Foolish Forecast: Fading Memories of Micron

"I remember the time I knew what happiness was / Let the memory live again."
  -- From Memory by Andrew Lloyd Webber

Those happy times seem so far away for computer memory maker Micron (NYSE: MU) these days. There's light at the end of the tunnel -- but is it an oncoming bullet train? Let's find out.

What Fools say:
Here's how Micron's CAPS rating stacks up against some of its peers and competitors:

Company	Market Cap (in billions)	Trailing P/E Ratio	CAPS Rating (5 stars max.)
Intel (Nasdaq: INTC)	$81.4	11.7	****
SanDisk (Nasdaq: SNDK)	$2.2	N/A	****
Micron Technology	$2.3	N/A	***
Qimonda AG (NYSE: QI)	$0.1	N/A	**
Spansion (Nasdaq: SPSN)	$0.03	N/A	**

Data taken from Motley Fool CAPS and Yahoo! Finance.

Late in November, CAPS all-star TheHuney noted that Micron's stock was selling at a near 75% discount to the $8.11 book value per share and thought that 25% to 40% would be a more reasonable discount. "This is a beaten-down stock with strong potential to rebound in a dramatic fashion sometime within the next 5 years," TheHuney says, "but this is a long-term buy-and-hold only and this is definitely not for the risk averse!"

Fellow all-star skymutt2 sees some pricing problems (more on that later) and says that Micron "is burning thru its cash at the rate of about [$]100 million a month and it has a little over a billion left." Other players point out a large debt load, too.

What management does:
You know you work in a messed-up sector when your gross margins are negative. Never mind pesky operational expenses, Micron loses money on every chip sold.

Margins	5/2007	8/2007	11/2007	2/2008	5/2008	8/2008
Gross	21.9%	19%	11.3%	4.3%	3.1%	(0.9%)
Operating	(1.6%)	(5.1%)	(11.1%)	(16.5%)	(16.9%)	(20.2%)
Net	(1.7%)	(5.6%)	(12.2%)	(25.3%)	(24.6%)	(27.7%)
FCF/Revenue	(40.9%)	(46.9%)	(43.7%)	(34.7%)	(28.2%)	(25.9%)

Growth (YOY)	5/2007	8/2007	11/2007	2/2008	5/2008	8/2008
Revenue	9.1%	7.9%	4.7%	(0.3%)	3.6%	2.7%

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Under these circumstances, and considering the free-falling chip prices to consumers and system builders, I'm sort of scratching my head over the fact that Micron grew its overall sales for the fiscal year. How? More importantly, why? And is the additional revenue worth burning through the company's cash reserves?

I'll be curious to see what Micron has to offer when they report first-quarter earnings tomorrow. This Fool would like to see even more cost-cutting initiatives and a greater reduction in inventory. A troubled economy and intense competition aren't exactly paving the way for a solid quarter.