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Conventional Wisdom, Run-Away Algos, And Teamwork - The Market Vs. Micron

William Tidwell profile picture
William Tidwell


  • Micron's fundamentals are solid and the stock is oversold.
  • The market's fears about the effects of a NAND oversupply are unfounded.
  • Micron's future success depends very little on NAND.

"The question is, "what will the market pay for a share of Micron that earns $5?" A P/E of 10 would take it to $50 or more. Eventually. I say eventually because it has been my experience that many analysts and institutional investors are dumbfounded by these big moves and don't catch on for a while. When they do catch on, they could "bubble" it up to $100/share.

So, this is the "Single Best Idea" that I have for the next two years, and "if you could only buy one stock," make it Micron."

- Seeking Alpha, "Micron: If You Can Buy Only 1 Stock, Make It Micron", June 10, 2013, Russ Fischer

"One man alone can be pretty dumb sometimes, but for real bona fide stupidity, there ain't nothin' can beat teamwork."

- Edward Abbey

I have been writing about Micron (NASDAQ:MU) for five years now, ever since Russ Fischer made his famous call. I remember being fascinated by his strategic vision. His analysis of the downstream effects of Micron's acquisition of Elpida was persuasive - his arguments compelling and actionable. You didn't have to be a technology guru to understand it. Boiled down, he presented an opportunity to buy cheap shares ($5 and change) in a company that had just acquired (for pennies on the dollar) the 4th largest memory manufacturer. And not just any memory maker, but a company which had just scored a multi-hundred-million-dollar contract with Apple (AAPL). So short-term it was golden and in the longer term - well the thing we needed to remember was that four minus one equals three - just three large DRAM makers were left.

Hmmm… Where have I seen this plot before? Industry consolidation to a few players from many which leads to new found capacity discipline, which leads to pricing

This article was written by

William Tidwell profile picture
An entrepreneurial generalist who has served principally as a business leader and consultant in the information technology, communications, and business services arenas. Now retired, a stock picker and writer who enjoys writing about the semiconductor memory industry, among other things. When I'm not doing that I'm backpacking, cycling, and playing with my grandchildren.

Analyst’s Disclosure: I am/we are long MU, WDC, NVDA, PSTG. 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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (1,252)

copacetic99 profile picture
I just read on CaringBridge that Russ Fischer passed away last night. This was the post (I deleted the personal phone number at the end, I don't think I should post it in the wider Internet world):

A Fighter Until the End

Journal entry by Julia Fischer-Roaldson — 3 hours ago
It is with the heaviest heart that I share with you that my dad passed away just after 1am this morning after an almost 3 week hospital stay.

He was admitted to St. Mary’s Hospital at Mayo on June 6th fighting Pneumonia and hypertension, then eventually a bowel distension and atrial fibrillation.

He was definitely a fighter over the last two and a half years but on Saturday he made the decision that he’d had enough and opted to discontinue medical interventions. He was very comfortable and surrounded by family when the time came.

Thank you to everyone who supported and loved my dad. He truly was an amazing man and it was a heartbreaking situation the last few years. He’s now finally at peace and we take comfort in that. I also want say thank you to the nurses, NP’s, and doctors that took wonderful care of my dad not only during this hospital stay but all the trips he made since 2016. They are simply angels.

I will post memorial details once we have them figured out. In the meantime, if you have any good stories or memories of my dad please share them with me. My email is julzbird@gmail.com or give me a call at ****.


Julia, Cheri, and Jon
William Tidwell profile picture
Thanks. I have missed his wit and wisdom on our board. I am in his debt and I know I am not alone in my feelings.
William Tidwell profile picture

Sounds reasonable to me, though I wonder how much pioneering Intel is going to do given the delays that Intel has acknowledged. They still haven't made a clear declaration as to how soon in CY '19 they will have the NVDIMM product. Assuming Micron actually releases a product in Q4... So many mysteries...
flintstone277 profile picture
WT, could the opaque stance on XP have anything to do with just milking the DRAM profits and holding their "ace in the hole" back for the time being, plus the longer they keep XP under wraps helps with the legal issues from the ECD situation? I still believe that the "New Memory" is a totally different type of product that will change the map on products that can not only replace DRAM but will be extremely profitable, but is being kept back so MU can milk the vast profits available from DRAM. Either way, I am LONNNNNG MU and very happy to be holding my little bundle of shares.
khanjar24 profile picture
Well also Flintstone, INTC server DIMM support projects and increased penetration of 7000 series and 8000 series intel chips are essential to establishing a market for demand for 3D XP(PC and server side), on top of process improvements as they likely stack 2 or 4 layers of it(I think they're at one layer now, right?) and improve process for better yields, initial whispers on yield 2+ years ago was it was amazingly bad, and this is a completely different type of semiconductor technology. I think 2 months ago one of the vendors showed a product for 2019 with the INTC server chip support that would support 512GB DIMM slot 3D XP, and it was 4 of them per server, and I just know tons of cloud capacity will benefit from that, lower cost than DRAM(and higher capacity and lower TDP) but orders of magnitude faster than NAND technology.

