Tuesday, November 21, 2006

Calls of Note Part 6

- UBS notes their global memory and end market checks are leading them to increase their sales and EPS estimates for Micron (NYSE:MU). Firm's F1Q07 sales estimate is increasing to $650M from $625M, with EPS advancing to $0.21 from $0.20 (pro forma $0.22). They believe the company is benefiting from stronger than expected PC demand, contract pricing increases, and solid NAND production ramp.

From a commodity PC DRAM perspective, what they believe to be a generally healthy demand environment for desktop and notebook PCs that ship in a "Vista Ready" configuration of 1GByte of DRAM or more continues to provide support for DRAM ASPs. DDR2 pricing in particular is seeing more of this ASP support relative to DDR as more recently launched PC platforms only support the former. With an estimated two thirds of PC DRAM production centered on DDR2, the firm believes Micron is maintaining pace with the industry's migration to DDR2.

They are also increasing F2007 EPS estimate to $1.20 from $1.15 (pro forma $1.25) owing to slightly more favorable GM assumptions as MU pulls down inventory in wireless areas, benefits from mix improvements, and accelerating DRAM and NAND cost decreases.

DRAM Spot and contract pricing are up 35% and 41% YTD, with a Spot premium of 9%. Contract pricing continues to rise into Nov Qtr end and should support higher financial projections, while DRAM spot appears to be reaching a near-term floor and argues an extension of this strength through

Maintains Buy and $24 tgt.

Notablecalls: I've been positive on MU since Nov 14 and looks like the call made by Bear Stearns continues to play out. The stock shot up following the call but has been coming in over the past couple of days. I think UBS comments will produce the needed bounce. Actionable call alert!

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