** Micron and DRAM pricing **
** My note: Most producers are profitable at $7.50 and above.
Micron Technology share price reflects DRAM price falls -- analyst
SAN FRANCISCO (AFX) - Micron Technology Inc's share price has largely
discounted the recent decline in DRAM prices, Gerard Klauer Mattison analyst
Jack Geraghty said.
Micron closed up 15/16 at 37-7/8, while the Dow Jones industrial average
closed down 37.51 points at 10,689.67 and the Nasdaq composite index ended 28.77
points higher at 2,590.31.
"If the stock does not reflect a worst-case scenario (for DRAM prices), it's
a close second place," Geraghty said.
He noted that Micron's shares have fallen over 50 pct since Feb 4, when they
reached a high of just over 80 usd.
According to industry sources, prices for 64 megabit PC100 SDRAMs fell this
week to 7.50 usd from around 9.50 usd at the beginning of the year.
Geraghty said that the completion of the merger between Hyundai Inc and LG
Semicon Ltd is unlikely to have a negative impact on Micron, as it appears that
the combined entity is still looking for financing to expand capacity.
Also, Micron will oppose any proposal that IMF financing be used to expand
chip capacity, Geraghty said.
Geraghty said it is not clear which producers are responsible for the
growth in DRAM supply, but noted that personal computer demand has entered a
seasonally slow period.
"It could possibly be Taiwanese producers, or fabrication plants where
Japanese companies have outsourced production," the analyst said.
He added that Japanese DRAM producers, such as NEC Corp and Matsushita
Electric Industrial Co Ltd, who were expected to reduce production after the end
of the Japanese fiscal year to March, could be behind the "incremental supply."
Earlier this week BancBoston Robertson Stephens analyst Dan Niles lowered
his Micron rating to a long-term attractive from strong buy.
In a note to investors, Niles said he has lowered his EPS estimates for the
third quarter to May to 7 cents from 23 and to 24 cents for the year
to August from 75 cents, based on the decline in DRAM prices.
"Pricing following the end of the Japanese fiscal year-end continues to fall
and now is in the low 7 usd" range, Niles said.
"We believe that at current prices, many vendors are once again heading
toward breakeven profitability. The next demand pick-up likely will be in the
pre-back-to-school season. As a result, we anticipate becoming more bullish on
the stock around August," he added.
Geraghty expects Micron to report full year EPS of 62 cents, compared to
consensus expectations of 44 cents |
