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Technology Stocks : Micron Only Forum

MU 207.36

+3.0%

Nov 21 9:30 AM EST

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To: Thomas G. Busillo who wrote (46457)	6/20/1999 11:29:00 PM
From: Carl R.	Read Replies (2) of 53903

In contemplating the size of the MU loss this quarter I think that now is a good time for everyone to recall that the JV relationship now partially protects MU from the vicious DRAM cycle. Remember that the price they pay the JV is a percentage of the selling price, and is not a function of the cost of the JV. Thus while MU can have a loss selling chips made in Boise, they are guaranteed to make money on JV production regardless of the selling price. This dramatically reduces their downside exposure. The flip side is that in a DRAM shortage, the profit that MU makes from the sale of the chips is limited by this arrangement as well. While MU will probably lose money this quarter, I have no doubt that there will be some perma-bears who are surprised at how small the loss will turn out to be. The reason in part will be the structure of the JV contracts. And of course those same contracts will also make sure MU will never reach that $6.32 target even if a shortage does materialize in 2001. Carl

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