Micron Technology, Inc.
Nikhil Nichani
Francis Perez
Business Summary
Micron Technology, based in Boise, Idaho, engages in
manufacturing and marketing of semiconductor devices worldwide.
The company’s product line include Dynamic Random Access
Memory(DRAM), Solid-State Drive(SSD), and Flash
Memory(NAND and NOR). Micron’s products are used in many
electronic applications such as personal computers, memory cards,
mobile phones, USB storage devices, digital cameras, and MP3
players. Micron has assembling facilities in the United States, Asia,
Middle-East, and Europe, and is a major player in the international
markets with strong sales in China. In May, 2010, Micron
completed the acquisition of Numonyx, which manufactures NOR
Flash Memory, giving Micron a 40% share in that market.
Micron Technology, Inc.(NASDAQ:MU)
S&P 500:
Last Trade:
Market Cap:
1,180.55
7.27
7.24B
52 Week Range:
Beta:
Recommendation:
6.36-11.40
1.05
Buy
2009A
2010A
2011E
2012E
EPS(Diluted)
(2.35)
1.85
1.10
1.24
P/E Ratio
N/A
3.93
6.61
5.87
S&P 500 P/E
20.52
21.53
Customer/Suppliers
• 45% of fiscal 2010 sales were to the computing market,
including PCs, servers, notebooks, and workstations.
• 84% of fiscal 2010 sales came from international
companies and divisions – 39% of total sales to China
• Intel and HP account for 9%, and 13% of sales,
respectively
• Majority of Micron’s operations require raw materials
obtained from limited number of suppliers. The
Numonyx division is under contract to receive supplies
from Hynix Semiconductors until September 2011.
Competitors
Micron
SanDisk
Elpida
Toshiba
Market Cap
7.24B
10.46B
¥189.8B($2.2B)*
¥1.8T($21.3B)*
Revenue(ttm)
8.48B
4.74B
¥623.6B($7.33B)*
¥6.5T($76.5B)*
3.99
9.61
22.9%
24.3%
-0.95%
1.01%
.93
2.13
EBITDA(MRQ)
433M
432.8M
¥48.8B($574M)*
¥71B($835M)*
ROE(ttm)
28.5%
26.4%
-1.80%
20.95%
YoY Sales(MRQ)
91.4%
39.8%
55.2%
2.9%
P/E(ttm)
Profit Margin(ttm)
P/TB
*Converted to USD using 85 USD/JPY cross rate
Competitive Advantage
• Only American company in the DRAM market,
one of the largest in the world. DRAM is used as
main system memory in PC and servers
• Broad international base give it less exposure to
local economic downturn
• MU’s EV is 15% less than that of SanDisk’s(6.6B
vs. 7.8B), yet revenues are 79% higher
• Variety of products offered for manufacturing of
a diverse list of electronics
Source of Revenue
Strengths
• Strong management – Decreasing debt,
increasing cash
• Diversified customer base – International sales
increased 82.05% in FY2010
• Gross Margin – 32% in FY 2010, highest in the
last 10 years
• Free Cash Flow – $2.4B; 245% increase YoY,
29.24% of sales, highest in the last 10 years
• Undervalued – 3.9 vs 18.7 industry P/E
Weakness
• Virtually no backlog – customers reluctant to
enter into long term, fixed price contracts
• Small in the over all semiconductor market –
less than 2% market share in the US
• Volatile average selling prices(ASP) in NAND
and DRAM market
• Exposed to significant liabilities related to
products that are incompatible to end users
Opportunities
• Corporate/Personal Windows 7 upgrade cycle –
still in the early innings of the migration from
XP to 7 – 109% growth in DRAM in 2010
• Growth in global smart phone usage – sales up
96% in Q3 YoY, 19.3% of overall phone sales
• Stronger foreign currencies(yen, Singapore
dollar, euro) and weaker US dollar
• Rebound in DRAM and NAND prices
• Takeover target
Threats
• Dramatic decline in ASP of DRAM and NAND is
continuous – decreased 52% and 56% in 2009,
respectively. Due to huge supply surpluses
• Further decline in global economic activity
• Litigation – Outstanding lawsuits over price
fixing
• Weakness in foreign currency could steer
customers to foreign competition, raise cost
• Higher rates – 25% of debt is variable