Micron Technology, Inc. Nikhil Nichani Francis Perez

Business Summary Micron Technology, based in Boise, Idaho, engages in manufacturing and marketing of semiconductor devices worldwide. The companys product line include Dynamic Random Access Memory(DRAM), Solid-State Drive(SSD), and Flash Memory(NAND and NOR). Microns products are used in many electronic applications such as personal computers, memory cards, mobile phones, USB storage devices, digital cameras, and MP3 players. Micron has assembling facilities in the United States, Asia, Middle-East, and Europe, and is a major player in the international markets with strong sales in China. In May, 2010, Micron completed the acquisition of Numonyx, which manufactures NOR Flash Memory, giving Micron a 40% share in that market.

Micron Technology, Inc.(NASDAQ:MU) 2009A2010A2011E2012E EPS(Diluted)(2.35) P/E RatioN/A S&P 500 P/E S&P 500:1, Week Range: Last Trade:7.27Beta:1.05 Market Cap:7.24BRecommendation:Buy

Customer/Suppliers 45% of fiscal 2010 sales were to the computing market, including PCs, servers, notebooks, and workstations. 84% of fiscal 2010 sales came from international companies and divisions – 39% of total sales to China Intel and HP account for 9%, and 13% of sales, respectively Majority of Microns operations require raw materials obtained from limited number of suppliers. The Numonyx division is under contract to receive supplies from Hynix Semiconductors until September 2011.

Competitors MicronSanDiskElpidaToshiba Market Cap 7.24B10.46B¥189.8B($2.2B)*¥1.8T($21.3B)* Revenue(ttm) 8.48B4.74B¥623.6B($7.33B)*¥6.5T($76.5B)* P/E(ttm) Profit Margin(ttm) 22.9%24.3%-0.95%1.01% P/TB EBITDA(MRQ) 433M432.8M¥48.8B($574M)*¥71B($835M)* ROE(ttm) 28.5%26.4%-1.80%20.95% YoY Sales (MRQ) 91.4%39.8%55.2%2.9% * Converted to USD using 85 USD/JPY cross rate

Competitive Advantage Only American company in the DRAM market, one of the largest in the world. DRAM is used as main system memory in PC and servers Broad international base give it less exposure to local economic downturn MUs EV is 15% less than that of SanDisks(6.6B vs. 7.8B), yet revenues are 79% higher Variety of products offered for manufacturing of a diverse list of electronics

Source of Revenue

Strengths Strong management – Decreasing debt, increasing cash Diversified customer base – International sales increased 82.05% in FY2010 Gross Margin – 32% in FY 2010, highest in the last 10 years Free Cash Flow – $2.4B; 245% increase YoY, 29.24% of sales, highest in the last 10 years Undervalued – 3.9 vs 18.7 industry P/E

Weakness Virtually no backlog – customers reluctant to enter into long term, fixed price contracts Small in the over all semiconductor market – less than 2% market share in the US Volatile average selling prices(ASP) in NAND and DRAM market Exposed to significant liabilities related to products that are incompatible to end users

Opportunities Corporate/Personal Windows 7 upgrade cycle – still in the early innings of the migration from XP to 7 – 109% growth in DRAM in 2010 Growth in global smart phone usage – sales up 96% in Q3 YoY, 19.3% of overall phone sales Stronger foreign currencies(yen, Singapore dollar, euro) and weaker US dollar Rebound in DRAM and NAND prices Takeover target

Threats Dramatic decline in ASP of DRAM and NAND is continuous – decreased 52% and 56% in 2009, respectively. Due to huge supply surpluses Further decline in global economic activity Litigation – Outstanding lawsuits over price fixing Weakness in foreign currency could steer customers to foreign competition, raise cost Higher rates – 25% of debt is variable