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Technology Stocks : Micron Only Forum -- Ignore unavailable to you. Want to Upgrade?

To: Steve Robinett who wrote (50508)	2/13/2000 9:29:00 PM
From: Skeeter Bug	Respond to of 53903

steve, you aren't right. mu will be breakeven, at best, during 2h this year. their only chance for a profit is if an earthquake and y2k double ordering occur again ;-)

To: Steve Robinett who wrote (50508)	2/14/2000 8:53:00 AM
From: Glenn D. Rudolph	Read Replies (1) \| Respond to of 53903

I don't even know who the Merril Lynch analyst is much less what he had to say but if he agrees with me he's obviously right ;-) Best Steve, He is Joseph Osha. Here is a bit of the report: "Micron Technology ? 4 February 2000 (Continued) 2 n Lousy short-term picture, but the second half still looks like a crunch As DRAM pricing continues to decline, it is becoming clear that there?s more to the current weakness than a simple seasonal slowdown. The current weakness is being driven by two factors, specifically (i) a shortage of Intel microprocessors at the 550 megahertz speed grade, and (ii) still-weak demand from the corporate PC sector. At the same time, however, our just-updated supply analysis continues to suggest that the DRAM industry will move back into shortage in the latter half of 2000. We think that the recent weakness offers an opportunity to buy a stock that should move substantially higher once the extent of the 2H shortage becomes clear ? we are reiterating our buy ratings and $100 price objective. Fine-tuning the model . . . We have taken the opportunity to fine-tune our model ? although our February quarter earnings estimate remains unchanged at $0.90, we?ve dropped our August 2000 full-year estimate slightly, from $4.66 to $4.58. Our revenue number for the year is essentially unchanged at $6.7 billion ? the change comes mostly from slightly lower margins as Micron has become more aggressive in ramping 128- megabit DRAM production that we had previously modeled. Weak spot pricing driven by Intel supply problems, poor corporate sector PC demand The picture for the next several months is murky. Micron indicates that its contract pricing for 100-megahertz 64 megabit parts is in the $7 to $7.25 range, and prices for off-brand 64-megabit parts in Taiwan are below $7. We believe that one-off deals for brand-name parts are being done in the $7 range. Despite the fact that we?re now past the usual time when a seasonal pickup occurs, the DRAM spot market shows little sign of improvement. What could have caused things to go sour so quickly? First, we believe that third-tier ?white-box? PC makers and distributors are having difficulties buying PIIIs at the 550 megahertz speed grade. Intel is in the process of switching over from the more expensive single-edge cartridge package to the smaller, and cheaper, flip-chip package. There appear to be problems with the new package, which we believe is causing Intel to limit availability to less-favored customers. We do know that it has become extremely difficult to find the 500-megahertz parts on the spot market. The result has been a reduction in DRAM purchases on the spot market, as white-box makers and memory module makers limit their purchases until they see a return to better availability in the microprocessor market. Comments from Dell, Micron, and other sources also indicate that demand from the corporate PC market, which drives sales of machines with richer memory configurations, continues to be weak. Whether the weakness is driven by buyers waiting for Windows 2000 is hard to say, but there is no evidence that PC makers are moving to build DRAM stocks in anticipation of a Windows 2000-led pickup. Slow demand means that inventories build In the meantime, DRAM makers are reluctant to reduce operating rates on manufacturing processes that are working well, and the result is accumulating inventory. We think that Micron has between four and six weeks of inventory on hand at this point. We note that the company is increasing the percentage of wafer starts devoted to flash and SRAM from 5%-6% of production currently to 10% within the next few weeks. Moves like that will not be enough, however, to firm pricing up for the intermediate term. Investing in Micron requires focusing on the 12- month picture, though ? here the outlook is good Investors wondering what to do should keep the following points in mind. Real, sustained downturns in the DRAM markets have never been demand-led ? rather, they have been led by very high growth in available supply. Our just-revised model shows a decline in the rate of available DRAM supply growth from 90% - 95% range in the current quarter to less than 50% in Q4. Reductions of that magnitude in supply have almost always been accompanied by flat or moderately declining DRAM prices. The accompanying chart illustrates the point nicely ? the correlation between slowing rates of bit shipment growth and firming pricing is visible. If demand strength or weakness were the dominant factor in sustained pricing moves, the opposite would be true ? decelerating shipments would be accompanied by weakening pricing, and vice versa. Chart 1: Changes in Bit Shipment Growth and Price per Bit -100% -50% 0% 50% 100% 150% 1991 1992 1993 1994 1995 1996 1997 1998 1999E YoY Bit Growth YoY Change in Price/Bit Source: World Semiconductor Trade Statistics Slow pricing declines aren?t a bad thing Slow declines in DRAM pricing aren?t a bad thing. We think too much emphasis is given to the direction of pricing moves in DRAM ? it?s important to remember that 10% - 20% price declines aren?t bad if costs are falling in the 30% to 40% range, which is usually the case with DRAM . The last time that we saw a period of moderately declining DRAM prices was from 1992 to 1995 ? over that time period, Micron outperformed the market by a factor of 20."