Documents
Resources
Learning Center
Upload
Plans & pricing Sign in
Sign Out

MU - PDF

VIEWS: 2,290 PAGES: 7

									                                                                                                       September 20, 2011 | 7 Pages

                      Semiconductors                                                                  Company Report

                                                                           Micron Technology, Inc.
                                                                                                                      (NNM: MU)
MU: LITIGATION HEADLINES, AUGUST KITCHEN SINK BUT                                                              RATING: BUY
EXPECT GOOD GUIDANCE, 2012 MUCH BETTER; LOWERING                        Vijay Rakesh
ESTIMATES                                                               (312) 525-8431
                                                                        vrakesh@sterneagee.com

   We believe significant DRAM cuts in the September quarter
   position MU well. But the August quarter will be a “kitchen sink”                      Fiscal Year Ends Aug
   and we are conservatively lowering our estimates further, as
   Taiwanese DRAM OEMs are indicating August was especially             Rating:                                                   Buy
   brutal. There is also MU-RMBS litigation going on with the trial     Price: Close                                            $6.88
   going to jury this week. MU will reports its AugQ after the          Price Target:                                          $14.00
   close of market on September 29. We believe MU presents              52-wk Range:                                    $5.18-$11.95
   attractive L-T valuations, as continued industry consolidation,      Market Capitalization (M):                             $7,058
   mix change to NAND and lower Memory Capex position it well.          Shares Outstanding (M):                                1,041.7
   DRAM Supply Cuts. While Korean OEMs have not cut output,             Avg. Daily Vol. (000):                                 43,544
   we believe almost every Taiwanese-Japanese DRAM OEM                  Dividend Yield:                                            NA
   has cut DRAM output. We believe 1) Nanya has cut output              Debt/Total cap:                                          20%
   20-30% into SepQ, 2) Powerchip cut output 30% in PC-DRAM             EPS Growth Rate:                                        10.0%
   and Rexchip, we believe running at a loss in August with DRAM        L-T Organic Revenue Growth:                             15.0%
   pricing, 3) Elpida we believe is unwilling to supply DRAM at         Short Interest:                                          6.5%
   these prices and we believe is reducing supply to the market by      Tangible Book Value:                                    $7.83
   20-30%+. We believe cash costs for Taiwanese-Japanese
   DRAM OEMs are $0.90-$1.10, which makes it unsustainable
   to supply DRAM at $0.60-0.70/Gb for DDR3 currently. We
   believe Inotera is also seeing some cuts with pricing.
   Nonetheless, given broadbased cuts, DRAM pricing has                                     Earnings Summary
   stabilized with DDR2 1Gb ~$1.00 and DDR3 1Gb ~$0.65.                FYE Aug      2011E             2012E            2013E
   RMBS Litigation Update: We believe Monday (Sep19) saw
   closing arguments/rebuttals in the MU-RMBS case. The case                                EPS & P/E Summary
   goes to jury on Wednesday and we could have some sort of a                               2011              2012              2013
                                                                       EPS:         2011E Prior 2012E         Prior    2013E    Prior
   wrap-up or headline summation from the case this week. There
                                                                       Q1           $0.17A $0.17A $0.00       $0.10    $0.22    $0.22
   has been a range of settlement estimates from $300M up to
                                                                       Q2           $0.09A $0.09A $0.04       $0.13    $0.20    $0.21
   $2-3B thrown around in the press.
                                                                       Q3           $0.09A $0.09A $0.17       $0.18    $0.26    $0.27
   August Kitchen Sink But now DRAM Supply Cuts for NovQ:              Q4           ($0.05) $0.07 $0.22       $0.23    $0.29    $0.30
   We are therefore conservatively lowering our AugQ from prior        Full Year     $0.31 $0.42 $0.45        $0.64    $0.96    $1.00
   $2.17B/$0.07 to $2.11B/($0.05) and FCF negative as it was a         P/E Ratio:      --     --    --          --       --       --
   peak Capex quarter. We are conservatively modeling a 20% drop
   in DRAM pricing in AugQ versus prior down 10%, and modeling
   0% GM for combined MU+Inotera in DRAM for AugQ. So far
   for the NovQ, DRAM pricing has been up 7%. Lowering F12E
   from $9.63B/$0.64 to $9.31B/$0.45. We believe F13E will see a
   significantly consolidated, low Capex memory environment
   and tweaking F13 to $11B/$0.96 from $11.4B/$1.00. We remain
   positive on MU not only because valuations have been depressed,
   DRAM pricing is unsustainable and competitors are cutting
   production, but also because of the longer-term story of
   diversification to NAND Flash. Our price-target of $14 is the
   equivalent of 1.4x 12-month TBV of ~$10.


