Tip, Only one thing has changed in DRAM: The Asians are running a DRAM scam. That has stopped DRAM prices from falling any faster. They still haven't gone up and they are about 35 pct. per chip below breakeven on a gross basis, much less on a net basis. The problem is, how long can the Asians afford to hold inventory? How many billion dollar fabs can be underutilized or shutdown? My guess is that we are close to the breaking point in both. The inventory will be sold and the fabs will be producing next generation chips in ever increasing yields. Any other action means either getting out of the business or declaring bankruptcy.
MU is really playing this DRAM scam exactly as they played the other two this down cycle. They are calling it a permanent stabilization of DRAM prices and are increasing their capacity to take advantage of the Asian sacrifices. In the first case, they know it is a bald-faced lie. In the second case, I agree with them. If your competition is stupid enough to give you market share, grab it.
Anyway, my worry is that MU will lose less money this quarter than last. Lower costs and slightly higher demand, plus MU's usual accounting tricks, are certainly taking dead aim at making a report of a loss of 25-40 cents that they can call a great "turnaround." I seriously believe the suckers will buy it, too. So, I am sticking with a 1/3 position until I have some sense that the scam is on its last legs.
MB |
