O.T.?
Micron Technology's quarter could have been worse
By Larry Dignan TDAIN ZDII
zdii.com
COMMENTARY -- As you pick through the rubble of yet another round of nonstop profit warnings from technology companies, you can't help but notice Micron Technology (NYSE: MU), which is so used to volatile markets that it can make an earnings miss look good.
Micron Technology missed estimates in its first quarter with earnings of 58 cents a share, two pennies below First Call consensus. Revenue of $1.8 billion fell well short of estimates. Analysts had been lowering projections for the last three days. The downgrades were flying ahead of the results.
So how can Micron's first quarter be viewed as good news?
Micron plays in a volatile market -- dynamic access random memory (DRAM) -- where wackiness is simply expected. Yes, we know memory prices have collapsed in recent months. We also know that Micron is very efficient and can weather downturns with the best of them.
Wall Street analysts apparently agree. In a slew of research reports Thursday morning, analysts flagged inventory worries and a bleak short-term outlook, but maintained "buy" ratings based on the theory that things will improve in the second half of 2001.
Most analysts sound like Merrill Lynch's Joe Osha. He cut his fiscal year estimates dramatically, but followed up with a positive outlook. "We continue to believe that Micron is further consolidating leadership in the DRAM business, and that supply in 2001 will be insufficient to create a sustained pricing crisis in DRAM," he said.
Simply put, Micron looks OK as long as there isn't a full-blown memory crisis. Osha's price target is $70. In fact, Micron's earnings miss actually topped some analysts' projections. The estimates for Micron were falling so fast that the company would have probably beaten consensus if it waited a few days to report earnings.
On Micron's conference call, there was a surreal business-as-usual tone to the quarter. No worries about memory prices -- Micron will deal with it. CEO Steve Appleton even had the audacity to proclaim the earnings miss showed "a very strong quarter." Micron keeps delivering in one wacky cyclical market. It's comfortable with its market, business model and ability to execute. Give Micron some credit. |
