Inventory write-downs

Normally when I talk about valuing inventory at its lower of cost or market (LCM) I state that one reason inventory can lose value is because of obsolscence or technological change, however my examples are usually not real world. However, today I saw a news release about Teletouch a company that operates a paging and two way messaging network. Cellphones and wireless networks are slowly making pagers obsolete and as this occurs we see companies in this area taking inventory write-downs. Here is a cut from the Teletouch's second quarter press release:

Teletouch recorded an operating loss of $457,000 for the latest quarter compared with operating income of $52,000 in the second quarter of fiscal 2004. The increased operating loss was primarily due to fewer pagers in service at the end of the period. The second quarter 2005 results include approximately $331,000 in inventory write-downs compared with $203,000 in the same quarter of last year. Adjusting for the inventory write-down, the Company would have recorded an operating loss of $126,000 for the quarter compared to an operating profit (net of inventory write-downs) of $255,000 in the comparative quarter last year.