The report noted, “Micron announced the Elpida deal after months of speculation surrounding the deal structure and payback. We believe the deal is very smart and a pragmatic structuring for MU, with only $750M upfront, and the remainder $1.75B in “interest-free” installments through 2019. Also a fungible limited Capex outlay for Elpida in 2013, we believe this should be very agreeable to investors.”
Rakesh now shows that the DRAM market is now down to only 3 real players controlling over 90% of the global DRAM market: Samsung(~38%), Micron-Elpida(~28%) and Hynix(~24%). This deal gives Micron access to Elpida’s Hiroshima fab and the 89% ownership in the Rexchip Fab. The combined entity will have a capacity of ~580K Wpm vs ~380K Wpm now
Rakesh concludes: “Near term DRAM trends continue to be Positive – but we might see the DRAM markets responding more positively over coming weeks as supply is further rationalized. Not changing any estimates here, but overall we believe a positive event as it removes a Significant Overhang from the stock.”
With shares at $6.55, the consensus price target is now $10.00 at Stern Agee. That target is not exactly unreasonable even if it is more than 50% projected appreciation because the consensus price target from Thomson Reuters is $9.97 on Micron’s stock.
JON C. OGG
Top Gaining Stocks
Top Losing Stocks