Please keep in mind that I invest in LEAPS (Long Term Equity Anticipation Securities - options more than a year out) which rise and fall much more quickly than the stock. I look for news that will move the stock a little and therefore move the LEAPS a lot. This involves looking short term and long term at the same time and trying to understand how the market will react to news (short term and long term).
Any announcement that Intel (NASDAQ:INTC) makes about putting more memory inside its processors is likely to make Intel's stock price rise (LEAPS go up a lot) and Micron's (NASDAQ:MU) stock price decline (LEAPS go down a lot).
The potential news and possible stock actions are not a sure thing, however, the potential news could have a significant impact on Micron stock (negative) and Intel stock (positive).
For many years Intel and Micron have been working together to produce processors and memory for computing needs. In some ways Intel is the main breadwinner and supports Micron. There are many examples of this including Intel support for Micron in the purchase of Elpida, Intel providing the facility for the Intel/Micron joint venture to produce NAND memory, Intel providing the technology for cramming more memory into a smaller space...
The Micron Press Releases internet page includes many references to Intel including: "Micron Collaborates With Intel to Enhance Knights Landing With a High Performance, On-Package Memory Solution, June 23, 2014" and "Micron Technology Announces DDR4 Modules Designed for Future Intel Xeon Processor E5-2600 v3 Product Family-Based Systems, April 2, 2014." In addition many of the other press releases involve technology provided in part by Intel. There are more references to Intel than any other collaborator.
Last week in the 2014 Micron Analyst Day Presentation, CEO Mark Durcan clearly stated that Micron relies heavily on Intel for research capital expenditures related to emerging memory solutions.
Intel and Micron will continue to collaborate to provide processors and memory, respectively, for the future of computing.
At the same Analyst Day Presentation Mark Durcan stated (2:45 in the presentation) that he is a big believer in the memory/processing convergence (he has even coined a term for it). Then he said that because he is in the memory business... and because he thinks it is true... he believes that this convergence will be memory-centric as the Internet of Things develops. Micron will continue to work on memory with processing embedded into the memory (e.g., Automata).
"There will be some level of increased memory on-board processors" (not SRAM)... but (according to Mark) "the bigger emphasis will be adding processing to memory chips."
Reading between the lines these and other statements make me think that Intel will be making an announcement soon related to adding more memory into processors. I don't think Mark would be talking so openly about memory on processor unless Intel was about ready to announce something.
The two Intel presentations this week: "Pacific Crest Conference" and "Advancing Moore's Law in 2014" provided some ground work for such an announcement. Remember that Gordon Moore (Moore's Law) was one of the founders of Intel... "the number of transistors in a dense integrated circuit doubles approximately every two years" (1975 version). This time Intel also significantly reduced the heat generated - SoC only generates 3-5 watts.
Please see my previous article for additional information on Intel memory on processor.
Internet of Things
Just as Micron and Intel worked together to provide memory and processors for personal computing to supercomputers, it appears they will continue to work together to provide the memory and processors needed for the Internet of Things (IoT). Intel has made a huge push toward establishing communication standards for the IoT and toward being a big player in mobile computing (especially the communication side of mobile). Intel will continue to push toward being the top to bottom platform for IoT.
Micron, according to Mark Durcan, will provide the memory centric side of the IoT by adding processing to memory. Intel will provide the processor centric side of IoT by adding more memory to processors. There will be plenty of room for both and plenty of profit in both.
Micron to do Well, Intel to do Great
In my opinion there is a significant risk to Micron associated with a likely Intel announcement regarding adding more memory to its 14nm processor to significantly reduce or eliminate the discrete memory needed. There will likely be a market reaction - nothing to do with fundamentals that will remain solid. How much reaction is a function of how the news is presented and what other news happens at the same time. Long term I think Micron will do fine because I do think that the Internet of Things will require a lot of memory centric products that will maintain Micron profitability.
I see Mark's comments on this subject as his attempt to soften the blow that the Micron stock price will likely see when a memory on processor announcement is made by Intel. I fully expect that Intel will temper its announcement of processors with more memory with a similar statement about an ongoing need for memory with processing in the future (more Micron) as well as the bright future for processors with more memory (more Intel).
Technical buzz regarding more memory on processors has been around for years. Based on the recently increased buzz among analysts, it appears that Intel is close to the point of making an announcement regarding more memory on the 14nm processor. Russ Fischer and Stephen Breezy on Seeking Alpha have both recently expanded on how the 14nm processor makes adding memory uniquely feasible. They have also made statements regarding the impact that such an announcement will likely have on Micron and Intel stock.
During the Micron Analyst Day Q&A I was surprised to hear that analysts were knowledgeable about adding more memory to processors and that Micron was prepared to make pre-emptive statements regarding the impact of the memory/processor convergence.
In one of his comments William Tidwell summed it up: "I like the MU LEAPS - but I'm not in them right now because INTC looks a lot better."
Micron stock price may go down in the short term with announcements related to memory in processor (market reaction). In the long term Micron will do fine. Intel stock price will rise in the short term (market reaction) and in the long term Intel will be great.
Disclosure: The author is long INTC. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: I use LEAPS as an investment vehicle which are inherently more risky than stock with possible loss of the entire investment. The potential profits are also much greater than with stocks.