Larry: While I don't claim to know all the reasons for today's action to the dot, here are some reasons for MU's rise:
1. Significant increase in market share in 16 Mb DRAM market where the price cross over to 64 Mb seems delayed till second half of 1998 as projected by MU and independently confirmed by market sources.
2. 20 percent growth in PCs for the fourth quarter means more demand for memory, and a possible tightening of prices. Given that MU can make money when 16 Mb is in the $6 range (they could have an ASP as low as $4 per reports in the industry), any rise in DRAM demand and concomitant price rise is going straight to the bottom line.
3. Consolidation in the Semi industry, meaning there is potential for tie ups and increased efficiencies/lower costs (MU, LSI deal is one example of what is happening).
4. By all accounts, increased application for semi conductor parts over the next few years, means, contrary to the gloomy scenario painted by the bears, in reality, 1998-2000 could see significant growth in chip (and DRAM) consumption in both dollar terms as well as bits. See the following article:
techweb.cmp.com
Also, the micron site has an excellent article by the much maligned Kipp Bedard about MU's broadening product range and market offerings (their eggs are in several baskets).
5. The whole semi industry seems to be bottoming out. The fundamentals are there; it is just that the bears refuse to see it while the market does.
Ultimately, it is not the perception of a motley collection of bears that is going to drive the markets. It has got to be fundamentals as perceived by the broader market. There is a saying in southern India that goes as "The Sun does not set just because the cat closes its eyes". Till the bears wake up to reality, it is going to be one long night for them.
As a side note, all this is for fun. I would appreciate it if no one takes umbrage (g) with the tone of my posting.
Best Regards,
Sridhar |