I consider myself on the whale side of personal computing, I spend between 500 and 1k/year on HDD's, video cards, and computer upgrades, but even I upgraded only to a 6800 series chip so 3D XP is useless to me(and the benefit of the Optane SSD is not for my non-existant workloads), but I would have loved to be able to get the Optane M.2 32GB or 64GB cache product.
William Tidwell profile picture

Possibly. Sanjay is clearly focusing the company on what they can deliver profitably. Clearly he doesn't think XP is ready - he's going to let Intel take the pioneering arrows.
linklinklink profile picture

While Micron has been brilliant in their execution of memory and storage, Intel has always been brilliant at integrating new technologies into their products.

I'm going to jump back quite a few years here, but Intel implemented their SSD Caching (Intel RST) way back on their Z86 motherboards in 2011. I know because I'm still running Z86 with an overclocked 2500k @ 4.5Ghz 7 years later. There's been no reason for me to upgrade even while running a 4K GTX 1070 setup.

While affordable mass storage plug and play SSD's are available today, back in 2011 the idea of buying a relatively cheap 32GB SSD and getting 90% of the benefits of a vastly more expensive SSD was pretty revolutionary.

The same thing is happening today. Micron is willing to take a back seat and let Intel work out all the bugs incorporating the speed benefits into their architecture and mobo designs.

Because at the the end of the day, Intel and Micron both know if they can nail the integration aspect both companies are going to be leaps and bounds ahead of the competition in performance.
William Tidwell profile picture
Well, interesting presentation, to say the very least. A mix of good and bad, with the biggest negative being the almost total opacity on XP. They did show one bit of very positive news on XP and that was its cost positioning very near NAND over the time it takes Micron to migrate to the 1 beta node on DRAM. That's probably 2021/22 timeframe.

The great news was on NAND, and DRAM was on the whole very positive.

The gigantic positive was the $10B buyback. That's worth 200 m shares at a $50 stock price - less of course if (as we certainly hope!) the stock appreciates significantly between now and FY '19. Still a really nice tailwind to the EPS...
kscopes profile picture
William Tidwell:

I also was surprised to have the XP can kicked down the road once again. As you say: :The great news was on NAND and DRAM. From the bleacher seats point of view, could this not be because they are killing it more than predicted on the N&D and so they would just as well rake in the $$$ while the gettin is good?
oak8292 profile picture

I also really like how competitive they have become in both DRAM and NAND.

I think that Micron is just a passenger on the XPoint ride. It seemed like they promised more information in the last quarterly conference call.

This fall Intel will release processors that are XPoint DIMM compatible. The Micron message seemed to be that they would not have any DIMMs when the processors are released?

I found it interesting that they now have "Replacement Gate" technology for Gen 4 NAND? Which include great improvements in power and bandwidth? Maybe Intel is going to XPoint SSD's after 96 layers and Micron will compete with RG NAND?

The 1z DRAM should also be interesting. Samsung may be using EUV while Micron sticks with quad patterning. Micron thinks the costs of EUV are too high and so bit density may not tell the whole story on bit cost.
linklinklink profile picture
I'll put my tinfoil hat on.

Is it not out of the realm of possibility that the government has stepped in here and implementing this under the table before the general public and major corporations have mass access to it?

This would explain the delay as well as the limited speed offered in Intel's current Optane production. We know for a fact that the faster controllers are available by Marvell, etc. right now.
ND1981goIrish! profile picture
I'm from Jersey - The Boss rocks! So far today I'm listening to "Born to Run". Thanks for your analysis and commentary on Micron WT. Greatly appreciated!
doggiecool profile picture
The Boss would be considered racist-zeno by the fake media, for his 'born in the USA' song
johndkopta profile picture
Oh good Doggie,

What are we going to do with you, my The Donald believing friend?

