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 (44781)	4/3/1999 9:39:00 AM
From: Carl R.	Read Replies (1) \| Respond to of 53903

Skeeter the choice of whether or not to do another shrink on 16mb is a simple choice of economics, as you will eventually learn in school. You make an additional investment in a product, and you compute the return that you expect from that investment. If the IRR of the investment is above your cost of capital, you make the investment. If it isn't, you don't. The cost is the cost of the design, the cost of the masks, the cost of implementing it, the cost of ramping up yields, etc. The returns are the cost savings per chip that you achieve from the time of the shrink until the end of life of the chip. By making the investment in a new shrink for 16mb, MU is saying that they believe that the life of 16mb will be sufficiently long to recoup the investment. I believe that they are correct because there are many applications that do not require 64mb chips, and therefore I expect 16mb chips to be used for many years to come. Why do you think they will not get an adequate return from this investment? In a company the size of MU they have many things going at once. You act as if the shrink at 16mb prevents them from reducing costs at 64mb. There is no reason they can't do both at the same time, and work on RDRAM at the same time. You are laboring under several different misconceptions. First of all, what MU just survived (unlike TI and some other players) is the biggest glut of all time, not the biggest boom. The boom was from 1990-1995. MU made some big profits in that time, and managed to make profits in 1996 and 1997 as well, though not 1998. They leveraged that profit into a much larger share of the world market. They have ample cash reserves on hand to assure their ability to compete even if the glut continues for another 2 years, which it probably won't. Under no definition can they be considered "nearly broke". That doesn't mean that they don't face additional challenges in the future. They are in a tough, unforgiving business, and they have done very well in it. Many "well-run" companies have failed to compete successfully in DRAM, including INTC and TI. So you have to give MU it's due. They have survived the dips and grown continually. They have been profitable almost every year. They have ample cash on hand to stay in business. They have borrowed money on favorable terms when necessary. In fact, I can't think off hand of anything they haven't done well from an operational standpoint. Carl