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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: Gottfried who wrote (32676)	9/30/1999 6:01:00 PM
From: Ian@SI	Read Replies (1) \| Respond to of 70976

No, I don't remember where I saw it. Nor was the full chain in the story. If I find it, I'll post it. Ian.

To: Gottfried who wrote (32676)	9/30/1999 9:00:00 PM
From: Ian@SI	Read Replies (2) \| Respond to of 70976

g., this might have been the story I saw. ian. +++++++++++ Micron Technology (MU) 67 3/8 -4 5/8: You might think that Micron Technology is an index on DRAM prices the way the stock has been moving. Stock prices are supposed to reflect the present value of the future earnings stream of a company. (Boy that sounds old-fashioned, nowadays, doesn't it?) But lately, MU simply seems to rise and fall with the perceived spot prices of DRAMs. Back on July 28, at the BancBoston Robertson Stephens Semiconductor Conference, Micron stated that they foresaw DRAM prices rising from the then current $4.50 (for a 64MB DRAM module) to $5.00, perhaps $5.50, by the end of the year. MU shot up 4 points, to about $62, although Micron refused to tell the crowd what the cost to produce a 64MB DRAM was. At any rate, DRAM prices did, rise, and quickly. A shortage in August caused prices to skyrocket on the Taiwan spot market to nearly $15. Micron, accordingly, rose as high as $71 during August. Then came the Taiwan earthquake, on September 20, which everyone first assumed would benefit Micron, as it wrecked competitor's foundries. MU rose again, to $85 on 9/23. Then, it turns out, the major Taiwan semiconductor manufactors, Taiwan Semiconductor (TSM), and United Microelectronics, were unharmed in the earthquake. MU fell to $72. Today, DLJ issues a report stating that the DRAM shortage is over and even expects an oversupply by Q4. MU falls according, all the way back to $67, pretty much where this two month saga began. Micron stock no longer represents the long term future of Micron; it tracks what is happening with the spot market for DRAMs. Traders can have fun with this, but long term investors must be pulling their hair out. No matter what the spot market price is, DRAMs are still commodities; Micron has only economy of scale as an advantage, and as such, it should probably not have the high Price/Sales multiple of 6 that it does, which implies huge growth. And it certainly shouldn't fluctuate daily with the DRAM spot price. You can't tell the market what it should and should not do, of course, but no one says you have to buy stocks that act like futures contracts, either.