Dave, that agreement with CHS electronics is not going to add any
"extra" money to the bottom line. Micron already, by their own
admission, has "no inventory" and sells at close to spot market
rates.
Thus regardless of agreements with Latin distributor, or a
newly opened office in Japan, they are really constrained by their
production. So the press announcement is somewhat meaningless
announcement as far as its revenue is concerned.
They expanded their bit production two quarters in a row, now
up 60% in 6 months (this is approx - can somebody verify this).
Yet their revenue from DRAM dropped from $700 to $350 million.
So the DRAM bit growth is not led by demand but only because
of price drop.
Kipp Bedard's pre-announcement on Thursday, also mentioned that
price pressures increase following this quarter.
Inspite of their attempts, Micron really is a commodity company.
They can only sell what others innovate. If you evalute this as
a commodity company, then you have to go 2 years back to look
at their traditional P/E. This was around 12. Or you could
use Price/Sales. Both mean that this stock could drop to $16
in a month (like it did a few months ago) and people could still
expect it to go lower !
Remember, you cannot take Micron as an innovative company, that
is constantly trying to reshape itself. Look at their track record.
Not the press releases. The track record is that they have held
their own in DRAM and PC sales. Both commodity markets. Their forays
in "innovation" have good press releases but very little success.
They get a point for trying. And they loose a point for failing.
Remember the MicroStamp Press Release 6 months ago that said,
"After 4 years of research...... Volume production in July, 1996..."
Well, this is end of 1996. And there is no volume production.
Maybe sometime next year ! Micron Communications Corp has
approximately 40 employees. Someone mentioned $900,000 of revenues.
That is puny sales for 40+ employees after four years of research.
If you were CEO and funding this project, how long would you wait
before shutting down the project and saying, "I have reason
to believe that our area of expertise and been overextended."
And then shut off the bleeding.
I really believe that Micron will admit that it is not good at
innovation and stick to its knitting. When the investment community
realizes this, MIcron stock will promptly be priced at it traditional
valuations of P/E and Price/Sales.
And this price is 50% below the current price. |
