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Friday, May 9, 2008

Micron (MU) at Merrill notes

At Merrill yesterday, Micron made their case for why they're going to be the low cost producer in memory. In DRAM, they're seeing "pretty robust demand" they termed seasonal or better -- the notebook business is the key strength there. Pricing in May was up in the 5-10% range. They already get a higher ASP than most of the industry due to their server and specialty DRAM business (programs where they have a design-specific win and its not a commoditized board swap every time a unit gets churned out). As a result of specialty DRAM and servers, their ASP is 50% higher than the rest of the industry.

Capital spending cutbacks in the DRAM arena have made customers concerned about supply availability in the second half. Micron is very big on discussing the supply side of the equation and often will remind investors that bit growth demand is relatively constant but its the supply side that drives their profitability. They say supply is somewhat tight right now. They believe there will be roughly 60% total memory demand growth in DRAM -- 50% bit growth plus ~8% unit growth.

Lexar, their NAND card division, continues to improve with better margins (though I think it still prints red). Lexar now procures roughly 50% of their raw NAND from Micron directly -- when they bought it a couple of years ago, Lexar was buying 95% of their product from Samsung. They're planning to roll out solid state NAND drives in the second half of the year and expect 256gb capacity by year end. Apple is getting ~$1200 for a 64gb drive presently -- are we really talking about $5000 hard drives? That's dumb.

The questions stunk. No one asked them about NAND pricing. No one asked them about channel and company inventories. Put me in, coach.

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