Going upShares of Micron Technology Inc. have climbed past $20, the highest price since 2002 and up about 200 percent from the beginning of the year.
What happened?There were three events: Microns purchase of Japanese memory chipmaker Elpida Memory Inc. in July; rising chip prices; and niggling concern about a memory chip shortage, said Dave Petso, a Boise financial planner who follows Micron.
Sweet, Sweet Elpida dealWhen Micron first considered buying Elpida, in 2009, it was chancy. The chip market was weak. As the $2.5 billion deal came to closing, chip prices improved, lifting the value of bankrupt Elpidas inventory. As the same time, the Yen fell. It turned out to be brilliant beyond belief, Petso said. Elpida became a legendary steal.
Growing marketThe Elpida purchase doubled Microns share of the world memory chip marto 26 percent in one quarter, said Mike Howard, a semiconductor analyst with IHS iSuppli. Micron increased that share without increasing the size of the overall market. They are making a fantastic margin on all of that extra 13 percent, Howard said.
Buddy, can you spare a chip?As demand stays strong, or even grows, the market is stabilizing. There arent a bunch of new companies building expensive memory fabrication plants to crank out chips. For some memory chip purchasers, that leaves a concern about a looming shortage. Its a psychological pricing game, said Howard. That kind of looming potential keeps pricing in check.
Look who noticedMicrons good fortune has drawn the attention of longer-term investors such as hedge fund Greenlight Capital Inc, which recently announced that it had bought 23 million shares for a total of $402 million. These kinds of funds arent in it for the short term or to pick up a dividend, Petso said: They are thinking the next three years look great.
Rebounding stockHistorically, Micron stock prices has swung wildly. They briefly hit $90 a share in July 2000, then tumbled. Petso remembers prices at $1.65. The stock traded at about $7.95 a share when Chairman and CEO Steve Appleton was killed in a plane crash in February 2012.
Wednesday's closingMicron ended at $21.17, up 86 cents for the day. The stock hit its 52-week high of $21.19 during the trading day.
Bill Roberts: 377-6408, firstname.lastname@example.org