I know resolutions and predictions are supposed to be made as the champagne is flowing on New Year's Eve. But here are some for Micron Technology (NASDAQ:MU) that are hopefully better late than never. Let's hope that Kipp Bedard, Micron's VP of Investor Relations, adopts some of the resolutions; I will go on the hook for the predictions.
- Micron is going to surpass the $3.50 in earnings per share for 2014 that Kipp Bedard guided in the hours before the SK Hynix (OTC:HXSCL) Wuxi fab fire. As of January 20th Yahoo has the consensus for the February quarter earnings estimates at $0.61 and the revenue estimates at $3.97 billion, both lower that last quarter. This is ridiculous with a restruck margin sharing agreement at Inotera, with the spot price for the 2Gb 1333Mhz DDR3 DRAM "reference" chip up better than 40% for the quarter, with the ongoing node shrinks at Micron and Elpida, and with the further integration of the Elpida acquisition. I think I will wait until we see the February results, and read the tea leaves of the many upcoming February conferences, to update a full year guesstimate from the $3.50 I advanced in the article cited above.
- RESOLVED: Micron will issue clearer earnings releases. On January 6 I urged Kipp to crib the ever-so-effective SanDisk (SNDK) releases, and he did. I am giving Kipp a Gold Star! And readers of my criticism of Micron's IR know those don't come easy. Now if we could just be a little clearer when a customer puts down a $250mm deposit. Does it apply to both DRAM and NAND? How about PoP (Package on Package) which includes DRAM with other technologies? Is it just for wafers, or for finished chips, or both? How about the Hybrid Memory Cube? Does it bear interest? Is it non-cancelable and non-refundable? What portion of Micron's DRAM capacity is obligated as "first dibs" under this deposit arrangement? When does it expire? Oh gotta read the 10Q to understand it expires in 2016; why not just include that information in the call? So whatever behemoth placed this deposit (Apple?) is not just nervous about memory availability this year, they foresee potential shortages for a good long while. It's different this time...
- Intel (NASDAQ:INTC) and Micron will continue to surprise the marketplace with joint announcements. Intel is looking to differentiate its offerings and so is Micron. The two companies can jointly benefit by delivering higher performance through improved and new memory interfaces. For instance, how will the Hybrid Memory Cube and 3D memories interface with the processor? Could each company tweak their offerings from the spec or at least be first to market with this functionality? I was nervous about SA's Russ Fischer's excellent articles on Intel jumping into the NAND market. It could still happen, but now that their giant Fab42 is mothballed and they are doing layoffs, perhaps we have a while.
- We will hear more from Seth Klarman's Baupost Group and David Einhorn's Greenlight Capital. Maybe we will see new value players taking stakes in Micron or our competitors. If Micron doesn't continue to clean up its communications, its shareholder governance and its director and executive compensation plans, perhaps we will see a 13D filing from an activist fund. If there is a misstep on execution we almost certainly will.
- We will see a dividend started or a share buyback begun. Alas, CFO Ron Foster is too in love with his convertible debt issues to ever actually buy back converts in a big way, as opposed to swapping old dilutive converts for new dilutive converts. While we are on predictions, I think we will hit some of the conversion parity levels contemplated in the new converts and they will indeed prove dilutive, Ron. Straight Debt, Ron, resolve to learn the term and issue some this year.
- Micron will make good on its promise to sample 3D NAND memory in the first quarter. The stock market will have a resulting flutter. Analysts will trip over themselves to compare Micron's offering with Samsung's (OTC:SSNLF) and to update timelines. Here is an excellent article on the state of things in 3D NAND.
- Many dire predictions have been written on what will happen to the DRAM market when Wuxi comes back on line. (And when will that be exactly, Hynix?) For subscribers to the doom and gloom scenario, look at what happened in Hard Disk Drives with the Thailand floods. You can bet that every participant in the DRAM market is studying that scenario and will run that same playbook.
Conclusion. On balance I see positives for Micron. I read all the analyst reports and SA articles I can to understand potential negatives. And while there are some, including an increasingly frothy overall market vis a vis general economic data, I think the balance is on the positive side. I don't think 2014 will repeat Micron's 2013 stock market performance but I think it will be very, very good for all memory companies including Micron.
Disclosure: I am long MU. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.