Micron Technology: Given Future Potential, Patience Is A Virtue
Smart Value Investor • 69 Comments
Smart Value Investor • 69 Comments
Dec. 14, 2015, 5:18 AM
- Micron Technology (NASDAQ:MU) has agreed to buy all the shares it doesn't already own in Inotera Memories, in a deal valued at $3.2B.
- "The acquisition is the culmination of a highly successful seven year partnership with Inotera," Chief Executive Mark Durcan said in a statement.
- Micron, which is expected to take on $2.5B of debt for the purchase, expects the deal to close in the middle of 2016.
Dec. 4, 2015, 7:47 PM
- Micron's (NASDAQ:MU) Automata processors, in development for some time, break from traditional processor/computing architectures by having thousands (and potentially millions) of independent processing elements that can be programmed to handle various instructions in parallel, rather than serially process chunks of data as standard CPUs do. (briefing note)
- Micron argues this approach can yield major performance gains for data-intensive search and pattern-matching applications requiring a huge number of operations that are individually fairly simple, but collectively amount to a large task. Cited examples include genetic analysis, security and video analytics, A.I./machine learning, and big data queries.
- Much like present-day server co-processors or GPUs, Automata processors won't act as a system's main processor, but instead run off an add-on board coexisting with a system's main CPU(s). Micron is currently offering Automata through a PCIe card that plugs into x86 servers.
- With Automata still needing a software ecosystem to take off, Micron is focused for now on growing developer support rather than selling to OEM clients or potential end-users. A few thousand processors will be shipped to developers in early 2016.
Nov. 17, 2015, 10:37 AM
- David Einhorn's Greenlight Capital lowered its Micron (MU +1.2%) stake by 67% in Q3 to 12.4M shares, per Greenlight's Q3 13F.
- Einhorn, whose fund was down 16% YTD through October due to losses taken in SunEdison, Micron, and Consol Energy, had upped his Micron stake to 37.5M shares in Q2, and defended the DRAM/NAND giant his Q2 letter following a major selloff. Micron is currently down 57% YTD.
- Einhorn also liquidated a 1.6M-share position in chip equipment maker Lam Research (LRCX), which in early Q4 announced it's acquiring KLA-Tencor.
- His position in Lam rival Applied Materials (AMAT +0.1%) was lowered to 5M shares from 8.2M. Applied jumped last week after providing better-than-feared FQ4 results, FQ1 guidance, and order data, and forecasting on its earnings call it expects the wafer fab equipment market to be flat or up, better than expectations for a moderate decline.
- A 600K-share position was taken in Garmin (GRMN -0.2%). The navigation hardware maker was hammered in October following a Q3 warning, but has since largely recovered its losses.
Nov. 16, 2015, 3:16 AM
- China's Tsinghua Unigroup is planning to invest 300B yuan ($47B) over the next five years to build the world's third-largest chipmaker and confirmed it was in talks with a U.S.-based company about a deal that could be finalized by the end of November.
- The state-owned tech firm declined to give more details of the transaction but said buying a majority stake was unlikely as it was too "sensitive" for the U.S. government.
- Over the last few months, Tsinghua prepped a $23B bid to acquire DRAM/NAND flash giant Micron (NASDAQ:MU) and took a 15% stake in Western Digital (NASDAQ:WDC).
Oct. 21, 2015, 9:50 AM
- BofA/Merrill has downgraded Micron (NASDAQ:MU) to Underperform a day after NAND flash JV partner Intel announced it's investing up to $5.5B (and at least $3.5B) on its own in the coming years to manufacture flash at its Dailan, China fab. Needham has downgraded to Hold from Strong Buy. Both firms cite Intel's efforts.
- Meanwhile, Western Digital has confirmed it's acquiring SanDisk eight days after Bloomberg reported both Micron and Western had talked with the company. Micron had rallied following the Bloomberg report.
- Micron is down 17% over the last two days. Shares go for 7x an FY17 (ends Aug. '17) EPS consensus of $2.27.
