Don’t Bet Your Chips on Intel, Micron
Posted on October 01, 2011 at 06:30 AM EDT
Intel’s solid but growing too slowly, and Micron’s too hard to predict. Both stocks might be worth avoiding.
When it comes to semiconductors, be wary of bets on PC memory — so-called Dynamic Random Access Memory (DRAM) — and instead bet on Flash, which is used on the iPhone, iPad and iPod. That does not mean that all PC chip bets are bad, though. That’s just the takeaway from a look at semiconductor companies Micron Technology (NASDAQ:MU) and Intel (NASDAQ:INTC).
Late Thursday, Micron reported an unexpected loss. In its report, Micron posted a $135 million loss of 14 cents per share for its fiscal fourth quarter. FactSet-polled analysts expected a penny per share of profit. Micron’s 14% revenue drop to $2.14 billion from was slightly better than the expected $2.11 billion.
The report is a mixture of bad news and good news. The bad news is that the revenues dropped because of Micron’s dependence on DRAM — where prices are dropping along with demand for PCs. The good news is that Micron has shifted its business mix in favor of the more profitable flash memory chips — 41% of total sales. Its DRAM business is down to 36% of the total.
That’s not to say that all bets on PC chips are off. Despite slowing PC sales, corporate PC demand has been stronger than many expected. Its new PC Central Processing Unit chip architecture helped it gain more market share. Dubbed Sandy Bridge, Intel’s CPU architecture combines “high-level graphics and CPUs integrated onto the same piece of silicon,” according to eWeek.
That architecture has given Intel a phenomenal market share of 81.8% in the global processor market, according to market research firm IHS iSuppli. And while the PC DRAM business features dropping prices, the CPU market remains a profit machine for the market king, Intel.
Despite slowing PC sales, corporate demand remains strong while consumer demand wanes. According to Matthew Wilkins, principal analyst for computer platforms research at IHS iSuppli, “Intel in the second quarter benefited from the combination of a recovery in PC demand and strong shipment growth for its new Sandy Bridge line of microprocessors. Strong corporate PC sales were particularly beneficial to Intel, as the enterprise computing segment has been outperforming the consumer market.”
Does this mean you should avoid Micron and buy Intel? I would avoid both but for different reasons:
While Intel clearly is a more solid company, neither looks like a great place to bet your investment chips.
Peter Cohan has no financial interest in the securities mentioned.
Nasdaq quotes delayed at least 15 minutes, all others at least 20 minutes.
Markets are closed on certain holidays. Stock Market Holiday List
By accessing this page, you agree to the following
Press Release Service provided by PRConnect.
Stock quotes supplied by Telekurs USA
Postage Rates Bots go here