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

To: topdwn who wrote (36099)	7/10/1998 12:24:00 AM
From: Chas	Read Replies (2) \| Respond to of 53903

This report from Montgomery provides some insight on the DRAM tightness and strong demand for PC100 providing some positive news for Microns stock. I have been sitting on 40 25 July calls for some time maybe a good gain is finally here up 1 5/8 from my buy price. I may roll the profit into some further out calls if the strength continues. A pure guess sure would seem MU could reach 30-35 by year end. This potential stabilization of DRAM maybe helping set the bottom here for these guys and with continued cutbacks maybe by year end the demand/supply will be in more of a balance than what it is currently. Hope this helps- ------------------ NATIONSBANC MONTGOMERY*NATIONSBANC MONTGOMERYNATIONSBANC MONTGOMERY MICRON TECHNOLOGY, INC. RATING: BUY July 9, 1998 SEMICONDUCTORS NYSE: MU Jonathan Joseph, CFA (415) 627-2925 First Call Claude Hazan (415) 627-2845 DJIA: 9174 S&P 500: 1166 NMSGI: 127 PRICE: $27-1/4 FY ENDS 8/30 1997 1998E 1999E 52-WEEK RANGE: $60-20 FULLY DILUTED SHARES O/S: 212.3 MM Q1 (NOV) $0.10# $0.04 ($0.22) MARKET CAPITALIZATION: $5,785 MM Q2 (FEB) 0.18## (0.23) (0.05) AVG. DAILY VOL. (3 MOS.): 3,270,246 Q3 (MAY) 0.44 (0.50) 0.11 SECULAR EPS GROWTH: 15% Q4 (AUG) 0.33 (0.50) 0.31 CY98E REVENUES: $3,040 MM FISCAL YEAR $1.05 $(1.17) $0.17 MARKET CAP./REVENUES: 190% P/E 26.0 NM N/M 5/98 LT DEBT: $718 MM P/E/G 173% NM N/M 5/98 LTD/TOTAL CAP.: 21% CALENDAR YEAR $1.00 $(1.44) $0.73 5/98 ROAE: -2% P/E 27.3 NM 37.3 5/98 SHAREHOLDERS' EQ.: $2,774 MM P/E/G 182% NM 249% 5/98 BOOK VALUE/SHARE: $13.07 DIVIDEND/YIELD: $0.20/0.89% # Not including one-time gain of $0.03. ## Not including one-time gain of $0.48 (MUEI shares) * NationsBanc Montgomery Securities LLC was manager or co-manager of a public offering and/or has performed investment banking or other services for this company in the last three years. Survey of DRAM Vendors Positive We spoke this morning with three large DRAM vendors and found all of them telling the same story: demand in recent weeks has picked up, which could result in flat contract prices going forward, a plus for the DRAM industry specifically and Micron Tech in particular. All the companies recorded a pickup in June. One top Korean firm was 15% above June's plan and substantially above May's. On a unit basis, June was its best month ever by a wide margin. The company entered July with orders still on the books, for the first time in three years. Another Korean firm recorded a 30% unit increase in June over May. And a top U.S. firm just yesterday got two huge orders from large OEMs that were 2x the amount of product they shipped to these top-tier companies in the second quarter. Most of this strength is in the U.S. market. The top and bottom of the DRAM market seems to be tightening. We have gotten numerous reports over the last week that PC-100, 100MHz 64Mbs have inched up in price in the spot market from a dead low of $7.50 to around $9.50. This is partly because of higher shipments of Pentium II 300MHz and above, but also because many DRAM firms are not yet able to manufacture the PC-100 standard in volume. Micron claims greater than 70% of its current wafer starts are PC-100 complaint. In addition, the low end of the market has firmed up as stronger Workstation and Server demand has called for EDO 64Mbs. At the margin, we see this strong pickup in unit demand as a plus for the whole industry. It supports our thesis that the PC market will improve in the second half, which is necessary to absorb excess DRAM capacity. One broker went out with the call this morning that Samsung would soon raise prices. Rather than raise prices, we believe the impact will be for firmer, and flatter prices for DRAMs in coming months, a plus for all players though not a prelude to a dramatic turnaround in profits. The U.S. International Trade Commission recently pushed out by two months its announcement of final tariffs on LG Semi and Hyundai for dumping DRAMs in the U.S. from March 1996-97. There is still speculation tariffs may be accompanied by retroactive penalties. Industry buzz is betting Hyundai gets off easy, but that LG Semi (which may merge with Samsung) will be stung hard.