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Technology Stocks : Micron Only Forum

MU 236.48

+2.7%

Nov 28 9:30 AM EST

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To: TREND1 who wrote (30769)	3/19/1998 11:14:00 AM
From: ComSolut	Read Replies (1) of 53903

Larry, Reference earnings estimates next quarter MUEI first. Based on the last quarter several notes are worth highlighting: 1) On an operating basis MUEI lost money, 1 time gain less restructure charge (write down of inventory less operating loss of approx. 7.5 cents 2) Management states they see an industry wide price decline in computers. Sales declined 3%. Unit sales up 7%. Average selling price fell 14-19%. Market highly competitive. Gross margins down. Not a pretty picture and the trend looks bad to me. So how do they fix the problem. 4 ways 1) Improve profitability & cash flow (can only lose money for so long) by reducing operating expenses - particularly reducing PC work force by 20%! and consolidate facilities 2) Change Sales force compensation to be margin based. Neither of the above can be good for morale. 3) Enhance and target DIRECT MODEL focusing on core and product superiority. 4) New Marketing Engine - Fired old marketing company and hire new marketing and advertising company and start a new ad campaign. More advertising expense even though management states ad expense are too high and keep going higher. My own two cents says MUEI is having trouble competing. The product may be great but the price is too high, market too competitive, management cannot get a handle on costs. Need to make more sales - people need to know about the product so more advertising. BUT AD COSTS COME FIRST & SALES SECOND - if sales do not go up then even higher operating costs. MU 1) Operating loss of -26 cents (-15 cents was MUEI and R&D) 2) DRAM prices continue to drop, supply exceeds demand. Okay, how to be competitive. My opinions - research and get there first to capitalize on higher margins early in the product cycle - but MU does not utilize this strategy. Be a low cost producer (MU Strategy) but if sales price is less than production costs how can money be made. OH BUT - 64 meg and other new products with still high selling prices. Well, if recent history is to judge, the prices will fall rapidly as supply increases and there goes the profits that were prevalent 2 years ago. ESSENTIALLY - MUEI is trying to be a quality pc supplier in a price market and MU is selling DRAM in an industry experiencing over supply. UNLESS the SUPPLY equation changes or MUEI can penetrate the PC market against DELL and company with a new business approach I am not hopeful of any positive change in the earnings picture. Sorry for the long post but would enjoy a discussion of the above company and personal observations. ComSolut

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