Midnight Rambler -
You wrote:
<<
That's interesting, because in a financial conference call with Micron, they reported that DRAM demand was very high right now. Of course, their words don't agree with their actions (ie. another price drop), but it just shows nobody really knows the exact state of the industry right now. >>
and also:
<<
...their situation is somewhat different now, as I noted before, sales right now are fairly strong (per their conference with analysts). Just look at their stock price if you need proof - up over $5 per share yesterday ... >>
Micron's own price-slashing actions do, indeed, belie the notion that "DRAM demand was [is] very high" and apparently Micron's words are not seducing analysts,
ALL of whom forecast
reduced revenues and earnings for Micron. The "demand" Micron speaks about is what's been created by its own price-slashing policies
at a cost to its bottom line...and just
who's buying SDRAM is a next question: PC makers (already 'stocked up' but some of whom might be attracted to stock more at these price levels) or John Q. Public (like the Anandtechies)?
But regardless who's buying, if sales are "currently strong" it would be based only on "megabits sold" rather than "dollars earned." Micron is still clearing out manufactured inventory that had gone unsold because PC sales were down at the end of 2000 and PC Makers had been stocked with SDRAM since September (Kocher said back on 12/20/00 that it would take "at least a quarter" to correct its inventory situation). The stock price is rising not because Micron's "sales right now are fairly strong," but rather because 1) the price of a share of stock had already plummeted
almost 75% (!) from mid-2000 highs of $97.50
(see Chart) and 2) multiple brokerage firms have just recently begun recommending purchase of the stock, this despite their common reduced revenue and earnings forecasts. The current rising price of the stock reflects a "value opportunity" after the severe crash in stock-price and in a context that Micron can be expected possibly to gain some new market share with its early and aggressive price-cutting measures. Just as sharply-lower-priced SDRAM creates "new demand," so, too, does a sharply-reduced price of a share of stock. Nothing much has changed business-climate-wise from two months ago beyond
some degree of reduction of both Micron's and PC Makers' SDRAM inventories, which degree no one knows for sure (see below
^^^ for perspective), but which reduction analysts seem to believe that Micron, an industry leader, can accomplish at least as well or at lower cost than its competitors in the same situation.
Here are three recent analysts' recommendations to "HOLD," "BUY," "Strong Buy" Micron Technology stock, despite their mutually agreed reduced revenue and earnings estimates for 2001:
02/13 USB Warburg:
"HOLD" ("...slashed its revenue and earnings estimates through 2002 for Micron Technology, citing further declines in DRAM pricing, the company's shrinking capital plan and ongoing softness in PC-related markets..."There is long-term value in the stock, as we believe that Micron is a cost and technology leader."
02/06 Merrill Lynch:
"BUY" ("...Merrill Lynch took a sizable chunk off its earnings and revenue estimates for Micron Technology (MU:NYSE - news) today, citing the company's backed-up inventory...Micron, a maker of memory chips, has "nearly a quarter's worth of inventory that it needs to take off its balance sheet." Osha also said the company "appears to be offering 128 megabit memories for $4.50 to $4.80," which he said represents "an abrupt decline" from the "mid-$5.00 levels" present in the market.
01/19 Prudential Securities:
"STRONG BUY from ACCUMULATE" )"...raised its rating for Micron Technology...saying that low cost structures would increase the company's market share"
=======================
^^^
Robbie Stephens Conference: Micron Says Some PC Makers Working Through Memory Glut
By Tish Williams, Senior Writer,
2/12/01 6:27 PM ET
<<
SAN FRANCISCO -- Micron Technology (MU:NYSE - news) is offering Evian to the drowning.
Presenting at the Robertson Stephens Tech 2001 Conference Monday, manager of investor relations David Parker held out an incentive for PC manufacturers swimming in Micron's memory chips. It seems that with six to 10 weeks of memory inventory on hand at PC makers, DRAM to be specific, prices are rock bottom.
PC players are going to love this, if they can clear out their windpipes.
A well-hydrated Parker explained that the price for memory has fallen about 40% as PC makers sandbag their leaking empires -- the same 64 megabytes of memory that cost $5 now can be had for $3. Some direct-sales model PC players have already managed to wade through excess memory up and begin to reap the benefits of consuming the new, low-cost memory. Now Micron is just rooting for the rest of the gurgling field to right themselves and do the same. "Inventory builds have most likely leveled off," he said. "We have heard from our major competitors that inventory levels are less."
Which means it's time to break out the refreshments and celebrate. Micron expects PC shipments will grow 10% to 12% this year, compared with estimates of 12% to 15% increases. And he'd like to put a cold, refreshing glass of nature's goodness to each bluish pair of PC lips out there
... >>