                                                                       Source: Factset

   Important Disclosures regarding Price Target Risks, Valuation Methodology, Regulation Analyst Certification,
Investment Banking, Ratings Definitions, and potential conflicts of interest begin on Page I of the Appendix Section.
          800 Shades Creek Parkway           Suite 700        Birmingham, AL 35209                   205-949-3500
                               Sterne, Agee & Leach Inc. is Member NYSE, FINRA, SIPC
MICRON TECHNOLOGY, INC. (NNM: MU)   September 20, 2011




                                              Page 2
MICRON TECHNOLOGY, INC. (NNM: MU)                    September 20, 2011


Micron Technology, Inc. Quarterly Income Statement




                                                                Page 3
MICRON TECHNOLOGY, INC. (NNM: MU)                           September 20, 2011

Micron Technology, Inc. Balance Sheet & Cash Flow Summary




                                                                       Page 4
MICRON TECHNOLOGY, INC. (NNM: MU)                                                                                     September 20, 2011

                                                       APPENDIX SECTION
Company Description: Micron manufactures and markets semiconductor devices worldwide primarily for the memory markets
today. Its DRAM products provide data storage and retrieval, including primarily DDR2 and DDR3. Micron is the fourth largest
player in the DRAM market, with approximately an 11% share, and the fourth largest player in the NAND flash market, with about a
7% share. In 2009, the DRAM market was $23 billion compared with the NAND flash market at $21 billion; by our estimates. Micron
currently supplies to DRAM, NAND, CMOS Sensor markets and is expected to enter the solar and LED markets in 2011-12.

IMPORTANT DISCLOSURES:
Price Target Risks & Related Risk Factors:
Investment Thesis and Price Target Risks
Micron competes in a cyclical, technologically intensive business. The company's ability to meet our financial expectations and
achieve future growth is subject to a number of risk factors, including, but not limited to, the following:

Market Risks
- Micron's continued success in its research and development efforts and timely introduction and execution of its new products;

- Slower demand growth in the NAND market may leave a substantial supply overhang, further depressing pricing;

- Competition from peer Taiwanese, Korean and Japanese OEMs in the 300mm DRAM market; and

- Unexpected changes in legal and regulatory requirements, tariffs and exchange rates, political and economic stability, staffing and
management issues, and potentially adverse tax consequences for its international operations.

Technology Risks
- Slower-than-expected DRAM transition from 40nm

- Slower-than-expected transition to 300mm wafer size in both DRAM and NAND.

Valuation Methodology:
Our $14 PT for MU is based on a 1.4x 12-month tangible book of closer to $10. We believe DRAM pricing will bottom in the
November quarter, and multiple new DRAM drivers with PCs, tablets, smartphones and new OS launches should stabilize pricing and
margins for MU. Also, NAND and NOR markets are strong and improving, which combined with strong cash flow should continue to
improve the book on MU. We also raised our gross margins and earnings expectations on MU, as fundamentals and pricing start to
stabilize and improve. We believe investors will start to focus more on the improving fundamentals and pricing and the potential $10
TBV could become a support level.

Regulation Analyst Certification:
I, Vijay Rakesh, (312) 525-8431, hereby certify the views expressed in this research report accurately reflect my personal views about
the subject security(ies) or issuer(s). I further certify that no part of my compensation was, is, or will be, directly or indirectly, related
to the specific recommendations or views expressed by me in this report.

Sterne, Agee & Leach, Inc. Disclosure Legend as of September 20, 2011:

            Company                                                                            Disclosure(s) – See Below
            Apple Inc. (AAPL - NNM):                                                           1
            Micron Technology, Inc. (MU - NNM):                                                1
            Research In Motion Limited (RIMM - NNM):                                           1

Disclosure Legend
   1. Sterne, Agee & Leach, Inc. makes a market in the shares of the subject company.
   2. Sterne, Agee & Leach, Inc. has, over the past 12 months, managed or co-managed a public securities offering or
           provided other investment banking services for the subject company.
    3.     Sterne, Agee & Leach, Inc. received compensation for products or services other than investment banking services
           from the subject company in the past 12 months.
    4.     The Sterne Agee analyst who has active coverage on this company owns a position in the subject company.
    5.     Sterne, Agee & Leach, Inc. or its affiliates beneficially own 1% or more of any class of common equity securities of the
           subject company.
                                                                                                             Appendix Section, Page I
MICRON TECHNOLOGY, INC. (NNM: MU)                                                                                 September 20, 2011


Sterne Agee & Leach, Inc. expects to receive or intends to seek compensation for investment banking services from the subject
company in the next three months. Sterne, Agee & Leach, Inc.’s research analysts receive compensation that is based upon various
factors, including Sterne, Agee & Leach, Inc.’s total revenues, a portion of which is generated by investment banking activities.

