Micron Technology Conference Call Nuggets: Consolidation and Contract Pricing

Micron Technology Inc. (NASDAQ:MU) reported its first quarter earnings and discussed the following topics in its conference call.


John Pitzer – Credit Suisse asked: A lot of investors I talk to are wondering whether or not there’s some consolidation events coming down the pipeline. Could just speak a little bit on your view on consolidation? What looks attractive as you think longer term?

I guess importantly, the biggest issue with consolidation is the price that the buyer and seller agree. What is your view around valuations?

Steven R. Appleton – Chairman and CEO responded: We wouldn’t comment on anything we’re thinking about or engaging in, but I will say that the DRAM market, the industry in general has been under a lot of pressure.

You can look at the financial results of a number of these companies.

In fact, if you look at our last quarter compared to the quarters of a couple of our competitors, I think (LP) lost about $500 million to $600 million; Hynix lost about $500 million, and obviously, we’re not happy to be losing any money, but it’s certainly a lot better than what their financials look like.

I think that a number of those companies continue to weaken. As they do continue to do so, they’re going to have to figure out what they’re going to do. I think that will drive some further consolidation.

I think that’s inevitable, and so, we’re just going to continue to look at whatever opportunities might exist out there.

Contract Pricing

Monica Garg – Pacific Crest Securities asked: Could you give us or provide some idea on the contract pricing in the DRAM market right now? How is it trending compared to spot market? Is it below, higher or in line?

Ronald C. Foster – CFO and VP of Finance responded: The contract pricing is above the spot market today and has been for the past few months, I think consistent with Steve just referenced, in terms of the health of the industry.

I think OEMs have to be a little careful on how hard they push given the supply from some of the more challenged competitors ability to consistently supply in the future. So, I think contract will stay that way as best we can see in the short–term.

Now having said that the spot market pricing within the last couple of weeks had a mild uptick–and when I say mild–I mean in a given week it was up from a low. It bounced up about 15 percent and then settled down a little bit, but it is still above where we were at the end of the quarter.

We think the OEM contract pricing will stay above that and again, the spot market has bounced a little bit incrementally higher but not to a place where we needed to get to.