Investopedia: The Craziness Is Well Underway Again At Micron

As someone who has almost always had a semiconductor stock in his portfolio, I can tell you that you have to a have a loose screw or two to like this sector. But the memory chip space is a completely different wing of the semiconductor asylum, one where the peak-to-trough cyclicality is truly impressive and where long-term economic returns are difficult to earn.

That has led to a pretty “challenged” existence for Micron (NYSE:MU), and a stock that has been all over the map. With the industry consolidating down to just four major suppliers, though, the thought now is that the players will operate on a more rational basis and allow each other to actually book some respectable earnings and cash flow. While I think Micron's shares have room left to run on investor enthusiasm, it's tough to outline a fundamental case where the stock is significantly undervalued for the long term.

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Investopedia: Is Micron A Call Option On Consumer Electronics?

Once again Micron (Nasdaq:MU) has disappointed investors relative to expectations, but that may not really be all that important anymore. The biggest question is whether the memory space has dug out its trough for this cycle or is about to do so soon. For all of the consumer electronics headwinds, the fact remains that Micron is still one of the stronger players, and demand will rebound eventually. Although Micron is really not a good candidate for buy-and-hold, it may have value as an expiration-free call option on a broader sector recovery. (To learn more, check out Options Basics.)

Do Poor Results Matter?  
Micron posted results that are frankly not very impressive and once again missed average expectations (making it three in a row). Revenue fell 7% from the year-ago level and about 2% from the prior quarter. It wasn't all bad news, though. DRAM revenue was basically flat (as double-digit increases in volume offset double-digit decreases in price), but NAND flash product revenue rose about 6% from the fourth quarter.

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Investopedia: How Did Intel Do This?

The word "surprise" is a given whenever it's time to talk about earnings season, but Intel (Nasdaq:INTC) went above and beyond this quarter. Is Intel's robust growth, in spite of sluggish shipment data from leading PC makers, a sign that U.S. computer companies are more significant than ever before, is it a sign that Intel is gaining shares or is it a sign that dangerous levels of inventory may be building up in the channel? While Intel looks too cheap, no matter what the answer may be, the degree of volatility in this stock may hinge on the answer.

A Surprising Third Quarter  

To be fair, it's not as though Intel left the Street thunderstruck; revenue rose 28% from last year (and almost 9% from last quarter), and that was about 2% higher than the average analyst estimate. PC Group's revenue rose almost 22% this quarter with strong double-digit sequential growth in the notebook unit. The server group was no slouch either, with 15% growth, and the company's acquisitions of McAfee and Infineon's wireless business seem to be paying off.

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Investopedia: Micron's Persistence Of Memory

Like the famous Dali painting, Micron (NYSE:MU) shares are looking droopy and melted these days. While the company has made meaningful strides over the past decade in becoming a more efficient and less commodity-focused memory chip company, the reality is that it is still operating in a brutally cyclical market niche and this is a downward cycle. All of this sets up as a good news/bad news story for investors - Micron is a poor candidate for long-term buy-and-hold investors, but today's valuation could be appealing for value and turnaround investors.

A Tough End to the Year 
Although Micron disappointed vis-à-vis a lot of analysts' expectations, the reality is that this is widely expected to be a washout quarter and underperformance in that sort of environment is not quite so troubling.

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http://stocks.investopedia.com/stock-analysis/2011/Microns-Persistence-Of-Memory-MU-HPQ-DELL-SNDK-RIMM-NOK-RMBS1004.aspx

Investopedia: Is Micron Bull Bait Or A Value Trap?

Looking at Micron's (NYSE:MU) results from Thursday evening, it is pretty clear that the chip market is not healthy. With memory chips filling such a fundamental role in so many devices, it does not seem out of line to say that "as goes memory, so goes chips." While memory has always been a volatile sector, there was not much in the Micron release to suggest that a big turnaround is on the way soon. And yet, with the stock trading at such an unchallenging multiple, it is worth asking if Micron is nevertheless a value today.


A Ragged Fiscal Third Quarter  
There was not much in the way of good news in Micron's fiscal third quarter report. Revenue fell 5% on a sequential basis and 7% from last year's level. In truth, there wasn't much strength anywhere. NAND sales fell 5% sequentially (with ASPs down about 5%) and DRAM sales dropped 7% despite a small uptick in price. In terms of operating units, Embedded Solutions and Wireless Solutions were strongest, which is not altogether surprising given the relatively better market for chips in automotive, industrial, server and mobile applications.

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Investopedia: Double Trouble For Seagate Technology

Even in the best of times, the disk drive business has been fiercely competitive and prone to brutal cyclicality. While Seagate (NYSE:STX) has survived long enough to be a leading player in disk drives, the company's future is still under assault. In the short-term, there are ample worries about whether the PC market will have a decent 2011 and survive the inroads made by alternatives like tablets and phones from Apple (Nasdaq:AAPL), Dell (Nasdaq:DELL), Samsung and Research In Motion (Nasdaq:RIMM). Longer term, there is the question of whether conversion to solid state drives will supplant the core of Seagate's business entirely. 

The Quarter That WasFor the here and now, Seagate is posting mediocre performance. The company's fiscal second quarter met consensus and was in line with a prior preannouncement. What's more, this cyclical malaise really did not surprise anybody all that much.

Consequently, there is not so much concern that revenue rose 1% sequentially, but fell 10% from last year's level. Gross margin was a bit more of a concern, though, as the performance was relatively feeble (gross margin declined 1,100 basis points from last year's level). Likewise, operating income was weak, falling by 64% on a year-over-year basis.  

All in all, Seagate's performance was hurt not only by a general slowdown in PCs, but a decision not to compete on price in certain markets. As a result, unit volume declined and the company had less operating efficiency. One small bright spot was the company's non-computer business, where there was some volume strength in drives for applications like DVRs and gaming consoles. 

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Micron Enjoying A Break In The Clouds

How do you evaluate a nice property in a very tough neighborhood? That is the ever-present challenge for investors considering American memory chip maker Micron (NYSE:MU). 

As investors have seen over and over again, no company can overpower the strong cyclical currents in the commodity chip market for very long. The key, then, lies in anticipating the changing tides and abandoning a classical "buy and hold" strategy in favor of "buy, sell, and maybe buy again later". 


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