Well.. it takes all kinds in this world. Little tune for ya:


PS. ya do know it's "xeno" , right?

Unless, of course, we are entering a dialectic about the racist paradox, for assuredly it would be impossible to be about the Stoicism of Mr. Trump.
johndkopta profile picture
Hey good Mr. T,

A tad early, but given the pre-announce,


as promised, right on top of that beautiful head.

Thanks my wise friend, and, of course, a tune.

Knowing your fondness for The Boss (and if there's a good Mrs. T, I recommend to follow his first-rate advice):


William Tidwell profile picture

Thanks. Love that tune!
ND1981goIrish! profile picture
Expect some profit-taking and sideways action tomorrow and possibly Friday.. Micron closed at just above the low of the after-hours session today and was the 3rd most active AH stock. Hopefully the uptrend will continue with good news flow from the May 21st Investor event next Monday. Nothing goes straight up without "the pause that refreshes". Good luck to all Micron longs
ND1981goIrish! profile picture
Without multiple expansion, if these estimates are anywhere near reality then why would anyone want to be long Micron???
William Tidwell profile picture

the only way these estimates come true is if there is a massive externality which changes current market conditions. Certainly that's possible with all the trade issues looming but right now I'm not assuming it in 2019 models. With 33% ASP decrease for NAND and flat ASP's for DRAM in 2019 I'm modeling $12+/share. It's going to take a massive shock to knock down DRAM pricing enough to produce the estimates above.
Timmy41 profile picture
Still predicting lower earnings though.

2018e 2018e 2019e 2019e
Quarter 2017 Prior Current Prior Current
Q1 0.25 - 2.40a - 2.19
Q2 0.84 - 2.78a - 1.82
Q3 1.56 - 2.82 - 1.47
Q4 1.96 - 2.76 - 1.28
i_am_seeker_2 profile picture
Chip stock Micron to rally nearly 35 percent on ‘exceptional’ cloud computing demand: Morgan Stanley

Morgan Stanley reiterates its overweight rating for Micron shares, saying demand for its memory chips will remain strong.
"Near-term conditions are in fact exceptional, and the exceptional cloud spending that has driven such conditions seems likely to persist. So, our 'stronger for longer' thesis remains intact," the firm's analyst writes.

Seeker, first time I've seen an analyst mention that MU's NAND cost declines will match the NAND asp decline.
I believe that Morgan Stanley putting into writing the observation that ASP decline can be offset by production efficiencies/cost declines will be helpful in allowing other analysts to begin to understand the current/future memory environment. Perhaps inception will occur and the idea will spread. Like a virus but a virus with positive outcomes.
JOE STERN profile picture
For years I have been hanging up on a telemarketing computer named Heather. I wonder if that was this project. I never stayed on the line long enough to find out what she or it was selling.
johndkopta profile picture
Man, that girl gets around.
linklinklink profile picture
Finally... everything we said was going to happen is happening right now...

Welcome to 2018 everyone! :)

bubbleking profile picture
Wow. I could use this for a bunch of menial tasks.
linklinklink profile picture

Are you accounting for an increase in NAND sales? Micron's MX500 as well as their 2TB 32L $300 black drive on Amazon has to be making a huge dent.

Even though the 32L isn't on par with the MX500, I was debating about ordering one just on the pure value standpoint. I'm sure a lot of other people have made purchases.
William Tidwell profile picture

No. For now I'm staying very conservative with my NAND fcst. Any good news on NAND this Q will be upside for my model. On the plus side, Micron has some world-beating 64L product. On the negative side, my guess is that they are having to discount their 32L product. I've got NaND rev and GM flat QoQ.
flintstone277 profile picture
Doggie, which company in the world do you think does anything because its the "honorable" thing to do? I am very much in favor of doing the "honorable" thing, but companies are not prone to doing that and I don't think (IMHO) that MU is under any obligation to pre-announce if that is what you are implying by saying that they should do the "honorable" thing. Regardless of how much I or anyone else might want them to do that, they are not "duty bound" or under any other pressure to give us a heads up. My contention is merely, that pre-announcing makes the whole process more prone to gamesmanship because it makes it a two-step process as opposed to just waiting and making it one fell swoop all at once on the date of earnings release. So your point (I think) is that we agree: "gamesmanship can only occur with time. Eliminate time or reduce it and you eliminate or reduce the gamesmanship." Take out the time between pre-guesstimates and just do it all at once. Am I right?
linklinklink profile picture
Not pre-announcing if the results are far above their estimate and delaying announcing by a month gives a greater opportunity for leaks. I have no doubt information is passed from those in the know within major corporations and wall street traders. If anything pre-announcing at this point is probably better for us retail investors.
doggiecool profile picture
I agree with l3
khanjar24 profile picture
Not if some of the slack jawed idiot-analysts, the ones that fell asleep during prior quarter DRAM pricing get whipped in the face by MU's blowing out expectations. Here, see this 2 months ago: https://seekingalpha.c...
"Upside Q3 guidance has revenue from $7.2B to $7.6B (consensus: $7.29B) and EPS from $2.76 to $2.90 (consensus: $2.66)."

