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

To: Ed Beers who wrote (25544)	12/16/1997 4:18:00 PM
From: mike iles	Read Replies (1) \| Respond to of 53903

Ed, Agree with most of what you said about SDRAM ... they said it's been about 70% of wafer starts for the last 2 months and they plan to keep ramping it for at least a few more quarters. Also heard them say they reduced finished goods inventory (BTW they really increased work-in-process because overall inventory in the semi business moved up by $12M to $351M), and Baldwin said, as an example, that 16 Mbit units in finished inventory were reduced by 25% from the end of August. Also, although bit production in the Q was only up 6%, this is a measure of bits going into finished inventory. Actual shipments out of inventory, i.e. sales (these guys like to make things complicated), increased by about 21%. So I think you're right. Despite the bottleneck in testing SDRAM, they managed to keep unit sales growth at a pretty good level by reducing their EDO inventory. Ironically, Appleton complained about the Koreans reducing inventory in order to get $U.S. What the heck was he doing it for? So the part to focus on is 16 Mbit SDRAM going forward ... might as well forget about EDO ... DavidG was more right about this than I gave him credit for (although a wee bit shy of the mark in other matters ... er costs for e.g.) Where I part company from you a bit is pricing for SDRAM. From Baldwin's (I think it was him) comments, I got the impression that they had been selling SDRAM on a contract basis at $3.50. However, he said as they renegotiate those contracts pricing will move down to reflect current spot market pricing which is in the $2.50-$3.00 range. So $3.50 for SDRAM sounds like history. BTW, the difference between contract and spot is largely artificial ... I think they do it to confuse the analysts ... Baldwin said they renegotiate most contracts on a weekly basis, some on a daily basis. What's the diff between spot and contract if you renegotiate prices daily? Another MU red herring. While SDRAM is temporarily trading at a premium to EDO this will become moot as everybody switches over to SDRAM as MU is doing. They were asked on the call how much of a premium they get to EDO and the answer was it's hard to say (Baldwin again) because most contract customers are only buying SDRAM. But then he said that compared to spot (which must mean EDO) they are getting a 10-20% premium. I've only seen one analyst's report since the call, Dan Niles. He had been estimating .06 for Q1, a loss of .10 for this quarter, breakeven for Q3 and a profit for Q4 of .14 ... giving a grand total of 10 cents for the year. Now he's forecasting a loss of .23 for this quarter, another loss of .12 in Q3 and a 1 cent profit in Q4. And this is based on extremely optimistic pricing assumptions, i.e. a 31% decline in ASP this quarter (which would bring it down to $3.37 from last Q's $4.88) and then prices level out for the next 2 quarters (eh? not sure why the world suddenly stabilizes for 2 quarters). Under this scenario he can get MU to essentially breakeven by Q4. Hallelujah and pass the peanut butter!! No wonder he downgraded it from BUY to Market Perform ... Basically, as the grim reality of the current supply/demand situation sinks in and people start to realize that these guys sure as heck ain't making money now and the day that they will start making it is quickly receding into the future, the stock will erode. regards, Mike