>Business PC sales are not doing well, and with consumer sales gravitating to the low end, I remain a skeptic on the matter of demand growth exceeding supply.
It will be interesting to see if the extra PC units shipped on the low end (i.e., demand generated by lower prices) outweighs the effect of lower base DRAM memory in these systems. My gut impression on this is that it ends up being at least a tad on the positive side for makers of DRAM.
>And even if it does longer term, all it takes is one inventory correction by PC makers to cause a collapse in DRAM demand and pricing.
True, but with more and more of the PC makers trying to shift over to more of a Dell/direct model, one would expect there to be less of an effect over time due to inventory corrections.
One interesting effect of this kind of direct model (i.e., lower inventory throughout the supply chain) is that when a shortage does pop up at some point in the supply chain, the effects are much more drastic and much more immediately felt. This has been seen in many industries, including the auto industry, where a small strike by one portion of GM had the power to essentially shut the entire giant down. Given the trend of the industry the last couple years in moving toward the lower inventory way of doing business, I would expect there to be more of a panic reaction when we see something like a supply/demand imbalance--i.e., 6.9% of the world's DRAM supply from LG Semicon at least temporarily coming off the market.
In this case, a "panic reaction" means the kind of increase in DRAM pricing that we are already starting to see. Since every dollar increase in pricing goes more or less straight to Micron's bottom line, I do feel like this is a buying opportunity with the stock back in the 60's.
>...given the very uncertain nature of earnings estimates further in the future than next quarter. The flood of 144s would argue the insiders are in agreement.
Good point. Still, when you look at the macro trends--supply not keeping pace with demand over at least the next few quarters; Korean and Japanese competitors not investing in next generation fab capacity or at least seriously postponing it; Micron having the ability to do such investment (in large part through the investments from Intel and TI--TI did hand Micron a large chunk of cash to upgrade their old facilities, right?; and overall demand still appearing to go through the roof this year--I'm less concerned by some of the insiders taking profits. Profit-taking has to--and ought to--happen sometime. If they have options priced such that selling at 70 or so is a 4X or more return for them, then waiting for the stock to appreciate to, say, 90 is only a 28% increase over where it was at 70. Why put a 4X return at risk to grab another 28%?
>I am glad to see that you are continuing to post, despite some recent unsavory responses. You have added many well reasoned, intelligent arguments to the debate, that I for one, have found very valuable.
Thanks, Dave--I appreciate the feedback.
SlowThinker |
