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

To: Dave Gahm who wrote (41791)	12/31/1998 10:53:00 AM
From: SlowThinker	Read Replies (2) \| Respond to of 53903

Note from Michael Murphy on Micron: cbs.marketwatch.com (I apologize if this was already posted earlier this week.) --------------------------------------- For money committed to the stock market, Murphy says mutual fund investors should think about conservative growth and income funds, equity income funds and utility funds. When it comes to individual stocks, he says the consumer staples like Proctor and Gamble (PG), Clorox (CLX), Colgate-Palmolive (CL) and Philip Morris (MO) are all candidates to check out, as are the drug stocks, like Pfizer. If you've just got to have some technology, he says go with Ascend Communications (ASND), Compaq Computers (CPQ), Dell Computers (DELL), Micron Technology (MU) or Apple (AAPL). "Micron has been in a basing pattern for about 2 years," says Murphy, "It recently set a 52 week high. It's backing off here a little bit, but if it can break through, and we think it will, we could see it move up to 90." ---------------------------------------

To: Dave Gahm who wrote (41791)	12/31/1998 11:08:00 AM
From: SlowThinker	Respond to of 53903

Good point, Dave--I believe that it remains to be seen (1) whether Micron has enough market power to affect the market to the extent where they cause more damage to prices than they are able to make up in costs and (2) whether they can do it in the face of the tremendous growth that market watcher firms are projecting for the next few years for DRAM (I quoted from these sources in my earlier post about increases the next few years for baseline DRAM in PC's.) Micron's management isn't dumb, and they are not likely at this stage in their growth to go out and start a price war that will hurt them more than their competition. My thinking based (as described in the earlier post) is that the capital investments Micron is making, combined with aggressive die shrinks, will allow them to still make money selling DRAM at prices that cause red ink to flow for most manufacturers in South Korea and Japan. I don't underestimate Japanese and South Korean competition, but if they aren't making the long-term requisite investments necessary to stay cutting edge in terms of process technology, then I have a hard time _not_ giving the cost advantage to Micron. Could they turn the investment spigot back on sometime soon? Sure, they could. But the results coming off the fab line don't ramp up instantly--it takes time to source production equipment and get the fab lines going. A question worth asking here is, "What is their (South Korean and Japanese) motivation for jumping back into the DRAM game with both feet?" I'm seeing more reason here for them to not do it than to do it (although I'll be the first to admit that it's not a black and white case.) Happy New Year, Dave--good luck in 1999. SlowThinker >What you have failed to address is the "Achilles heel" of that cost reduction strategy, namely the impact of all that cost reduction (increased bit production)on the market price of DRAM. When MU had 4% of the DRAM market, they could rapidly ramp production without a big impact on the market, but as they have grown their increased output has played a larger role in driving prices down. I think most objective observers, and certainly the Asian producers, will testify that MU's strategy has been instrumental in the collapse of pricing.