Vasu, I was verbose but by no means emotional about it. I think the
essence of my point is that MU is loosing market share (and not just
market). This is a double whammy. The stock is priced as if the
recovery had already happened and 1998 had come around and that
MU was going to recover DRAM market share.
If you owned this stock, like I did, wouldn't you rather sell the
stocks now, since it already reflects 1998 prices. This price
may be supported by "comments from MU".
As far as trying to determine whether DRAM business has turned around,
Jerry's posts indicate that spot prices are continuing their decline.
Now that Micron is selling DRAM at prices lower than what they
accused the foreign suppliers of dumping at, they make their case
very weak. When bigger manufacturers start ignoring the dumping
charges initiated by Micron, then prices will continue their
decline.
So MU's memory business has not really bottomed but will continue
a steady decline.
This is not much to worry about on the stock. Unless you have paid
100%+ premium. If the memory business disappears into the oblivion,
then you really have to start worrying. You are then paying 100%+
premium on a holding company that is holding MUEI stocks, which
accounts for only (approx) $7 at current valuation, but at
$3.5 if you evaluate MEUI at traditional price/sales. (MU owns 85%
of MU, MEUI shares approx=90 million, MU=213 million).
So the risk of decreasing market share carries a very substantial
risk to the stock price. Right now the MU stock has a very
substantial premium over the sum of its parts.
My estimate of $16/share is only assuming that one of these premiums
disappear (i. MU premium, ii. holding premium). If both premiums
disappear, then further decline is possible.
If the risk is that high, then what are the rewards ? If you estimate
that the potential rewards are going to be high, then you really
have to determine how high. From fundamental analysis I don't see
any upward potential in stock price. But you have to use your
own numbers and analysis. If you do find an upward potential,
please share that with us.
The declining market share is a phenomenon that has been repeated
several times. Eventually the production base shifts the the most
efficient manufacturer (and usually a larger manufacturer). |
