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Robert Myers

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  • How Tesla's Deceptive Self-Defined Gross Margin REALLY Compares To Porsche's [View article]
    I'm not interested in wading through the reports of auto manufacturers. I tried with GM's annual report, and the experience made me even more resentful of the fact that my tax dollars were used to bail them out in a way that has not and never will be recouped. Intel's gross margin is one of the most widely-watched and reported numbers on Wall Street. In fact, Seeking Alpha is the only place I have ever heard anyone mention the gross margin of anyone but a chip manufacturer. Here is an example of how Intel's gross margin is reported to the general public. I don't care what you, your accounting teacher, the IRS, or anyone else thinks. I also, for the record, think you are probably correct in shorting TSLA...if only you had known the correct time to do so. That's the problem with any short.
    Jan 1, 2015. 03:30 PM | 1 Like Like |Link to Comment
  • How Tesla's Deceptive Self-Defined Gross Margin REALLY Compares To Porsche's [View article]
    Expensing R&D, as opposed to depreciating it, is generally advantageous for tax purposes. As I recall, allowing the immediate charging off of R&D was introduced as (possibly temporary) tax relief to encourage companies to get off their butts and do some R&D. Such temporary tax cuts do have a way of becoming permanent, but it does obscure whether a product is even potentially viable. If the cost of manufacture (excluding R&D) is greater than a plausible selling price, you're dead, and that is the most easily interpreted measure of a product's viability. If including R&D spoils everything, you just up your level of wishful thinking and tell investors you're going to sell more of whatever it is.
    Dec 30, 2014. 10:03 PM | 1 Like Like |Link to Comment
  • How Tesla's Deceptive Self-Defined Gross Margin REALLY Compares To Porsche's [View article]

    "What are the Expenses?
    There are many kinds of expenses, but the two most common are the cost of goods sold (COGS) and selling, general and administrative expenses (SG&A). Cost of goods sold is the expense most directly involved in creating revenue. It represents the costs of producing or purchasing the goods or services sold by the company. For example, if Wal-Mart pays a supplier $4 for a box of soap, which it sells to customers for $5. When it is sold, Wal-Mart's cost of good sold for the box of soap would be $4.

    Next, costs involved in operating the business are SG&A. This category includes marketing, salaries, utility bills, >>>technology expenses<<< and other general costs associated with running a business. SG&A also includes depreciation and amortization. Companies must include the cost of replacing worn out assets. Remember, some corporate expenses, such as research and development (R&D) at technology companies, are crucial to future growth and should not be cut, even though doing so may make for a better-looking earnings report."