Oct. 20, 2015, 2:39 PM
- Intel (INTC -0.3%) "plans to increase its investment in non-volatile memory technology to better serve customer needs and keep pace with the strong demand for Intel [SSD] solutions," the chip giant states in a brief announcement.
- Industry analyst Patrick Moorhead reports Intel is investing to convert its Dailan, China fab to support 3D NAND manufacturing. Bloomberg (citing Intel SVP Rob Crooke) reports Intel plans to begin Chinese 3D NAND manufacturing in 2H16.
- Intel NAND partner Micron (NASDAQ:MU), which was previously off moderately in response to a Bloomberg report stating SanDisk is in advanced sale talks with Western Digital (and not Micron), has fallen sharply.
- Update: Crooke provides details about Intel's plans in a blog post (.pdf). Intel will invest up to $5.5B "over the coming years" to produce flash memory at its Dailan fab. Intel and Micron unveiled high-density 3D NAND chips in March, and their 3D XPoint next-gen memory solution in July.
Oct. 19, 2015, 4:42 PM
- Six days after reporting SanDisk (NASDAQ:SNDK) has talked with Micron (NASDAQ:MU) and Western Digital (NASDAQ:WDC) about a potential sale, Bloomberg reports SanDisk is in advanced sale talks with Western.
- Negotiations are said to have "accelerated" over the weekend. A deal could be reached as soon as this week.
- Western has been viewed by analysts as a smoother fit than Micron, given it's not currently a NAND flash manufacturer - with many thinking Western needs to become one to insure itself against hard drive cannibalization by SSDs - and SanDisk and Micron respectively having NAND alliances with Toshiba and Intel.
- SNDK +8.3% after hours. WDC -3.1%. MU -1.3%. Micron joined SanDisk in rallying last week following Bloomberg's original report, fueled by expectations a deal would improve Micron's NAND scale and IP, and potentially lead to more favorable industry pricing.
- Earlier today: SanDisk gains following Korean site's M&A report
Oct. 13, 2015, 5:38 PM
Oct. 13, 2015, 5:07 PM
- Sources tell Bloomberg SanDisk (NASDAQ:SNDK) is in talks with Micron (NASDAQ:MU) and Western Digital (NASDAQ:WDC) about a possible acquisition. No decision has been made.
- Acquiring SanDisk, which partners closely with Toshiba (OTCPK:TOSBF) on NAND flash manufacturing, would turn Micron (NAND partnership with Intel) into a heavyweight within the NAND market - Samsung and SanDisk/Toshiba are currently the market's biggest players. Micron received 32% of its August quarter revenue from flash, and 60% from DRAM. The company has been betting on 3D NAND and 3D XPoint to strengthen its flash position.
- Western has made several smaller flash-related acquisitions, as it tries to offset the gradual encroachment of SSDs/flash storage on hard drives. However, none of the buyout targets were comparable in scale to SanDisk, and Western still depends on 3rd-party NAND suppliers who also compete with the company in the SSD market.
- SanDisk +11.5% after hours to $68.90. Micron +2.6% to $18.65. Western +0.8% to $85.00.
- Earlier: SanDisk jumps on reported sale effort
Oct. 13, 2015, 4:26 PM
- Bloomberg reports SanDisk (NASDAQ:SNDK) is working with a banker to explore a potential sale.
- SanDisk and (to a lesser extent) Micron (NASDAQ:MU) have risen after hours. Numerous chipmakers have been acquired over the last two years as the industry consolidates; SanDisk would be one of the biggest if a deal occurred.
- The chairman of China's Tsinghua Unigroup (previously bid for Micron) recently suggested his company wants to be a NAND flash manufacturer, but added it's uninterested in buying SanDisk, Toshiba, or SK Hynix (assuming regulators would allow it).
- Update: Bloomberg's sources state SanDisk has held buyout talks with Micron and Western Digital.
Oct. 12, 2015, 5:16 PM
- Charles Kau, chairman of Micron (NASDAQ:MU) and Nanya's Inotera DRAM JV, has been hired by China's state-controlled Tsinghua Unigroup, which was previously reported to have bid for Micron. Kau will act as one of Tsinghua's three global EVPs and be responsible for its memory business, while remaining Inotera's chairman.
