S.T.:
Your points seem to relate to a basic premise, that a new cycle is getting underway. I can find nothing to suggest that this might occur, but let's say that it does.
Do you or does any analyst think the company could make $2.00 per share (per annum) in the next year or two? Again, let's give the company the benefit of the doubt, and say sure it can. At $65. per share, that still leaves us with a 30 plus PE,..... awfully high for a commodity producer, but again, let's say OK.
With roughly 270.0 million shares outstanding (from memory), that means this company must earn over half a billion dollars in a year. Note; not revenues, EARNINGS. Now how much bottom line earnings do you think ANY company can make in a commodity product like 64 Mbit chips, currently selling for $10? Might they manage 1% to the bottom line? 2%? 5%? Let's be wild-eyed and grant them 10%. (impossible, but what the heck). (I won't even bring up the fact that MU's interest bill next year will exceed $100.0 million, never mind plug it into the following.)
Could memory chip prices rise by 20%? Not even possible from where I stand, but again, let's be generous and say sure it could. Now for some math. It's late, I'm tired, so throw cold water if I err, but it looks a bit like:
To earn that half a billion, $5.0 billion in revenues must be generated. Since the company did just over $2.8 billion last year, it must almost double sales. In this market, with PC sales in the tank? Not likely. Last year, the bottom line as a percent of sales was,........oops, no profits at all,....in fact, a loss of $571.0 million. So we are looking for over $1.0 billion in net bottom line "swing",....in a year? two years? NOT!
The whole semi industry did, what,.....$4.0 billion in Q4 (the big quarter). Micron did $409.0 million in memory products, that is ,...10% market share (thanks Tom). With even IDC calling for reduced PC UNIT sales in 1999, figure on,...let's be generous,...85 - 90 million units in 1999. Reduced PC sales won't make it easy for the whole memory industry to experience a significant rise in total revenues, so let's call it $15.0 billion during the year. Micron is going to garner $5.0 billion of this? Let's see,...that's 33%. So Micron is going to move from 10% to 33% in a year or two? NOT!
How many chips do you want to plug into each PC, remembering that over 50% are "bottom end" machines, and that there are next to no programs that can benefit from more than 32 m. on board. So we need, just for rough calculating,..... 85 million PCs times say 4 chips equals 340.0 million.@ $12 equals $4.0 billion. Not good enough so let's go back and DOUBLE UP the plug-in. Still only $8.0 billion. Sure there are lots of other uses for memory chips, but most go into PCs. In MU's case, over 70% goes into PCs. MU cannot rocket up from 10% of the market to a third, or to a half in a year or two.
Obviously, one can bend the "what ifs" to suit the case to be made, but the big fly in any exercise like this for MU is the mountain of issued paper out there.
I'm not trying to be a wise guy with the above. I hope that what might show up is that the technicolour dreaming of some analysts often omits the realism associated with a quarter billion shares issued.
Incidentally, feel free to play with this as you see fit. The exercise in so doing is both fun and educational, and I'd like to see what others visualize as realistic for this company.
Now if we took the scenario I EXPECT to occur,........(G)
Best, Earlie |