    When the >>>technology... is obsolete (worn out) it must be replaced like anything else that wears out--by spending money on R&D. Intellectual property is an *asset*, just like the office furniture. The cost of acquiring assets is not a cost of manufacturing. When seeking outside funding, those are the only assets a venture capitalist will care about. Once you've developed intellectual property, you don't have to keep paying for it over and over again. Unlike materials that go into production, you are not going to sell the asset. Make one object, or a million, or none, intellectual property remains the same. If it must be replaced, it is because it has become obsolete, not because you have sold it.
    Dec 29, 2014. 03:06 PM | 1 Like Like |Link to Comment
  • How Tesla's Deceptive Self-Defined Gross Margin REALLY Compares To Porsche's [View article]
    I'm an applied scientist, not an accountant, so I don't follow the subject closely. Mostly, this subject comes up because of its tax implications, and the rules have changed periodically to incentivize R&D. If you can expense what is logically a capital expenditure, it's a tax break. I'm not interested in and I'm not competent for a flame war over accounting rules. Decades ago, IBM developed an electron lithography process, believing that getting to smaller wavelengths would require switching from photons to electrons. It was not a blue sky project. IBM fully expected to have to go that route, but the process never made it into a product for sale. In what way is that a cost of manufacturing (cost of goods sold)? It isn't. It is R&D, and whatever logic whoever might use to include R&D in the cost of manufacture may think they understand accounting, but they sure don't understand the logic of cutting edge manufacturing. Accounting rules can and do change, but the logic of what R&D is and how a rational manager would account for it have nothing to do with the daydreams of apparatchiks.
    Dec 29, 2014. 02:22 PM | 1 Like Like |Link to Comment
  • How Tesla's Deceptive Self-Defined Gross Margin REALLY Compares To Porsche's [View article]
    Whether R&D should be treated as an investment or as an expense is apparently a matter of debate. Since you went to the trouble to explain why you think it should be treated as an expense, I will take the trouble to explain to you why it should be treated as an investment. Gross margin, with R&D reported as an investment, tells you how much the nuts and bolts of manufacturing one more widget gets you as a percentage of sales. A company with a small gross margin eats up all its cash just producing the physical item for sale. There is nothing left to market or even to run the company, and such a product is not viable, independent of the number of widgets you are able to sell. If the cost of parts and putting them together is greater than the sales price, the proposed product is not a candidate for profitable manufacture under any circumstances. With R&D counted as an expense, whether a product is viable depends on how many you can sell and how wisely or unwisely you spend your marketing budget.
    Dec 28, 2014. 07:22 PM | 2 Likes Like |Link to Comment
  • How Tesla's Deceptive Self-Defined Gross Margin REALLY Compares To Porsche's [View article]
    What an incredibly long and noisy thread about a question of basic accounting. R&D does not affect gross margin. It is a capital expenditure and not a cost of manufacturing. Intel has to spend constantly to develop new products. Those expenditures are always reported as R&D, and because the numbers are reported that way, you can tell when Intel is more or less in panic mode, because R&D goes through the roof. Things may be done differently in Italy, and they are, in effect, done differently by the DoD, which is constantly fiddling with the RDT&E line to make things come out some way or other. For a commercial manufacturer in the United States of America, this entire thread should not even be a topic of discussion.
    Dec 28, 2014. 06:33 PM | 4 Likes Like |Link to Comment
  • Intel And Inevitability [View article]
    "Intel is already of the size that they can buy the top line growth, but still they have continue to innovate and that casts a wider net." Intel has been trying to cast a wider net for decades now. Mostly, they might just as well have dumped the money into the Pacific Ocean. Innovation on x86 has been amazing, but that's it. They already own that market.
    Dec 6, 2014. 12:52 PM | Likes Like |Link to Comment
  • Intel And Inevitability [View article]
    Your articles on Intel stand above the crowd, Russ. I don't follow Intel as closely as I have in the past, but I still have a million questions I'd like to pick your brain about.

    I'm skeptical about 14 nm in mass production, but maybe not so much for memory. I long ago predicted that we'd never get even close to where we are in scale size, so I'm not a reliable guide. Still, I'm not convinced that Intel is being completely candid about costs and yield even at 14 nm, never mind at further scale shrinks and extensive stacking. As to the possibility of putting so much memory so close to the processor, it sounds exciting, but one computer architect opined that level three cache much bigger than what we have now offers very little in the way of performance improvement.

    Intel is currently trading at or above its consensus 12-month target. Probably you think it should be. One source of information that I think must be taken seriously would say that Intel is already pretty seriously overpriced. Clearly, you would not agree for reasons that wouldn't necessarily impress a stock analyst. I'm short a small position in Intel right now, but I'd be happy to lose money on it if your predictions actually pan out.
    Dec 1, 2014. 08:39 PM | Likes Like |Link to Comment
  • Intel: Semiconductors And The Blame Game [View article]
    Industries may go through cycles, but mostly they mature. What Intel has accomplished in the senescence of the semiconductor industry is at least as impressive as what Boeing is doing in the senescence of the commercial airplane business, but these are both mature industries. Software, on the other hand, if you're looking for the really big picture, may never even grow up, much less mature. Maybe you're more comfortable betting on hardware, but there's not much left there.
    Nov 1, 2014. 09:32 PM | 2 Likes Like |Link to Comment
  • Apollo: An Undervalued 10% Yielder [View article]
    Thanks for the article, and thanks for the reference to the Morningstar piece, which is also good. I suspect that no one knows how to calculate a risk premium for this industry to account for the possible effect of rising interest rates. Apollo claims it is well-insulated, and I believe them, but maybe the market is not so sure.
    Aug 15, 2014. 11:00 AM | Likes Like |Link to Comment
  • Intel's Costly War On ARM [View article]
    AAPL's assault on enterprise is already beginning to peter out?