Definition of Investment Ratings:
BUY:                       We expect this stock to outperform the industry over the next 12 months.
NEUTRAL:                   We expect this stock to perform in line with the industry over the next 12 months.
UNDERPERFORM:              We expect this stock to underperform the industry over the next 12 months.
RESTRICTED:                Restricted list requirements preclude comment.

Ratings Distribution:
Of the securities rated by Sterne, Agee & Leach, Inc., as of June 30, 2011, 50.8% had a BUY rating, 47.6% had a NEUTRAL rating,
1.1% had a UNDERPERFORM rating, and 0% was RESTRICTED. Within those ratings categories, 1.59% of the securities rated
BUY, 5.86% rated NEUTRAL, 0% rated UNDERPERFORM, and 0% rated RESTRICTED received investment banking services
from Sterne, Agee & Leach, Inc., within the 12 months preceding June 30, 2011.
ADDITIONAL INFORMATION AVAILABLE UPON REQUEST: Contact Robert Hoehn at 1-212-338-4731.
Other Disclosures:
Opinions expressed are our present opinions only. This material is based upon information that we consider reliable, but we do not
represent that it is accurate or complete, and it should not be relied upon as such. Sterne, Agee & Leach, Inc., its affiliates, or one or
more of its officers, employees, or consultants may, at times, have long or short or options positions in the securities mentioned herein
and may act as principal or agent to buy or sell such securities.

Copyright © 2011 Sterne, Agee & Leach, Inc. All Rights Reserved.

Sterne, Agee & Leach, Inc. disclosure price charts are updated within the first fifteen days of each new calendar quarter per FINRA
regulations. Price charts for companies initiated upon in the current quarter, and rating and target price changes occurring in the
current quarter, will not be displayed until the following quarter.

Price Chart(s):




To receive price charts or other disclosures on the companies mentioned in this report, please contact Sterne, Agee & Leach, Inc. toll-
free at (800) 240-1438 or (205) 949-3689.



                                                                                                         Appendix Section, Page II
                                                              STERNE, AGEE & LEACH, INC.
                   Founded in 1901, Sterne Agee has been providing investors like you with high-quality investment opportunities for
                   over a century. During the early years, our founders prominently established themselves in the financial securities
                   industry in the southeastern United States. Today, we have expanded to serve all regions of the country. Sterne,
Agee is headquartered in Birmingham, Alabama with offices in 22 states. Sterne Agee is one of the largest independent firms in the
country. Sterne, Agee & Leach, Inc. is a division of Sterne Agee Group, Inc., which also includes The Trust Company of Sterne, Agee
& Leach, Inc.; Sterne Agee Asset Management, Inc.; Sterne Agee Clearing, Inc.; and Sterne Agee Financial Services, Inc.—
www.sterneagee.com
                                                       EQUITY CAPITAL MARKETS
Ryan Medo           Managing Dir., Eq. Cap. Mkts.      (205) 949-3623    William McIlroy            Director, Equity Products          (212) 338-4781
Robert Lake         Vice President                     (205) 949-3624    Paul Garner                Associate                          (212) 338-4799
                                                                         David Lee                  Director, Equity Services          (205) 949-3689
                                                                         Yan Chao                   Associate                          (205) 949-3622

                      INSTITUTIONAL SALES                                                            INSTITUTIONAL TRADING
Steve Pokorny       Head of Institutional Sales        (214) 702-4020          JT Cacciabaudo       Head of Trading                      (212) 763-8288

                                                           EQUITY RESEARCH
                                      Robert Hoehn      Director of Research                     (212) 338-4731

