Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Is Micron Technology Worth Buying?

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

Micron Technology (Nasdaq: MU  ) recently disappointed investors by reporting a double-digit fall in revenues. The company reported a loss in its final fiscal quarter of 2011. But is its future really that bleak? Let's take a closer look.

Through the magnifying glass
As was the case in the previous quarter, Micron fell short of consensus estimates. It reported a net loss of $135 million, or $0.14 a share. Revenues were $2.14 billion, a 14% decline over the same quarter last year. Gross margin came down to 15%, from 31% in the same quarter last year

The main reason for the dismal performance was a major decline in DRAM prices driven by sluggish demand and excess supply. Prices are expected to remain low in the future because of increasing demand for tablets, leading to a fall in PC demand. Manufacturers might need to rein in production to allow prices to normalize. Investors in companies such as Apple (Nasdaq: AAPL  ) and Dell (Nasdaq: DELL  ) should also take note, though it's important to remember that computers make up only around 27% of Apple's revenue.

A spoonful of sugar
Some good news here may be that Micron is looking at products other than DRAM chips. Intel (Nasdaq: INTC  ) and Texas Instruments (NYSE: TXN  ) have already exited the DRAM market, and the poor performance of the DRAM segment indicates that Micron should also consider doing the same.

NAND prices have improved marginally, and the final quarter offered a surprise with total DRAM revenues being less than NAND revenues -- something that has never happened before in the company's history. This development suggests that the company should consider moving further into the NAND segment -- especially with the approaching holiday season, which usually sees a marked increase in demand for smartphones, solid-state drives, and tablets.

The Foolish bottom line
I don't think the near future looks very rosy for Micron. Falling DRAM prices could significantly affect the company's results in the near future and beyond. Until pricing dynamics change or Micron diversifies away from DRAM, I'd be cautious of investing in this stock. Investors, beware.

Fool contributor Abantika Chatterjee doesn't own shares of any company mentioned. The Motley Fool owns shares of Intel, Texas Instruments, and Apple. Motley Fool newsletter services have recommended buying shares of Apple, Dell, and Intel, creating a diagonal call position in Intel, and creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (1) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 14, 2011, at 11:18 PM, justicenow wrote:

    How could this article be written with no mention of the Rambus suit, currently in the hands of the jury?

    The potential judgement is greater than the market cap of MU.

Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1570362, ~/Articles/ArticleHandler.aspx, 10/26/2016 11:21:41 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 2 hours ago Sponsored by:
DOW 18,199.33 30.06 0.17%
S&P 500 2,139.43 -3.73 -0.17%
NASD 5,250.27 -33.13 -0.63%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/26/2016 4:00 PM
AAPL $115.59 Down -2.66 -2.25%
Apple CAPS Rating: ****
DELL.DL $0.00 Down +0.00 +0.00%
Dell CAPS Rating: *
INTC $34.92 Down -0.18 -0.51%
Intel CAPS Rating: ****
MU $17.64 Up +0.10 +0.57%
Micron Technology CAPS Rating: ***
TXN $71.71 Up +0.51 +0.72%
Texas Instruments CAPS Rating: ***