Still playing the puts, Michael? From where I sit it looks like this stock has made about the same number of up moves and down moves over the last year or so. I'd have to guess that the sellers of options have been the big winners so far, and the buyers of both puts and calls the big losers. I have made only occasional bets on this company, mostly on the long side, mostly successful.
My take on some questions regarding MU:
1. Is MU the low cost producer? It certainly seem so.
2. Does that make them profitable. No, it only makes them the one who loses the least.
3. Is anyone making money on memory these days? Doesn't appear so.
4. Is MU the technology laggard? No, in fact they may well be the technology leader. They apply advanced technology to old products, increasing the yields on them, and making the older produces profitable for longer. This forces the competition to "run" to the next generation of chips prematurely. The competition gets higher prices for the next generation, true, but much lower yields, and remains less profitable. The lower you are able to make your costs, the longer you are able to profitably stay with an older generation of chips. Many people believe that because MU stays with an older generation of chips longer it is a sign of weakness, but in fact it may well be a sign of strength. Recall about 17 months ago when MU made the crossover from 4MB to 16MB they were able to lower costs on the 16MB chips much, much faster than anyone expected because they had the technology in place. There is every reason to believe that MU is prepared to make just as dramatic change when they crossover to 64MB.
5. Does MU have the staying power to play the game? This is the big question. Certainly if they weren't the low cost producer, they'd have been dead a long time ago.
6. Can they outlast Korea? Same question as number 5. My guess is yes because the Koreans will be unable to buy sufficient next generation equipment, and will eventually be unable to compete, while MU will find a way to get what they need.
My current position is on the sidelines.
Good luck,
Carl |
