Micron Tech Poised to Raise Memory-Chip Prices, Analysts Say
5/26/00 8:22:00 AM
Source: Bloomberg News
Boise, Idaho, May 26 (Bloomberg) -- Micron Technology Inc., the biggest U.S. maker of computer-memory chips, may boost contract prices on its mainstay product in the next two weeks as supply dwindles in the face of rising demand, analysts said.
Contract prices for the standard 64-megabit chip, now at $6, will rise about a dime, Thomas Weisel Partners analyst Eric Ross said. Micron's inventory has been halved to two to three weeks worth from six to seven weeks in March, he said.
Micron sells hundreds of millions of dynamic random-access memories, the main memory chips in personal computers, so small price fluctuations have a big impact on the bottom line. With spot- market prices steady at $6.44 today and supply tightening throughout the industry, analysts expect Micron to reap more benefits in the next few months.
''Demand has been pretty good all spring, and we expect business to pick up for them in the summer,'' said Josephthal & Co. analyst Larry Borgman, who rates the stock a ''buy.''
Sales of server computers that power companies' Internet sites and PCs have risen more than expected, Ross said. And as PC makers bulk up for the back-to-school and holiday seasons, DRAM prices will go even higher, because PC makers are adding more memory to handle complex graphics and games, Borgman said.
Micron spokesman Grant Jones declined to comment on the company's business, though he said industrywide inventories have shrunk in the last couple of months and prices have been rising.
''We're in a strong demand environment now,'' Jones said.
Rising PC demand has tightened supply of everything from simple capacitors to complex Intel Corp. microprocessors. Computer makers use contracts to buy in bulk and lock in prices for a set time period, while the spot price of a single chip changes daily.
Shares of Boise, Idaho-based Micron rose 5/16 to 64 9/16 in midmorning trading on the New York Stock Exchange. They've gained 65 percent this year.
Not This Quarter
Micron, which reports fiscal third-quarter earnings late next month, probably won't feel the price gain this quarter. Though they've recovered from a low of $4.70 in February, spot DRAM prices are below last year's average of about $7.77 for the period.
Since many manufacturers have switched some production from DRAM to flash-memory chips used in cellular phones, Micron will have the upper hand going forward, analysts said. Because the company already has capacity in place, Micron will fare best if the shortage predicted by analysts and industry executives comes in the second half, Ross said.
He expects DRAM demand to double this year, with supply growing just 60 percent to 70 percent.
''Micron is the best-positioned to take advantage as the buffer inventory is rapidly diminishing, and the stage is set for price increases in the future,'' Ross said. |