The consensus for Q3 earnings before the guide was 2.66. The guide sets that at 2.83 midpoint, and David_Li has some exceptionally bullish estimate around 3.20. Current analyst estimate is 2.84 per WSJ w/ 22 analysts, but more hilariously/importantly, the Q4 estimates are absurdly wild positive and negative, TD Ameritrade has the low Q4 estimate at 2.52, and a high at 4.12(lol?), Nasdaq has it as 2.62-3.19. I think pricing moves slow enough that we can start writing off some of those low ends, as it would require a precipitous and catastrophic pricing collapse, those are the sleeping analysts, the ones that made some model or assumption tweaks 2 months ago and haven't reviewed it since.
Micron is and has been emphasizing their early collaboration with partners in relation to

The critical factor is to engage in partnered efforts with the ecosystem early to enable the successful rollout.


Seems as if they are working hard to decrease qual times for this important DDR5 product.
flintstone277 profile picture
Doggie, are you "tongue in cheek" here? I do agree that there is plenty of manipulation going on, but it's not because of whether or not the company pre-announces. It's going to get manipulated either way. So be it. I'll take my chances, but pre or not is NOT the problem, it only provides another "opportunity" toward gamesmanship. IMHO
doggiecool profile picture
gamesmanship can only occur with time. Eliminate time or reduce it and you eliminate or reduce the gamesmanship.

Immediately announcing earnings when they are calculated is the honorable thing to do.
JOE STERN profile picture
I agree, do not preannounce, don't ruin the surprise. If it runs up before the earnings release, it will plunge afterward just like so many times before.
doggiecool profile picture
yes folks,
a company shouldn't pre-announce.
That way all the bookies in vegas and all the I-Banks can place their wagers, prior to the conference call... and thus, continue to facilitate the 'MU stock is rigged' game.

flintstone277 profile picture
Joe, I agree, there is a bit of "gamesmanship" in the art of disclosures, but by not pre-announcing, they get to leave all the bang in the mix for one big presentation. That way they don't have to pre-announce good numbers only to then beat those numbers a few days later. So, while there are always pros and cons, I prefer to get it all in one fell swoop. That way, everyone gets it all, all at once. Then they can do with it as they wish, but it takes out that extra step of "gamesmanship" of pre-announcing in my humble opinion.

By the way, either way, it's going to be a GREAT report, IMHO.
JOE STERN profile picture
My opinion is that all companies should give an honest assessment of business conditions and vaguely state their targets for sales and expenses but not forecast their earnings. Companies who consistantly beat estimates are expected to continue to do so, and get slammed if they only beat by a penny or two. You can fool the street only so long before it doesn't work any more.
linklinklink profile picture
Question for everyone. Since the EPS for Q2 was $2.82 and they sandbagged the guidance for Q3 at only $2.83. If Micron sees results to be substantially above this ridiculously conservative estimate do they have an obligation to pre-announce earnings on May 22nd?

My feeling is that if they do make an announcement that it will be in the $3.05 - 3.1 EPS range, meaning the Q3 will likely be 10 cents above that.
doggiecool profile picture
I always thought if a company knew they were going to beat or miss by a significant amount and it was still weeks before conference call, that they were obligated to preannounce. However, others on SA insist they are not obligated to preannounce. Not preannouncing, leaves a large window for insiders to act on said information.
Doggie- They are under no legal obligation to pre announce and insiders are in a blackout period under which they can't trade.
If history is a guide, earnings beats by Micron are largely ignored by the market, unless they miss in which case the stock will be hammered down. Same goes with next quarter forecasts....if they raise estimates it has no impact. Despite all the talk about TTID, Mr. Market seems to be convinced that at some point the party is going to end and they don't want to be holding shares at that point.
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