    AAPL just signed a deal with IBM. If anyone understands enterprise, it's IBM, AAPL isn't going to talk Steve Jobs-style to IBM, and enterprise is more impressed with the IBM logo than any comment on Seeking Alpha. I shorted INTC today.
    Jul 16, 2014. 06:28 PM | Likes Like |Link to Comment
  • Somewhere In Europe, 100 Model S' Destroy A Myth [View article]
    Securities fraud and corporate defamation are serious charges. Fortunately, they are difficult to investigate and to litigate, so the list of questionable claims that could be conceivably be litigated each day but aren't are is very long. Not all those claims are without merit. They are just not worth pursuing. No matter what I believed about the future of TSLA, I would neither buy nor short the stock. You might as well go to Las Vegas. In the meantime, you might want to consider this:, along with the stock price history of Pike Electric (PIKE), a company that would benefit powerfully should the energy now supplied by gasoline be drawn off the electric grid. I see wind turbines, solar installations, hybrid cars, and electric cars, but I see nothing of consequence happening to the electric grid. That observation, if accurate, seems far more compelling than unsold cars in Germany. It will take much longer to build out the electric grid in a meaningful way than it would to build a lithium battery gigafactory.
    Mar 21, 2014. 05:43 AM | 2 Likes Like |Link to Comment
  • Intel: 14 Nanometer Production Looks Like A Go [View article]
    Since we're on the subject, and since you're being friendly, I'll comment that the kind of thing that Intel *should* be able to do is to bring down the cost of a Playstation 4, which is flying off the shelves but which Sony is barely breaking even on, if that. I gather that the market for game cartridges is not so hot, so it would appear that Sony has a hot product it can't make money on. How did Intel miss that one? That (fancy hot rod chips underselling all comers) is Intel's game, not mobile chips sold by the bushel basket full. That's the kind of thing I want to hear to invest in Intel. If it's not what we're going to hear, how has Intel changed its game to do what it has never done successfully before? I'm guessing the problem with Playstation is the on-board graphics processor. So, Moore's law notwithstanding, is Intel caught in a squeeze play between Qualcomm and AMD? If not, why not?
    Mar 17, 2014. 08:01 PM | Likes Like |Link to Comment
  • Intel: 14 Nanometer Production Looks Like A Go [View article]
    For a while, I worried that Intel might be facing an IBM moment. For those who are too young to remember, IBM had a near-death experience. The market doesn't seem to be afraid that Intel is facing an IBM moment, and I'll accept that the market is probably smarter about that than I could be. That said, while investors in Qualcomm might be fad-of-the-moment investors, investors in Intel are probably Warren Buffett types. What is Intel going to do in the long haul? Right now, we really don't have a clue, and shipping manifests tell us nothing to answer that question.
    Mar 16, 2014. 08:21 PM | 2 Likes Like |Link to Comment
  • Tesla's Gigafactory: A Risk Assessment [View article]
    Anybody can make big plans. NASA had big plans. Lots of them. Go to and check out "NASA rocket plans," without the quotes. Someone will be putting satellites into geosynchronous orbit. Maybe it will be Elon Musk. He won't be doing anything new. When someone gets a human some place interesting or demonstrates enough AI to dispense with humans on the scene, given the communication delay, then I'll be interested. You can be interested in anything you want.
    Mar 16, 2014. 02:35 PM | Likes Like |Link to Comment