Micron Associates: Micron can be a good deal under the right conditions
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Micron Associates: Micron can be a good deal under the right conditions

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Memory chip maker Micron Technology (NAS: MU) recently came out with fiscal third-quarter losses that were much wider than what analysts had expected. However, what's proved to be even more ...

Memory chip maker Micron Technology (NAS: MU) recently came out with fiscal third-quarter losses that were much wider than what analysts had expected. However, what's proved to be even more disappointing is the fact that Micron has made its biggest yet, fourth consecutive quarterly loss.
So what seems to be the real problem with Micron? Before we delve into the details, let's take a closer look at the numbers.

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Micron Associates: Micron can be a good deal under the right conditions Micron Associates: Micron can be a good deal under the right conditions Presentation Transcript

  • Free Powerpoint Templates Page 1
  • Memory chip maker Micron Technology (NAS: MU)recently came out with fiscal third-quarter losses that weremuch wider than what analysts had expected. However,whats proved to be even more disappointing is the fact thatMicron has made its biggest yet, fourth consecutivequarterly loss.So what seems to be the real problem with Micron? Beforewe delve into the details, lets take a closer look at thenumbers. Free Powerpoint Templates Page 2
  • Microns revenue increased 8% on a sequential basis,although it remained relatively flat from the prior-yearperiod. This was mainly because of a 20% sequentialincrease in revenue in the DRAM segment -- the result ofa combination of higher sales volumes and averageselling prices.Unfortunately, on the other hand, Micron incurred a lossamounting to $320 million, as part of a series of quarterlylosses mainly caused by the prevailing softness in theflash memory market. Revenue from the companysNAND segment remained largely flat, despite a whopping40% increase in sales volumes, mainly because of weakmarket prices. Free Powerpoint Templates Page 3
  • However, one can take heart from the fact that theseproblems are not specific to Micron, as its peers in theNAND industry have also been having a hard time oflate. For instance, flash memory king SanDisks (NAS:SNDK) net income declined almost 50% as compared tothe prior-year period because of weak market prices. Free Powerpoint Templates Page 4
  • Demand in the DRAM space is beginning to show somesigns of bottoming out. Plus, a further boost in the DRAMsegment should occur when Microsoft releases itsnewest Windows 8 operating system, which in turn,should stimulate demand from Microns OEM customers,namely Intel and Hewlett-Packard. Free Powerpoint Templates Page 5
  • Micron is also in the process of taking over the bankruptJapanese DRAM manufacturer Elpida Memory. If thecompany is successful, this would double Micronsmarket share in the DRAM space and should somewhatreduce competition as well. Nevertheless, the positiveeffect of this development remains to be seen. Free Powerpoint Templates Page 6
  • But the company has its share of concerns, too. TheNOR flash space is witnessing tough times. According toa TechNavio analyst forecast, the global NOR flashmarket will decline at a CAGR of -5% from 2011 through2014 mainly because of a decline in average sellingprices. However, the increasing demand for NOR chipscould be a long-term positive in this direction. Free Powerpoint Templates Page 7
  • The NAND flash space is also passing through aturbulent phase, and Micron could see this segment ofits business take a hit in the coming months. This isbecause NAND flash memory chips, used in mobiledevices and solid-state drives, or SSDs, have beenfacing weak demand, coupled with oversupply issues oflate. Free Powerpoint Templates Page 8
  • Micron is currently trading at a price-to-book ratio of just0.7, which at first makes it seem attractive. However, Idprefer to watch from the sidelines until Micron startsputting some cash on the table. The companysacquisition of Elpida could work in its favor in the longrun, provided there is a significant improvement in theDRAM space. Free Powerpoint Templates Page 9
  • But, if you are not too enthused about Microns possiblerecovery, you can check out this special free reportcalled "The Motley Fools Top Stock for 2012". Thereport wont be there forever, so click here to get it whileits still available. Free Powerpoint Templates Page 10