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Technology Stocks : Micron Only Forum
MU 230.24+2.5%Nov 26 3:59 PM EST
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To: Chi Melville who wrote (13)5/15/1996 3:18:00 PM
From: David Young   of 53903
 
Top ten reasons to bail out of Micron:

10. History. Remember a company called Mostek? I didn't think so. They
owned 40% of the world's Dram market in the early 80's. They are a
grim reminder of what can happen to a DRAM supplier in a down
market.

9. DRAM pricing typically does not go back up. Prices for 4 Megs have
fallen from$15 six months ago to under $4.00 on the spot market.

8. The competition. Blue-Chip, well diversified, electronics giants
who have deep pockets: Toshiba, Hitachi, NEC, Samsung, Hyundai,
GoldStar, Mitsubishi, etc.

7. 16M DRAMs are now driving the market. Micron is late with 16M
DRAMs. Most of the Japanese and Korean companies have been in
production for one to two years and Micron is just now starting to ramp production. The competition can probably sell 16 Meg parts for $10 and still make money. If that happens, that makes a 4M worth $2.50.

6. Q3 looks bad. First Call lowered consensus estimates to .41
from .45 and that may be optimistic. Average spot market price in March was maybe $9 (not too bad) but April was more like $5.50 and so far in May it has been under $4.

5. Q4 may well be a disaster. Three more months of price decline and
they will be unprofitable. Best case still looks worse than Q3.

4. Low P/E is a myth. You have to take Q1 and Q2 in which they made
a total of $2.48 out of the calculation.

3. Conversion to 8" wafers is just a catch-up move. Competition has
been shipping 16M DRAMs made on 8" wafers for a long time.

2. Taiwanese are coming. Mosel/Vitalic is already producing commodity
memories. Five or six other companies have announced plans to start
production in the next year. The scariest scenario here is that the
Japanese and Korean companies will keep production high
to keep the Taiwanese from gaining a significant market share.

1. Micron's Chief Technology Officer owned 105K shares. He bailed out
of 98K shares in April. He knows more about Micron's prospects than we do.
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