CONSUMER                                                                       FINANCIAL SERVICES (CONT.)
 Apparel Retailing & Toys                                                        Life Insurance
  Margaret Whitfield                SVP, Sr. Analyst   (973) 519-1019            John M. Nadel                      Mng. Dir.            (212) 338-4717
  Jennifer Milan                    VP, Sr. Analyst    (212) 763-8211            Dennis Zavolock                    Analyst              (212) 338-4748
  Jessica Gerberi, CFA              Analyst            (212) 338-4784
                                                                                 Mortgage Finance & Specialty Finance
  Educational Services / Interactive Entertainment
                                                                                 Henry J. Coffey, Jr., CFA          Mng. Dir.            (615) 760-1472
  Arvind Bhatia, CFA                Mng. Dir.          (214) 702-4001
                                                                                 Jason Weaver                       Analyst              (615) 760-1475
  Brett Strauser                    Associate          (214) 702-4009
                                                                                 Calvin Hotrum                      Associate            (615) 760-1476
  Footwear & Apparel
  Sam Poser                         Mng. Dir.          (212) 763-8226
                                                                                 Property/Casualty Insurance
  Kenneth M. Stumphauzer, CFA       Sr. Analyst        (212) 763-8287
                                                                                 Dan Farrell                        Mng. Dir.            (212) 338-4782
  Jessica Bornn                     Associate          (212) 338-4721
                                                                                 Nitin Chhabra, FCAS                Analyst              (212) 338-4779
  Leisure & Entertainment
                                                                               GLOBAL INDUSTRIAL INFRASTRUCTURE (GII)
  David Bain                        Mng. Dir.          (949) 721-6651
  Sherry Yin                        Associate          (949) 721-6651            ACME & Latin America
                                                                                 Ben Elias, CFA                     SVP, Sr. Analyst     (212) 338-4706
  Restaurants
  Lynne Collier                     Mng. Dir.          (214) 702-4045
                                                                               TECHNOLOGY
  Philip May                        Analyst            (214) 702-4004
                                                                                 Data Networking and Storage
ENERGY                                                                           Alex Kurtz                         Mng. Dir             (415) 402-6015
  Exploration & Production                                                       Amelia Harris                      Analyst              (408) 918-6132
  Michael J. McAllister             Mng. Dir.          (212) 338-4783
  Tim Rezvan, CFA                   Analyst            (212) 338-4736
                                                                                 Financial Technology
                                                                                 Greg Smith                         Mng. Dir             (818) 615-2029
  Ryan Mueller                      Associate          (212) 338-4732
                                                                                 Jennifer Dugan                     Analyst              (415) 402-6051

FINANCIAL SERVICES                                                               Hardware, Mobile Devices, IT Supply Chain
                                                                                 Shaw Wu                            SVP, Sr. Analyst     (415) 362-7431
  Asset Management
  Jason Weyeneth, CFA               SVP, Sr. Analyst   (212) 763-8293
                                                                                 LED Supply Chain
  Charles Warren                    Analyst            (646) 376-5309
                                                                                 Andrew Huang                       Mng. Dir.            (415) 362-6143

Banks & Thrifts                                                                  Semiconductors
  Matthew Kelley                    Mng. Dir.          (207) 699-5800            Vijay Rakesh                       Mng. Dir.            (312) 525-8431
  Mike I. Shafir                    SVP, Sr. Analyst   (212) 763-8239            Mark Kelley                        Associate            (312) 525-8430
  Matthew Breese                    Analyst            (207) 699-5800
  Brett Rabatin, CFA                SVP, Sr. Analyst   (877) 457-8625          TRANSPORTATION, SERVICES & EQUIPMENT
  Kenneth James                     Analyst            (615) 760-1474            Jeffrey A. Kauffman                Mng. Dir.            (212) 338-4765
  Nathan Race                       Associate          (615) 760-1477            Sal Vitale                         VP, Analyst          (212) 338-4766
  Peyton Green                      Mng. Dir.          (877) 492-2663            Kanchana Pinnapureddy              Associate            (212) 338-4767
  Zachary Wollam                    Associate          (615) 760-1468
  Todd L. Hagerman                  Mng. Dir           (212) 338-4744          ADMINISTRATION
  Robert Greene                     Analyst            (212) 763-8296            Carlo Francisco              Supervisory Analyst        (914) 434-3451
                                                                                 Leslie Lippai                Supervisory Analyst        (914) 606-0497
                                                                                 Marianne Pence               Mgr., Res. Admin.          (205) 949-3618
                                                                                 Nathan Mitchell              Editor                     (205) 949-3635
                                                                                 Elizabeth Koch               Editor                     (615) 946-0216
Email Address for Sterne Agee Employees: first initial + last name@sterneagee.com (e.g., jsmith@sterneagee.com)

								
To top