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To: DJBEINO who wrote (7147)	3/22/2000 12:30:00 AM
From: Czechsinthemail	Read Replies (1) \| Respond to of 9582

Morningstar commentary on Micron & DRAM market: Lower DRAM Prices Slam Micron Technology by Jeremy Lopez \| 07:26 PM \| 03-21-00 In a commodity business like memory-chip manufacturing, success is often a matter of feast or famine. Micron Technology's MU fiscal quarter ended this February was no exception to the rule. Micron is a classic example of what is known as a price-taker. The company is one of the largest suppliers of dynamic random access memory (DRAM) chips, which are most commonly known for their use in PCs. Largely a commodity in the semiconductor industry, DRAM makers like Micron Technology have a hard time turning a decent profit when DRAM prices are low--as the company experienced in its most recent quarter. Lower-than-expected DRAM prices and slack demand dramatically hurt Micron's profits in its fiscal second quarter. The company reported earnings of $0.58 per share for the quarter just ended in February, or more than 20% lower than First Call's consensus estimate on the quarter. The news wasn't all bad, however. The company alluded that demand picked up sharply at the end of the quarter, as more than 40% of its second-quarter shipments occurred in the month of February. Also, the company mentioned in its conference call that demand has since remained strong in the first few weeks of March. Chances are, the tide of low DRAM prices will also radically change over the next six months. Demand for DRAM is expected to ramp up in the latter part of the year, with major products like Microsoft Windows 2000 likely to boost the demand for PCs and servers. In addition, supply is shaping up to be very slim in the upcoming months because DRAM makers have been reluctant to spend money on expanding their production capabilities. As a result, a significant, industry-wide shortage of DRAM chips seems imminent, beginning in the second half of 2000. The combination of these two elements is likely to bode extremely well for Micron. Not only should DRAM pricing improve considerably as supply tightens, but the company is also one of the lowest-cost producers of DRAM chips in the industry. This means that Micron's margins could improve dramatically by the end of the year. But the possibility of improving DRAM prices does not mean investors should hastily jump on Micron's shares. Just like this past quarter, the direction of DRAM prices is very unpredictable. They could easily stay depressed for longer than the industry expects and come back to hurt Micron's profits again in the near future. Couple the unpredictability of DRAM prices with a trailing P/E north of 70, and Micron is one speculative investment at its current price. Even though Micron's stock has returned more than 50% so far in 2000, it could easily decline just as fast if the outlook for DRAM pricing changes. Investors might still be able to make a lot of money with Micron, but not without taking on a heap of volatility and risk.