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

To: Thomas G. Busillo who wrote (44001)	3/18/1999 9:14:00 PM
From: Skeeter Bug	Read Replies (6) \| Respond to of 53903

tom engebous (txn ceo) - "I'm definitely happier being a DRAM stock investor than being in the business." ------------------------------ Semiconductor Business News, © 1999, CMP Media Inc. March 15, 1999 By J. Robert Lineback DALLAS -- After racking up tremendous losses over the years in the memory business, Texas Instruments Inc. may, ironically, end up making money in DRAMs. It won't come from selling chips, but from selling stock. At some point between the end of March and the peak of the next DRAM business cycle - whenever that is - TI plans to unload the 41 million shares of Micron Technology Inc. common stock that it received in payment for its memory business last fall. If its timing is right, the Dallas company could end up making more money from the sale of the stock than it had lost in DRAMs over the past 17 years, acknowledges CEO Tom Engibous. "We could cover those total losses and then some," he says. "I'm definitely happier being a DRAM stock investor than being in the business." When TI completed the deal with Micron on Sept. 30, 1998, it received 28.9 million shares of common stock and $740 million in notes that are convertible to an additional 12.3 million shares. The stock, which was selling for just over $30 a share at the time, has nearly doubled in price since then. Engibous will not say how much money TI lost in the DRAM business during the '80s and '90s. But he does admit that "the total was huge and a surprise to us when we sat down and totaled [it all up]." Wall Street analysts and other industry sources, however, estimate that the company's loss from DRAMs between 1982 and 1998 amounted to more than $1.5 billion. TI now aims to make at least a $2 billion (that's "B" as in boy!) profit from its 41 million shares of Micron stock, according to these sources. The chip maker could have realized that kind of profit if it had sold the stock on Feb. 4 when Micron hit a 52-week high of nearly $81 a share. But it can't sell the stock until March 31, the end of a six-month waiting period. As of mid-March, however, TI's profit from the stock sale would have been cut in half since the price of Micron's stock had slipped by about $25 a share. But TI executives figure that the price will bounce up again when the DRAM market begins a long-awaited recovery, which they say could happen anytime in the next nine months. "We believe in the 'sine wave theory' in the DRAM business, and this marketplace is poised for another up cycle," maintains William (Bill) A. Aylesworth, TI's chief financial officer and senior vice president. Speaking at an analysts' briefing in early March, he commented that DRAM up cycles run historically from two to three years and it's during that time that TI wants to "commoditize" the Micron stock. TI managers figure they should be able to pick the right moment to sell, because the company has learned a lot about the volatile memory business during the time that it was a player in this marketplace. "We still know a lot about this business," Engibous declares. "We know the size of Micron's die, and we know they are going to be the low-cost leader. We [also] know everyone else's die sizes, and we have a pretty good handle on their costs as well." While Wall Street analysts acknowledge that TI may know as much about the DRAM market as anyone, they aren't so sure that the chip maker can play the stock market any better than other major investors. "All I can say to them is 'Good luck,'" responds A.A. (Tad) LaFountain, principal semiconductor analyst at Needham & Co. in New York. "In the technology area," he says, "the worst thing that can happen to a stock is for a company to start generating earnings because people will actually calculate a PE [price-to-earnings ratio]. That's not been an issue with Micron," he adds. The Boise, Idaho-based Micron has no PE ratio now, simply because it has no earnings, piling up losses during the DRAM slump last year. However, its stock has been rising since last fall because investors believe the company is well positioned to grab market share and big profits in any DRAM recovery. Part of the reason for predicting such gains is that Micron is now a much larger DRAM producer thanks to its acquisition of TI's global DRAM business. But financial analysts are quick to point out that the price of Micron's stock could just as easily move in the opposite direction, upsetting the best laid plans of TI, if the DRAM maker fails to meet or even exceed Wall Street's consensus forecast. So everyone is watching closely. Comments Needham's LaFountain: "It will be very interesting to see if TI can get the its money out of the stock."