In finance, a contrarian is one who attempts to profit by investing in a manner that differs from the conventional wisdom, when the consensus opinion appears to be wrong. MU - Strong Buy
A contrarian believes that certain crowd behavior among investors can lead to exploitable mispricings in securities markets. For example, widespread pessimism about a stock can drive a price so low that it overstates the company's risks, and understates its prospects for returning to profitability. Identifying and purchasing such distressed stocks, and selling them after the company recovers, can lead to above-average gains.
Cash flows from operations for the first quarter of fiscal 2011 were $732 million. During the quarter, the company invested approximately $570 million in capital expenditures and spent $635 million to retire debt. The company ended the fiscal quarter with cash and investments of $2.4 billion.
Memory chip prices are tumbling. The average selling price of its core dynamic random-access memory chip is down 23 percent.
But Steve Appleton, chairman and CEO, isn’t predicting gloom — at least not for Micron.
The company’s diversification is helping weather the price cycles of the memory chip industry, he told analysts Wednesday after Micron reported another quarterly profit, although one that fell short of analysts’ expectations by almost half.
One analyst said the nearly $3 billion Micron had socked away in cash and investments by the end of its fourth quarter in August will help sustain Micron through meager times that could last several more months. The cash could even help the company pick up some assets on the cheap, said Mike Howard, an analyst for iSuppli, which follows the tech industry.
At the annual meeting last week, Appleton predicted that only two or three of the 11 memory chip producers may survive. On Wednesday, in a phone conference with Micron analysts, he said “the majority of our competition is not in very good shape.”
Micron keeps looking for opportunities. Earlier this year, Micron bought Swiss company Numonyx Holdings B.V., which makes two types of memory that Micron was not making, in a stock transaction valued at $1.2 billion.
Micron’s market share for dynamic random-access memory, its primary product, is about 11 percent based on revenue, Howard said. Expansion, through taking control of other existing production facilities, could expand Micron's presence in the market without adding to overproduction, he said.