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  • Amazon's Profit Margins Are - Like The Curate's Egg - Good In Parts. At Its Core, It Will Remain A Low-Margin General Retailer For Years To Come [View article]
    But the price went up over the long term...so according to your logic

    "Great Companies go up over the long term", Microsoft went up over the long term, therefore, Microsoft was a great company in 1999.

    Cmon Gary, simple logic...it is not a difficult concept.
    Aug 11 10:33 AM | Likes Like |Link to Comment
  • Amazon's Profit Margins Are - Like The Curate's Egg - Good In Parts. At Its Core, It Will Remain A Low-Margin General Retailer For Years To Come [View article]
    "Great Companies go up over the long term"

    Gary, You could've made the same argument for Microsoft in 1999...

    Microsoft

    1986: $0.15 Earnings: less than $0.01
    1999: $52.53 Earnings: $0.71
    2000: $19.51 down 63% Earnings: $0.85

    Amazon
    1997: $ 5 Equity Cap: $1.3 bln Net Income: -$31 million
    1/21/14: $407
    Now: $ 317 Equity Cap: $146 bln TTM Net Inc: $180 million
    2015: ??
    Aug 11 10:20 AM | Likes Like |Link to Comment
  • Who Is John Galt And What Stocks Would He Buy? Part I [View article]
    Actually Joey, I get more financial information from the Private companies I invest in than the information public companies are mandated to disclose, all without the coercion of the government. Private companies have an incentive to provide information because they need access to capital and would not get it without the increased disclosure. Public companies would likely disclose significantly more information if it weren't for the threat of frivolous lawsuits they face from the disclosures that they make. The SEC provides a veil for public companies to disclose the absolute minimum amount of information and allows them to present the information in a manner (GAAP accounting) that is not particularly useful in evaluating the true economics of a business.
    Aug 6 11:59 PM | 1 Like Like |Link to Comment
  • Amazon.com's Free Cash Flow Has Not Been Doing Too Well, Either [View article]
    Cayman - Amazon is only free cash flow positive because it sells equity to pay its employees and it borrows money from its suppliers, neither of which demonstrates that the primary operating activity of the company, the selling of products and services to customers, can generate cash flow.
    Aug 4 12:23 PM | 6 Likes Like |Link to Comment
  • Amazon.com's Free Cash Flow Has Not Been Doing Too Well, Either [View article]
    Cayman, it is included as Property and Equipment on the balance sheet, but it is NOT included in Cap Ex in the Cash Flow Statement, because it is a "non-cash" transaction. That is the reason for the Supplemental Cash Flow section of the cash flow statement AND the statement directly from Amazon's 10K that is listed above which clearly states "free cash flow does not incorporate the portion of payments representing principal reductions of debt, property and equipment acquired under capital leases and other leases accounted for as financing arrangements". How much clearer does it have to be for you?
    Aug 4 12:17 PM | 5 Likes Like |Link to Comment
  • Amazon.com's Free Cash Flow Has Not Been Doing Too Well, Either [View article]
    Cayman,
    FCF is NOT hit with Capital Leases, because they are NOT included in the Cap Ex line. Take a look at the Cash Flow statement, look under Supplemental Cash Flow Information, and you will see the line item Property and Equipment Acquired Under Capital Leases. Payments on Capital Leases are under the financing section, but the depreciation on the capital leases IS in the D&A line, so free cash flow gets a boost by the depreciation but does NOT get penalized by the payments.

    From the 10K: Free cash flow has limitations due to the fact that it does not represent the residual cash flow available for discretionary expenditures. For example, free cash flow does not incorporate the portion of payments representing principal reductions of debt, property and equipment acquired under capital leases and other leases accounted for as financing arrangements, or cash payments for business acquisitions. Therefore, we believe it is important to view free cash flow as a complement to our entire consolidated statements of cash flows.
    Aug 4 11:22 AM | 5 Likes Like |Link to Comment
  • The Amazon.com 'Come To Jesus' Earnings Report [View article]
    With that kind of accounting logic, PeterXLX must be the CFO of Amazon...
    Jul 28 08:59 PM | 3 Likes Like |Link to Comment
  • What Amazon's Earnings Won't Tell You [View article]
    "free cash flow is the key metric...I prefer to take into account all investing activities not just capital expenditures."

