade?

To: Scott Kessler who wrote (3795)	6/18/1998 9:55:00 PM
From: pat mudge	Respond to of 6180

Random notes. I could be off here and there. [Not finished, either --- later] MU/TXN conference call, June 18, 1998 [Missed first part] The deal will close the end of Sept. Run fabs as are now; transfer technology as soon as we can. Will take 10 - 18 months before we feel impact. Will purchase new equipment. Some lag. Efficiencies? Will create improvements. Increase in R&D? Will do all work in Boise. Some costs in transferring. TI has been compensated for costs. TI's memory team will add experience in handling joint ventures. TI and royalty stream? TI will not continue to invest in DRAM. Will retain patents. Royalty stream will continue [speaking of other licensees]. Will make additions to portfolio, but not in DRAM. Can TI walk away in terms of price? No. Neither co. is timing purchase to cycle of market. Would TI have memory after transfer? No. Lubbock will be closed. Products moved to Dallas facilities. Increase in depreciation --- TI assets being assumed? 3Q --- $150M depreciation and 4Q $165M. Any restrictions on stock TI gets? 144, demand registration, piggyback registration. Transfer creates CapX expectations? TwinStar will be inoperable; Avizzano and Singapore --- billion over 3 years to put .21 in place. JV will finance CAP spending. MU gets $750 M in financing from TI. Is equal to convertible and subordinate notes. All are 7 years. Same $750M. NOT $1.5B. Can steppers be used? Too early. Lots of re-use. . . not a complete change out. Do you see more consolidation with foreign competition? They should. We will be largest supplier. We can lower costs on per unit basis. JV's be run as now? Too early to know. Almost all output will be MU's responsibility. TI's P&L? $270M in cost reductions. DRAM had loss before. Will this disappear? Yes. After closing and at completion of restructuring. Over time memory business will be removed. Closing Sept. 30. Starting from today a couple quarters to complete. Will improve margins from here. Swapping cash for paper? MU borrowing money from TI? Joint Ventures --- MU receives 100% of output. TI providing cash over 3 year horizon. Proforma numbers? Not available. Expected to be dilutive this year. Accretive after that. [MU] TI had operating loss of $129M in 1Q, is this eliminated? That is the intention. May be some costs lingering. We're going through restructuring. . . covering all costs. Will recover all costs with cost savings. Sept. 30 closing --- financing advanced then? Yes. Asset values? Hard to estimate. Bill Stover, MU: DRAM pricing 31% drop QtoQ. $708 M cash and investments. $379M inventory. $4.7B in assets. $820M debt. Don Baldwin: Market is difficult. 4 weeks finished goods inventory. Feel inventory is trending in right direction. 16 mg output; 64 mg ramped aggressively; will surpass 16 mg this Q. Sept will surpass; MU gambled on shrink and it paid out. PC100 64mg --- ramping, moving to 100% as bring on .21 product. Starting wafers now. Capable of quick conversion. First .18 is out. 128mg DRAM looks good. Sample by end of summer. 68,000 sq. millimeters. Only we have this. SL DRAM out of fab and sampling; 1.6 gigs per sec. Products late 98, early 99. Whose process capability? At what line width? Use MU process as quickly as possible. Running on .18 to .30 now; transition to .21 to .18 by end of year. Acquired won't transition as fast. 10 - 18 months. Market flavor? Korea? Co. strength in this cycle. Supply in Korea, some will shut down part time (1 wk per mo over summer); MU pleased with financial status --- this cycle has lasted a year longer than others. Getting good reception from financial market should the need arise. Why do you say deal is dilutive? Market is bad. TI not as efficient as MU. Will take time to bring them up to standard. CAPX in 700-900 range. Will it be affected? Close to $700 now. 900 will be close. No further costs. Micron Electronics royalties are eliminated. By 2Q'99 all .21 or better. Going from .25 to .21, what efficiencies? 78% increase in die per wafer. Why shut down TwinStar? It was smallest and least mature. More efficient to change other plants. Production in Q? Affect of efficiencies? Spot 1.40 to 1.50; contract, 1.50 to 1.80. Productivity, 36% increase. 64mg improvements in 4Q getting close to 3Q. Any evidence OEMs inventories are low? General pick up. Forecast numbers are up. Going well on that front.