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Wednesday, February 6, 2008

DRAM spot firmer; Micron

I'm reading about this big rally in DRAM spot prices. There have been a lot of capacity cutbacks of late and I guess it's leading to speculation of tighter supply going forward. That will probably prove true at some point, but I think its way too early to be thinking that way.

From what I understand, inventories at the OEM level are pretty high. The lowered guidance from companies like Intel and National Semiconductor are not indications that the situation is about to get better. There's an awful lot of economic concern out there and it wouldn't be surprising to see further weakness in PC sales as we move through this uncertainty.

Micron has some substantial design wins in CMOS sensors (camera phones) at Nokia. I think by mid-2008 they could go from single digit market share at Nokia to the #1 supplier. The Intel NAND business will begin to generate cash for them due to accounting -- for the first few quarters they had to put money in, now they'll be getting cash back. Relative to other companies in the space, they're likely to look pretty good. That said, I don't love their recent re-embrace of the DRAM market. They went from deemphasizing that business as a driver to saying they have to fight it out in the trenches with low cost Asian producers -- a difficult endeavor for a more unionized workforce. I think it's going to be very hard for them to succeed in memory.

I wouldn't chase a DRAM spot rally here.

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