I was gambling in Havana
And I took a little risk
Send laywers, guns, and money
To get me out of this!
-- From "Lawyers, Guns, and Money" by Warren Zevon
It sounds like tough cookies, but it's even worse than that. Micron and rivals could do something about the problem. Instead, they keep making it worse.
CEO Steve Appleton proudly reports that his next-generation 34-nanometer technology is "ramping rapidly." This will again lower the cost of making a gigabyte of flash memory, but it will also let Micron keep pumping inventory into a market that already has more than enough of it.
As a result, the average selling price of a NAND flash chip (the kind of memory that Apple
Under those conditions, I'm not surprised to see Micron lose $751 million this quarter, or $0.97 per diluted share, on $993 million in net sales. We're looking at a negative 27% gross margin. That's better than the 32% underwater gross margin of last quarter, but clearly not a great way to run a business.
There are some encouraging signs of discipline around the memory industry right now. A cadre of Taiwanese powerhouses are banding together to gain economies of scale and the power to exercise some restraint. Micron is playing an instrumental part in that effort and could end up running the show in Taiwan. But it could be too little, too late.
Send lawyers, guns, and money. Please?
Apple is a Motley Fool Stock Advisor recommendation. Intel is a Motley Fool Inside Value pick and The Fool owns shares of Intel and covered calls of Intel. Try any of our Foolish newsletters today, free for 30 days.
Fool contributor Anders Bylund owns shares in AMD, but he holds no other position in any of the companies discussed here. He believes that rock lyrics qualify for National Poetry Month duty. You can check out Anders' holdings or a concise bio if you like, and The Motley Fool is investors writing for investors.