Micron shares hit four-year high

Article published Sep 14, 2006
by Ken Dey @ The Idaho Statesman

Micron shares hit four-year high
Increased price, stock upgrade follow Boise tech giant's strong third-quarter earnings

Micron Technology's stock is trading at a four-year high this week, after a JPMorgan analyst upgraded his recommendation for the Boise company's stock based on higher prices for its primary product.

The stock recorded a high of $18.65 a share earlier this week, but pulled back somewhat as investors took profits. It closed at $18 a share Wednesday.

Over the past year, Micron stock has traded as low as $11.60 a share.
The boost in the company's stock price comes on the heels of a strong third quarter that saw revenues up nearly 25 percent over the third quarter of 2005.

Analysts say the increased stock price and improved market conditions are further good news for the company, which employs more than 10,000 people at its Boise headquarters and is the region's top private employer.
JPMorgan analyst Shawn Webster said in a research note to clients Monday that he was changing his rating from the equivalent of a hold to a buy.

Webster said the company would benefit from an increase in the price of DRAM — dynamic random access memory. DRAM chips are primarily used in personal computer applications and make up about half of Micron's business.

"Our checks indicate DRAM memory pricing continues to improve during the third quarter of 2006, ahead of our expectations for roughly flattish pricing," Webster said in his note.
Stock prices for most semiconductor companies saw a boost this week on the news that DRAM prices are expected to increase.

Bill Dezellem, with Tieton Capital Management in Yakima, Wash., said Micron's stock moved steadily up for the first part of the year, dropped back in July and is now on its way back up.
"The stock price is acting as though there is a continued increase in the level of conviction the investment community has that Micron is well positioned," Dezellem said.

Webster and other analysts say DRAM prices are being driven up by supply as companies move from DRAM production to making products like Flash memory.

Micron has done the same, but Webster said Micron still produces enough DRAM to benefit from the increased prices.
Webster expects demand for DRAM to remain strong as computer manufacturers need more memory to meet the demands of Microsoft's upcoming VISTA operating system.

Because Micron has diversified, Webster said, it's also in a better position to weather any downturn in the DRAM market.
Dezellem said demand for memory is typically strong as companies build up products for the Christmas season.

Micron fortunes have historically depended on the DRAM market. But the company has sought to insulate itself from the dramatic shifts in DRAM prices by diversifying the company with a better mix of products.

Micron's third-quarter 2006 earnings released in late June were the first time in the company's history that DRAM sales didn't account for the majority of Micron's revenue.
Company officials say they're moving to a mix where only a third of Micron revenues would be tied to DRAM. The rest would be split equally between flash memory and imaging chips.