Denali Memory Report - Latest comments on Memory Company Financials: 3Q was bad; 4Q will be worse:

In response to: Memory Company Financials: 3Q was bad; 4Q will be worse:

Denali [Member] — Tue, 25 Nov 2008 21:22:03 +0000

Robert: You're right, but it is an increasingly complex accounting and disclosure problem to give a succinct discussion of 'how well are the companies doing', which we still believe is best measured by profits, with all the write-off and restructuring charges included. Different presentations can be useful for different audiences and for different purposes, as we have noted in the write-up. In general, we stick to the simplest version..."sales and profits"... and leave it to the reader to probe further in the specific companies SEC documents and filings. What we have said in the article about 'accounting nuances' and 'warnings' is clearly only the tip of the iceberg.

Rarely very profitable for any length of time, memory chip companies are at their worst now...that is, until tomorrow, when they will be even worse as they close out 4Q and move on to 2009.

Lane

In response to: Memory Company Financials: 3Q was bad; 4Q will be worse:

R Beal [Visitor] — Tue, 18 Nov 2008 23:33:05 +0000

I'd recommend looking at EBITDA or similar cash flow measure, rather than just accounting profit/loss. Besides the GAAP distortion of equity awards (most of which will expire worthless, or cash out at far below GAAP cost), the losses on many of these companies can be misleading. For example, the majority of Micron's loss is due to a write down for their purchase of Lexar. Micron bought Lexar with stock, there was no cash flow implication of this huge paper loss. Some of these companies are still operating-cash-flow positive, meaning they are generally ok until they have to make large capex investments... unless they are highly leveraged, like Freescale (not memory, but semiconductor). Most memory companies are not highly leveraged. Survival for many of these companies over the next couple quarters will depend mainly on cash flow management.