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

To: Fabeyes who wrote (45672)	5/9/1999 10:40:00 AM
From: A. A. LaFountain III	Read Replies (1) \| Respond to of 53903

Re: "What happens if they continue to store more and more parts?" Inventory must be valued at the lower of cost or market. Therefore, unless a company has extremely compliant auditors (the kind that couldn't care less about having a lawsuit slapped on them by unhappy shareholders), it becomes necessary to recognize the diminished value of the parts being held. In other words, you can't inventory losses - either the parts get sold at a lower value or you still have to recognize them. I believe that this is why we tend to get such vicious moves on the downside in DRAM pricing. For whatever reason (like management believing that softness in the market is temporary), parts will be withheld. When it becomes apparent that the problem is not temporary, this inventory is dumped on the market and further exacerbates an already unappealing situation. After all, why not convert them into cash instead of just watching them lose value? For that reason, I tend to view pricing such as what the market is currently experiencing not as a leading or coincident indicator, but as a lagging indicator. I know that sounds weird, but past patterns have worked in this manner. In any event, this situation leads me to feel increasingly confident that we are approaching a bottom of systemic DRAM weakness. It could (and very well might) get really ugly for about three more months, but then we are likely to see the beginnings of a sustainable upturn. What makes this so interesting from an investment perspective (interesting like hearing your doctor discuss your illness) is that for Micron there exists little or no earnings support for the current stock price with the Dow at 11000. If the market stays high (or gets higher), maybe a suitable entry point for MU occurs higher than my current thinking (I guess it's fairly well known that I have a $30 12-month target, so with my rating approach, a Buy would occur at $25 when there would be 20% upside to the target). If, however, the market tanks for whatever reason, this stock probably goes through $25 like a rock, particularly if additional DRAM pricing pressure occurs through the end of the quarter and portfolio managers decide that exiting the quarter with one of the worst-performing stocks in the market in their portfolios doesn't make them look too good. That would probably turn out to be a wonderful buying opportunity. - Tad LaFountain

To: Fabeyes who wrote (45672)	5/9/1999 12:09:00 PM
From: Knighty Tin	Read Replies (1) \| Respond to of 53903

Fab, I was just commenting on the idea that the same units inventory gets priced at the new market price. If they add units to the pile, the number will grow. I expect that is what will happen. Applesauce is out making excuses right now for this quarter. "We are gaining market share." "The Koreans are rotten human beings." "Siemens is a bunch of louses." "The Japanese are dropping out." "Taiwanese? Never heard of them. Until the next lawsuit." "I can beat up the CEO of Rambus with one steroided arm behind my back." <g>