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Mar 19, 2012

SAN FRANCISCO (MarketWatch) — The last few months have been rough for Micron Technology, though that might not be so apparent from looking at the incredible run-up on the chipmaker’s stock price.

Micron (US:MU) has struggled with falling prices for its products and a market so wobbly it recently forced one of its rivals into bankruptcy. This on top of the tragic death of its well-regarded chief executive, who was killed in a plane crash in the company’s hometown of Boise, Idaho, last month.

It has had such a rough time recently that Micron is expected to swing to a loss when it reports second quarter earnings on Thursday, March 22. Analyst are expecting a loss of 19 cents, on revenue of $2 billion, compared with a profit of 7 cents a share, on revenue of $2.3 billion in the year-earlier period, according to FactSet Research.

But behind the dark clouds that have surrounded the Boise, Idaho-based chipmaker are signs of better times ahead.

This much is clear on Wall Street where the stock has soared roughly 40% since the beginning of the year, and more than 50% over the last three months. The shares were trading flat on midday Friday at $8.83.

The optimism is based on signs that the PC market is rebounding. More importantly, analysts see Micron emerging as a better-positioned player a rapidly shifting landscape in the market for DRAM memory chips — and in a fast-growing market for NAND Flash processors.

DRAM processors are used mainly in PCs and servers. The industry has struggled with the PC market as a result of weak consumer demand and the growth in popularity of mobile devices led by smartphones and tablets.

Micron also sells NAND Flash chips, which is riding a wave of growing demand. These are the types of chips that enable data to remain stored in devices even when they’re turned off, and is widely used in smartphones, tablets, digital cameras and MP3 players, just to name a few categories. Flash is also the foundation for solid-state drives that now also being adopted by a broad range of products, including PCs and servers.

Micron is the No. 3 NAND vendor in terms of revenue, after Samsung and Toshiba, according to IDC. It also is the third biggest player based on sales in the DRAM market, IDC said.

But many also consider the NAND market to be mostly a commodity. The market has been so shaky that, last month, Elpida Memory Inc. of Japan filed for bankruptcy. That move shook up the industry, and some analysts see Micron emerging as a more competitive player as a result.

On March 14, Bernstein Research raised Micron’s rating to outperform from market perform, speculating that the company will likely buy most if not all of Elpida, becoming a stronger rival to Samsung and Hynix.

“We believe Micron offers the best reward for the least amount of downside risk of all DRAM investments,” wrote Bernstein analyst Mark Newman.

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Posted: Mar 19, 2012 11:20pm


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