- "We have cooperation with Micron on the business level," says Tsinghua chairman Zhao Weiguo. "We’d like to conduct business by cooperating with current memory giants, by setting up JV plants in China." The remarks come shortly after a Tsinghua subsidiary took a 15% stake in hard drive giant Western Digital, and a few months after rumors of a full-blown Micron bid drew hostile responses from politicians.
- Zhao suggests Tsinghua is more interested in manufacturing NAND flash (at least directly) than DRAM. However, he adds the company has no interest in buying NAND vendors SanDisk, Toshiba, or SK Hynix (assuming regulators would approve).
- Meanwhile, Barron's provided a bullish write-up for Micron over the weekend. The paper cited the potential of Micron/Intel's 3D XPoint memory tech - commercial shipments start next year, with "meaningful" revenue contribution by 2018 - and a belief DRAM demand is bottoming. It also sees Micron benefiting from chip industry consolidation, either as a seller or a buyer.
- In spite of the Barron's piece, Micron fell 0.7% today. The Nasdaq was up fractionally.
Oct. 8, 2015, 12:56 PM
- HP (HPQ +1.8%) and SanDisk (SNDK +2.4%) are partnering to develop a a memory technology they expect will be up to 1,000 times faster and offer up to 1,000 times as much endurance as NAND flash, while also providing "significant cost, power, density and persistence improvements over DRAM technologies."
- The solution will leverage HP's Memristor R&D investments - HP once promised memristors would enable computers that instantly turn on and off, and never lose data - as well as SanDisk's ReRAM R&D investments and broader manufacturing/design resources. Target server applications include "in-memory databases, real-time data analytics, [and] transactional and high-performance computing." HP also plans to use the technology with its futuristic Machine computing concept, in which memory and storage are one and the same.
- The announcement comes less than 3 months after Intel (NASDAQ:INTC) and Micron (NASDAQ:MU) unveiled 3D XPoint, a next-gen memory tech (commercial shipments in 2016) also promised to be up to 1,000 times faster than NAND and much cheaper/denser than DRAM, and which has much in common with ReRAM.
- HP and SanDisk are both rallying. The former could be getting a boost from reports Dell is in merger talks with EMC, thanks to hopes such a deal would lead the post-split HP Enterprise to receive M&A interest. The Nasdaq is down 1%.
- Separately, HP has rolled out a 34" Envy all-in-one PC (starts at $1,800), a 12" convertible (starts at $800), and a $429 Windows 10 tablet.
Oct. 5, 2015, 11:35 AM
- Micron (NASDAQ:MU) is now up 17% since beating FQ4 estimates and providing below-consensus (but perhaps better than feared) FQ1 guidance on Thursday afternoon. 27.8M shares have already been traded; the 3-month daily average is 33.3M.
- Micron is at its highest levels since early September, albeit still down 51% YTD. Shares go for 7.1x an FY17 (ends Aug. '17) EPS consensus of $2.43, down from $2.86 pre-earnings.
- Separately, Micron has bought Tidal Systems, a startup working on SSD controllers, for an undisclosed sum. Tidal employs well-known engineers hailing from leading controller vendor SandForce (now a part of Seagate), and claims to have developed superior compression and error-correction algorithms.
- The purchase comes as Micron gets set to ramp production of 3D NAND chips developed with Intel, as well as 16nm tri-level cell (TLC) meant to improve Micron's low-end/value segment positioning. A NAND alliance with Seagate was announced in February.
- In addition to SandForce, Marvell and Silicon Motion are major SSD controller suppliers. Intel, Samsung, and Toshiba are among the SSD vendors to have developed controllers for internal use.
- Last week's Micron coverage
Oct. 2, 2015, 1:23 PM
- Micron (NASDAQ:MU) remains up strongly after beating FQ4 estimates and issuing soft FQ1 guidance against a backdrop of low expectations. NAND flash rival SanDisk (NASDAQ:SNDK) is also rallying.
