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To: The Ox who wrote (13861)	9/6/2000 9:22:58 AM
From: The Ox	Respond to of 14427

More on MU: INSIDE THE NUMBERS By Donn Vickrey, PhD, CPA Insiders Unload Shares at Micron as Troubles Begin to Brew in the Chip Sector September 5, 2000 Insiders at Micron Technology (MU ) unloaded a record number of shares in June and July, signaling that the highflying chipmaker may be running out of steam. During this period, Micron insiders sold a record 16.5 million shares worth over $1.3 billion. After leading the NASDAQ to a 32% return since Memorial Day, chip stocks have recently shown signs of weakness. The Philadelphia Semiconductor (SOX) index - a key measure of semiconductor and semiconductor equipment stock price movement - has been down five out of the last six sessions. And the competitive environment has turned downright ugly, with both Micron and Hyundai filing suit against chip-memory supplier Rambus Inc. (RMBS ). Court documents filed by Micron claim that "Rambus subverted the open standards process so that it could gain monopoly control of the Synchronous DRAM technology and Synchronous DRAM markets." On the other hand, Rambus makes the argument that the open standards process is voluntary, and that it has the right to opt out – that is develop and patent its own proprietary technologies that can be sold at a premium. Regardless of the ultimate outcome, the prospect of a long court battle can do nothing but harm to the semiconductor industry. If Rambus wins, it could signal a decline in the open standards process that has helped fuel innovation in the technology sector. But, a Micron win would be a blow to the value of intellectual property, which could also act as a deterrent to future innovation in the chip industry. Suffice it to say that the chip industry has benefited from an environment of cooperation and mutual respect of intellectual property. If this delicate balance is disturbed, industry growth and profits will suffer. Another potential problem for Micron investors is the prospect for a negative earnings surprise when the company announces earnings in early-October. Analysts have been ratcheting up their 4th quarter earnings expectations over the past several months. Just 90 days ago, the consensus estimate was $0.59 per share. Now the consensus per share estimate stands at $0.93. Unfortunately, Micron has not been particularly good at managing analysts’ earnings expectations, as evidenced by a -27% earnings surprise in the second quarter of fiscal 2000. Last time Micron missed the mark, the stock dropped 12% on the day of the earnings announcement. Despite the large drop in the price of Micron shares, there was a subtle warning sign that preceded the negative earnings surprise – the company reduced its inventories by 17% during the prior quarter in anticipation of a slowdown. Investors should take caution in the fact that Micron again reduced inventories during the fiscal 3rd quarter. This time, the reduction was only 7%. But, given the downturn in the SOX index and the change in the competitive environment, it may be time for investors to take a cue from insiders and reduce their Micron holdings prior to the October earnings announcement. Dr. Donn Vickrey is an Associate Professor of Accounting at the University of San Diego and Executive Vice President at Camelback Research Alliance (a Scottsdale, AZ research firm). As one of the country’s leading experts on forensic accounting, he serves as a weekly contributor to InsiderSCORES.com.