    Do you realize that you excluded from AAPL's free cash flow purchases of marketable securities (i.e. cash), of $24 bln, $38.5 bln and $32.4 over the last 3 years? For Amazon, they had net purchases of marketable secruities of 520mm in 2013 but net sales of marketable securities of $935 mm and $586 mm in 2012 and 2011. You may want to re-run your numbers before jumping to any conclusions.
    Jul 28 08:11 AM | Likes Like |Link to Comment
  • Micron's Toxic Converts: The Beginning Of The End? [View article]
    >> 4) think an increasing stock price makes converts more expensive.<<
    You don't think the price of a convert is affected by the stock price?????

    Of course the price of the converts is higher if the stock price goes up, but a convert this deep in the money is essentially equity. The same number of shares will be issued regardless of the share price as long as they are in the money. The equity embedded in the convert has already been sold at a specific price when it was issued. That doesn't make it any more expensive, similar to if they had sold equity and the price goes up after the fact doesn't make the equity issuance "more expensive".

    Since you are obviously incapable of comprehending my responses, and don't care to understand, this will be the last you hear from me.
    Jul 27 07:40 PM | 1 Like Like |Link to Comment
  • Micron's Toxic Converts: The Beginning Of The End? [View article]
    I'm doing quite well, thank you.

    If you do own thousands of options contracts, that is impressive given that you:
    1) still think of profitability you make on positions as "house money"
    2) don't understand that a deep in the money convert is essentially the same as stock
    3) think you can buy back converts in the market without paying a premium to the conversion price for the interest expense that would be paid until the company can force conversion.
    4) think an increasing stock price makes converts more expensive.
    5) wanted the company to "defease" the convertible bonds, when actually buying shares to offset the dilution is essentially the same thing and couldn't come to grips with that concept.

    "Once again, I am no wiser on converts having read your latest comment."
    Then either you're not reading the comments or lack the ability to comprehend. I can't help with either of those.

    "I've elaborated a rank order list of other choices and you are mute on the subject"
    Take a deep breath, and actually read the comments - here is what I wrote and I've put in brackets which issue it addressed...
    In hindsight, you wish that they had issued different securities than the converts, yet at that time this was a company that had never earned an economic profit over its history {in other words, issuing straight debt may not have been a viable option}. You wish that their customers would have paid for the acquisition of Elpida by providing low cost debt, but why would the customers provide a supplier with the ability to consolidate the industry which has enabled them to raise prices? {in other words, the likelihood of obtaining "customer" financing at low rates of interest is absurd} The reality is that their funding options were likely either selling converts {your next choice} or issuing more equity {your last choice}.

    So if your 1st and 2nd choices weren't viable, they issued converts, which was viable at the time.

    You asked me to address the following...
    Lets look at the present and forward:
    - Are you blissfully happy with the capital structure Ron Foster has put together?
    As of 5/29/14, they have $4.8 bln of cash, $3.75 bln of which is held by foreign subsidiaries. So they have about $1 billion in U.S. cash to weather a potential downturn in a notoriously cyclical business. Are you advocating they repatriate the foreign cash and pay 35% taxes on it? Are you suggesting they need to lever up more to repurchase what is essentially equity and expose themselves if there is a cyclical downturn? A business can take operational risk or financial risk, but taking both is a recipe for potential disaster.

    - Having seen the money Foster has left on the table exercising his stock options, and having seen the $250 million loss he generated on currency hedging would you have him manage money for you?
    Foster's personal stock options have no bearing - it could just be prudent risk management - I don't know enough about his personal finances to draw any conclusions. Given that the company's stock hadn't moved since he joined the company in 2008 prior to the Elpida acquisition and he is 63 years old, it doesn't seem imprudent to take some chips off the table without waiting for the highest tick price in what has been a highly cyclical business.
    As far as the $250 million loss on currency hedging, if it was in fact a hedge against the fluctuation of the profitability of the business based on currency movements, then yes, that is acceptable, because the business was $250 million more profitable due to currency movements. A CFO should not be speculating on currency movements. If it is truly a hedge, and the currency had moved in the other direction, it would have produced a $250 million profit and the business would have been $250 million less profitable. That's what hedging is. Would Ron Foster have been a financial genius in that outcome? Or are you suggesting they aren't hedging the operations of the business properly and if so, where is the data to back that up?

    - Would you try to get rid of these converts? How would you do it if so? There is no reason to try to get rid of the converts specifically, as they are essentially equity at this point. Getting rid of the converts is the same as buying back shares, unless you think the share price will fall below $14.23 on the 2014 notes, or below $10.93 for any of the other tranches.

    - Do you see the converts as an impediment to establishing a well explained policy of returning cash to shareholders?
    Not at all. What impediment is there? It can be confusing to people that don't know how to or take the time to read financial statements?

