Here's an article the SA editors turned down saying it didn't add anything to the betterment of understanding on Micron or its competitors. Humbug!
As we Micron(NASDAQ:MU) shareholders thump ourselves on the back about our outstanding stockpicking abilities (this week anyway), we can give thanks this Thanksgiving that a bit of light is being shed on our company. But we should not forget that all of the memory companies are just dwarves playing amongst the toes of some very big giants. Bloomberg gives me the following company equity market capitalizations:
|Company||Market Cap, $ billions|
Look at that, all of Samsung's competitors in the memory space have a combined market cap of only about one third of Samsung's. And just for fun put all of the memory guys together with INTC and Samsung and that conglomeration has a smaller market cap than the largest memory buyer in the world, Apple.
Why do we care? I find it helpful to periodically look at rankings like this. Its interesting to see who is moving up in the rankings-- Micron! It can give an idea about how the industry is changing and is one way to take the temperature on whether more consolidation is likely.
With the massive scale of the two largest smartphone manufacturers, Apple and Samsung, is their supply chain hefty enough to grow with them? Bernstein's great stock analyst, Mark Newman, has suggested that Hynix is weakest in flash memory and points out that they have floated the idea that they would be interested in joint ventures. I have suggested that Sandisk/Toshiba are at a disadvantage going it alone in flash memory when all of their competition sells both DRAM and flash. And I've floated the idea that perhaps the largest memory buyer in the world, Apple, should buy the largest non-captive memory maker in the world, Micron. And our esteemed dean of semiconductor stock wizardry here on Seeking Alpha, the great Russ Fischer, has said that perhaps Intel needs to own Micron as memory packages get more complex, closer to the CPU, and even part of the CPU System on a Chip in some instances.
Conclusion. Our newest cheerleader, David Einhorn of Greenlight Capital, likes consolidating businesses. Commenters on some of the articles mentioned above have had a couple of problems with Micron being considered as a participant in a merger & consolidation dance: a) they think the market cap of Micron has moved up too much and/or they want it to move up more before an exit via a takeover, and b) antitrust regulators would never allow it. When you look at the relative rankings in the table above I think it answers both questions: Micron's size is tiny in the general scheme of things, and antitrust regulators should be worried about constructing a sizeable counterbalance to the Samsung behemoth.
Will more consolidation happen? I think so but couldn't tell you when.
Disclosure: I am long MU.