The light at the end of the tunnel isn't always an
oncoming bullet train. Sometimes it's simply daylight at the
end of a long, dark night.
Computer memory maker
Micron Technology (NYSE: MU) is enjoying that
cheery kind of daylight today. The entire memory market has
been mired in oversupply and weak demand for more than two
years now, forcing the entire industry into
a destructive price war. And now, the war is over. At the
very least, we're looking at a cease-fire.
Micron reported much stronger memory sales in the fourth
quarter than the third, whether you're looking at unit
volumes or dollar sales. Average selling prices actually
increased for once, and management talked about improving
markets and increased demand.
That still wasn't good enough to pull Micron out of the
red ink. Micron reported a net loss of $88 million or $0.10
per share, and the full-year net loss added up to $1.8
billion. But Micron runs a capital-intensive business, and
$2.1 billion of that annual loss came from depreciation and
amortization of those expensive manufacturing facilities.
Micron doesn't use third-party manufacturing specialists like
United Microelectronics (NYSE: UMC) or
Taiwan Semiconductor Manufacturing (NYSE:
TSM), but builds and runs top-notch facilities of its own.
Along with JV partner
Intel (Nasdaq: INTC), Micron is ready to
deliver 34-nanometer NAND drives that keep it at the
forefront of memory technology.
When you back out those massive infrastructure costs from
years past, Micron is doing surprisingly well. Operating cash
flow stopped at $357 million in the fourth quarter and $1.2
billion for the full year. And because the memory industry at
large is trying to stem the tide of huge oversupplies,
current capital expenses are small and free cash is flowing
in healthy amounts.
I think it's safe to say that the memory sector is a safe
place to invest again. Unfortunately,
market consolidationand a few bankruptcies have left us
with precious few stocks to choose from. Micron and
SanDisk (Nasdaq: SNDK) are the only easy
answers, as Intel has distanced itself from memory chips,
Samsung
can be purchasedby those with access to the Korean
market, and everyone else is a
high-risk penny stockat best.
Micron's stock price has tripled in 2009, and
SanDisk's has doubled. Is it too late to
jump aboard the memory bandwagon, or will this stock
bounce higher still? Discuss in the comments below.
This article was originally published as
The Memory War Is Over!on
Fool.com
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