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

To: Trey McAtee who wrote (39561)	10/2/1998 10:56:00 AM
From: Carl R.	Read Replies (2) \| Respond to of 53903

Trey, I was the original poster, and my point is that you are wrong when you say that they are losing money from operations before depreciation. If you do not take depreciation into account they are making money from operations. The problem is that the cash flow from operations, while positive, is not enough to replace the equipment, so they are burning cash, a point on which we agree. From their year end financials they had a loss before tax of $335 million. Disregarding their gain from sale of subsidiary, they had a loss of $494 million from operations. Adding back in the $606 million of depreciation and they have a cash flow from operations of $112 million. Note that this is positive. However even though this is positive, it is not enough to buy $800 million to $1 billion in equipment. Add it to the $250 million that they have on hand, and it is still not enough. However if the memory market remains more stable this year, and they manage to break even from operations, then the cash flow from operations in the coming year could be higher than in the past year. If they break even, their cash flow from operations would approximately equal depreciation, or $600 million. That combined with the $250 million on hand would come close to paying for their capital budget. So the question is, will memory pricing be more stable this year, allowing them to reach break even? Neither of us knows the answer to that, though we both have opinions. I have no problem with your short position, but I do think it is important that you understand cash flow regardless of your position. Good luck, Carl