- A slew of firms with Micron targets in the $20s or higher have cut them, while reiterating bullish ratings. Credit Suisse's John Pitzer (Outperform, target cut by $9 to $25) thinks the fact Micron is staying profitable during a downcycle trumps near-term negatives. "While we remain concerned with F2Q (Feb) – (1) seasonally weaker pricing, (2) mobile mix (72% of Op Profit) weakens post iPhone 6s builds, and (3) Company specific operational improvements still geared more toward F3Q (May) – we see trough EPS ABOVE break-even ... and SIGNIFICANT Company specific drivers in F3Q – full impact of 20 nm cost downs and Inotera pricing agreement. While fundamentals are not great, trough EPS above break- even would be definitive proof of a structurally better industry."
- Susquehanna's Mehdi Hosseini (Positive) offers a similar brand of cautious optimism. "Our expectation is for NAND ASP declines to exceed that of DRAM. However, if MU can execute on cost reductions ... we possess line-of-sight to a bottoming of margins in the Nov-Feb timeframe ... we believe the risk/reward profile remains favorable at current levels, as our “worst-case” EPS scenario (~$0.90-$1.00 in annual EPS), combined with a 10x P/E would suggest ~$4-$5 downside risk from current levels, while we view upside to our PT at $7-$8." Deutsche's Sidney Ho (Buy) thinks "potential capex cuts by memory suppliers (esp Samsung) should lead to better supply-demand next year."
- Nomura's Romit Shah (Neutral): "We continue to see the bottom in Feb-qtr, as we leave our seasonal decline unchanged -5% Q/Q vs. cons. of up slightly. We see stronger leverage in 2HF16 driven by more rationale supply (potentially helped by Samsung) and a more optimized cost structure in DRAM (mainly 20nm crossover) and NAND (TLC, XPoint)."
- On the earnings call (transcript), president Mark Adams stated mobile made up a low-30s % of DRAM revenue, PCs low-20s, servers low-to-mid 20s, and specialty DRAM (GPUs, autos, networking, etc.) low-20s. Consumer products (cards, USB drives, components) made up ~40% of trade non-volatile memory revenue, mobile low-20s, SSDs mid-teens, and embedded markets (autos, industrial, etc.) also mid-teens.
- Micron's FQ4 results, guidance/details
Oct. 1, 2015, 5:35 PM
Oct. 1, 2015, 4:30 PM
- While it beat FQ4 estimates, Micron (NASDAQ:MU) has guided on page 20 of in its earnings slides (.pdf) for FQ1 revenue of $3.35B-$3.6B and EPS of $0.20-$0.26, below a consensus of $3.74B and $0.38. However, much has been priced in over the last several months.
- FQ4 performance: DRAM bit shipments -1% Q/Q, ASP -7% (in-line with guidance), cost/bit +3%. Non-volatile memory (primarily NAND, with some NOR included) bit shipments -6%, ASP -1% (close to NAND ASP guidance), cost/bit -1%. DRAM was 60% of revenue, non-volatile memory 32%, and other 4%.
- Financials: Gross margin fell to 27% from 31% in FQ3 and 30% a year ago; FQ1 non-GAAP GM guidance is at 24.5%-27%. GAAP SG&A spend fell by $10M to $170M; R&D rose by $21M to $379M. Micron ended FQ4 with $5.6B in cash/marketable investments, and $7.3B in debt.
- The company states DRAM end-market demand is healthy in non-PC markets, and that NAND demand is relatively stable. "We expect the demand environment to stabilize and improve as we move through calendar 2016 ... We expect industry supply and demand for both DRAM and NAND to be relatively balanced in 2016."
- Shares have risen to $15.76 after hours.
- Micron's FQ4 beat, PR
Micron Technology, Inc. provides semiconductor solutions. It manufactures and distributes semiconductor solutions. It manufactures and markets DRAM, NAND Flash and NOR Flash memory, as well as other memory technologies, packaging solutions and semiconductor systems for use in computing,... More
Industry: Semiconductor - Memory Chips
Country: United States
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