Convertible debt was not necessary at the time as they had cash on hand plus they were far enough under their loan covenants to borrow a lot more without conversion provisions. The amount of additional money that Micron will have to pay to extinguish this convertible debt is huge and could have been better spent. Granted what is done is done, but it was a dumb CFO move.
Interest rates may be low now, but Micron will not enjoy the full benefit of a lowest possible interest rate because of the net negative effect on the balance sheet of retiring this convertible debt. Look at the Moody's rating, it is not stellar, and Micron pays for that. That was and is money wasted.
Maybe this is what got leaked out a few weeks ago when the stock started to cave in, and those institutional holders with huge firepower know finances well enough to know that this wasn't going to be taken well on Wall Street. Just a hunch.
Oh really!!! That is probably how Foster thinks too.
When interest rates are close to zero, that means that the cash they have on hand is earning close to zero. Moody's ratings will mean that Micron will be paying between 4 to 6% on this $750 million debt. That = $30 to 45 million in additional interest expense plus any fees to do the deal, less a much smaller amount of debt retirement interest expense. Interest expense far outweighs any interest income on the money on hand.
DEFINITION of 'Three Black Crows' A bearish candlestick pattern that is used to predict the reversal of the current uptrend. This pattern consists of three consecutive long-bodied candlesticks that have closed lower than the previous day with each session's open occurring within the body of the previous candle.
"the convertibles would lead to stock dilution" That would depend on whether MU had to issue additional stock or take treasury stock to cover the note redemption. If the notes are satisfied using existing issued stock, no dilution occurs.
Sentiment: Strong Buy
I wonder how many DRAMs and NANDS devices Apple will buy over the say the next five years. Total up that number and then divided $40 billion /(Total NAND + DRAM Units over five Years Bought by Apple).
I ma sure that this could be estimated but maybe someone has done it.
Whatever one thinks of the convertible debt at the time issued they seemed to be necessary. With the stock appreciation (that is a good thing) the convertibles would lead to stock dilution and lower EPS (that is a bad thing).
MU management has decided that is better to take care of the dilution aspects now. This required them to use cash to essentially pay off (not a real technical term I guess) the holders and stop the potential dilution. The additional debt will allow that.
Interest rates are very low historically so I think borrowing now is better than borrowing later. It has to be paid back sure. I think they will be very successful over the next five years and that this will all be noise. Still it gives some in the market concern and can cause selling.
One may not like what was done in the past but it must be judged with a knowledge of the conditions at the time.
The support is strong here. I am Long and Strong. IMHO. MU can go to the 30's by next week for sure.
Sentiment: Strong Buy
Absolutely!!! The CFO continues to show he is just either a yes man, or has not used good judgement in how to best utilize the leveraged free cash flow. They need a strong CFO replacement who can maximize the financial position of the company. Foster never should have engaged in convertible debt in the first place and now he is ridiculously not using available cash to extinguish his errors. Forget share buy backs, or dividend talk. Reduction of debt would do more to improve the stock price than any of his un-bright ideas. It would reduce share dilution and interest expense, both positives to an improved income statement and balance sheet.
Morons is a mild word.
Yeah I did but then I bought it back under $30 after deciding that it was a pretty good trading stock between $30 and $35. I went back over past six months and discovered it had made that move 4 times over the last 6 months. I don't know what the price was this morning when I sold my Calls but I broke even. I'm trying to buy the drop in QRVO after they reported a strong quarter with great forward guidance last night but haven't quite hit with the right price yet. As far as MU is concerned, I doubt if I'll be back. This is one stinky stock and I think we finally hit the right answer as to why yesterday when someone said MU and SNDK sell commodities but companies like SWKS and QRVO sell proprietary products. That's a big difference and is the likliest explanation as to why MU has been languishing and SNDK has been going down. Cramer thinks SNDK will drop further from here and if he's right, IMO MU will go with it. I kind of feel sorry for those here that have stars in there eyes with MU. It's like that first love, you can't see reality when your eyes are glossed over. Well sooner or later, the reality that your true love isn't what you thought she was replaces that starry eyed feeling and you come to your senses. Hopefully everyone here will come to their senses before it's too late.
It's the whole semis sector. We had the bad news about; MSFT,IBM,QCOM,SNDK and many others. The problem is not MU. If the problem was MU, the price should be around the low $20's by now. This is the time to buy when there is so much pessimism, gloom and doom, this is the right time to buy. I am not worried I plan to add more MU to my portfolio before EOD. If you buy here or hold you should reap handsome profits next few months. If you are worried I suggest buy the SOXS.
Sentiment: Strong Buy