    - Is it a good or a bad thing that Intel and Sandisk have very impressive plans on how they will return cash to shareholders, and we don't?
    I think it's irrelevant what Intel and Sandisk are doing. MU needs to figure out on its own, based on its own situation, the best allocation of capital for the company.

    Is it a good or bad thing that MXIM, TXN and so many of our competitors have dividends and we don't?
    Whether a company pays a dividend isn't necessarily relevant. If you want to generate cash from your stock, you can sell a portion of it each quarter. Is it better for a company to pay a dividend or repurchase equity? It depends on the equity price. Given your bullishness for the equity price, you should prefer that they repurchase equity over paying a dividend.

    - Do you think we should declare a dividend while the converts are outstanding?
    Whether there are converts outstanding is irrelevant in the determination of whether to pay a dividend, but is related to the overall cash generation and uses of the business in conjunction with the option of repurchasing equity.
    Jul 27 06:21 PM | 5 Likes Like |Link to Comment
  • Micron's Toxic Converts: The Beginning Of The End? [View article]
    Phred - I've simply pointed out the fallacy in your logic which concludes, over and over again, that the converts are toxic. Instead of trying to learn from someone that has over 20 years of experience in converts, you have chosen to take it as a personal attack.

    First, do you really own several thousand contracts of January 2015 35 calls which would imply you have nearly $1 million of premium for out of the money calls that expire in 6 months?

    Do you understand if you repurchase the converts prior to when you're able to force conversion you will end up paying all the subsequent interest payments discounted back to the present value in the purchase price? For accounting purposes you will eliminate the interest expense going forward, but for economic purposes it will have no effect.

    You still haven't realized that the company should be indifferent between buying back stock and buying back the converts. Instead, you strongly disagree.

    In hindsight, you wish that they had issued different securities than the converts, yet at that time this was a company that had never earned an economic profit over its history. You wish that their customers would have paid for the acquisition of Elpida by providing low cost debt, but why would the customers provide a supplier with the ability to consolidate the industry which has enabled them to raise prices? The reality is that their funding options were likely either selling converts or issuing more equity. You claim that they didn't need to raise the amount that they did, but that too is in hindsight.

    The point is that given the lack of funding options they had when they issued the converts, you should be thankful they were able to raise the capital they did in order to put themselves in a position to succeed going forward, which they have. Instead, you claim that every dollar the share price goes up, the more expensive the converts are. Yet had they raised equity when they needed funding instead of issuing the converts, you wouldn't say that the equity issuance was more expensive every time the stock was up a dollar.

    Don't take it personally, if you listen, you will be able to learn from it.
    Jul 27 11:13 AM | 4 Likes Like |Link to Comment
  • The Amazon.com 'Come To Jesus' Earnings Report [View article]
    And in an article written by Paulo on April 23, 2013, his estimate for 2014 earnings was.... $0.17 compared to the consensus analyst estimate of $3.26 at the time.
    Jul 25 09:01 PM | 6 Likes Like |Link to Comment
  • The Amazon.com 'Come To Jesus' Earnings Report [View article]
    In March of 2011 (stock price $180), consensus EPS estimates were $9/sh for 2014 and in August 2011 (stock price of $215), consensus EPS estimates were over $12 for 2015.

    Post Earnings consensus is now $0.17 for 2014 and $2.14 for 2015.
    Jul 25 08:41 PM | 6 Likes Like |Link to Comment
  • Micron's Toxic Converts: The Beginning Of The End? [View article]
    Jaret is right. Phred wouldn't have anything to complain about if Micron had just sold equity when they needed to fund their business instead of selling bonds convertible into equity. Using the convertibles instead of selling equity saved them dilution, since the conversion price of the bonds was at a 25% premium to the trading price when they were issued. The 2031B Notes were issued 7/20/11 when the stock was at 7.60 and has a conversion price of 9.50, a 25% premium. Selling $345 million worth of converts instead of a secondary offering (which would've likely been priced at a discount to the closing price), means that they have at least 9 million LESS shares outstanding because they did the convert instead of an equity offering.
    Jul 25 07:37 PM | 1 Like Like |Link to Comment
  • Amazon.com's Management Discusses Q1 2014 Results - Earnings Call Transcript [View article]
    I counted 32 instances of the use of "invest" in some form by Amazon management. They have deluded themselves to think that expenses that occur today have future benefit, even though all of the "investments" made in the last 6 years have apparently not paid off, given negative incremental profitability on the last $55 billion of revenues. They believe if they say invest enough times that people will believe it, and for the most part, it has worked.
    Jul 25 12:21 AM | Likes Like |Link to Comment
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