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To: Glenn D. Rudolph who wrote (86147)	12/3/1999 10:40:00 PM
From: Bill Harmond	Read Replies (3) \| Respond to of 164684

Rick Whittington, B of A Securities, on Micron Technology, 11/26/99: Rising PC visibility [discussed earlier due to, among other things, the upgrade cycle to Windows 2000] benefits none more than Micron (MU-$68.00-Strong Buy). Now the world's largest DRAM producer, with 15%-20% higher production that either Korean, and rapidly gaining additional share, a strong PC first half 2000 will catapult Micron's earnings into the stratosphere. Stable ASPs, rapid cost reductions and strong unit growth are a sure-fire recipe for upsides. Samsung and Hyundai-LG are stuck at 0.21-0.25 micron for the bulk of their DRAM production in 2000, with the possibility of no more than one-third of their capacity hitting 0.18 micron in the second half of 2000. Micron has already moved to nearly 100% 0.18 micron wafer starts and today has fully allocated costs roughly half that of their closest competitor. This is an advantage not seen in the DRAM market since the early-mid 1970s, the last time a US company reigned supreme in this highest unit volume of semiconductor markets. Once dominant Japanese producers have all but disappeared from the landscape - they'll never publicly admit this, but as one long has learned: watch what they do, not what they say. Japan, Inc is rapidly disinvesting from DRAMs and, indeed, from semiconductors in general. They have tired of the battle. DRAM capital spending trends are well below what has been seen in prior upturns, with very little incremental capacity additions now taking place. This will have to change, so great is the demand cycle now facing the industry but the tardiness to respond cements in a tight supply period for at least the next eighteen, if not twenty-four months. In our opinion, the principal reason for this changed investment pattern, particularly on the part of the Koreans, is their recognition of Micron's technologic and cost superiority, as well as appetite for market share. Following this train of thought, Micron has won the DRAM wars and will now harvest its victory. The Street hasn't even begun to comprehend the magnitude of this watershed event nor has any inkling of the impact upon earnings for years to come. In essence, Micron is ensured a profit because the Koreans can no longer run DRAMs as a loss-leader, at least not unless they want their government bankrupted again and back on the IMF's door-step. This means that Samsung and Hyundai-LG will add only enough capacity to hold some respectable, say 15%, market share, and to ensure no worse than breakeven - fully allocated, not variable this time. Most may be too polite to state the obvious but the world is watching. Infineon, too, is no longer a captive Siemens subsidiary able to subsidize DRAM losses and will run itself on a P&L mentality. The Taiwanese will continue to foundry outsourced designs from Japan but these will become steadily less competitive as resources are earmarked elsewhere. Gauging upside earnings at Micron is always an interesting proposition and is really dependent upon how quickly incremental supplies are created. Right today that balance would seem to favor the aggressive estimate. Street sentiment has already swung to the negative side of the ledger, anticipating seasonal weakness that isn't happening and won't this time. When that realization sets in, the stock will be off to the races. How high, one only can guess. Micron's head of sales, Don Baldwin, has resigned and is replaced with his deputy, Mike Sadler, effective immediately. This management change has been underway since early summer and should be of no particular consequence. Given the DRAMs industry's structure, essentially five buyers and five sellers, the sales role is less impactful than for specialized, non-standard products sectors. In any event, we wish Mr. Baldwin well and welcome Mr. Sadler to the front ranks.