By Ronda Fears
Nashville, March 14 - Wachovia Securities, Inc. convertible analysts foresee a wider loss at Micron Technology Inc. than previously expected, but they still recommend the new 2.5% issue as they are bullish on the story long-term.
"Micron's February quarter looks weak," said Henry Voskoboynik and Dmitry Melnick in a report Friday, noting pressure in the DRAM market and weak enterprise spending.
"The long-term outlook for Micron remains unchanged. Our long-term outlook for Micron is intact. We believe Micron remains one of the most cost-efficient DRAM producers in the world."
Also, the analysts see positive credit events unfolding at Micron.
"Moreover, Micron is finally addressing its operating costs," the analysts said, pointing to the company's Feb. 18 announcement that it will cut 10% of its workforce.
"This is the first round of job cuts the company has had since 1985. We believe this is a positive move for the company and should have a positive impact on Micron's cash consumption and credit."
With the expectation that the DRAM market environment in the February quarter was challenging for Micron, the analysts widened their forecasted loss for the company.
The analysts now see a fiscal second quarter loss per share of 39c versus 17c previously. For fiscal 2003, they now expect a loss per share of $1.70 versus 94c previously.
Sales in the quarter are now projected at $706 million versus a previous expectation of $678 million. For the year, sales are now projected at $3.0 billion versus a previous forecast of $3.4 billion.
"We maintain our buy rating on Micron's 2.5% convertibles due 2010," the analysts concluded.
Micron Technology 2.5% convertible due 2010
| Price: | 96.79
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| Common price: | $7.74
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| Current yield: | 2.58%
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| Yield to maturity: | 3.02%
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| Premium: | 47.41
|
| Conversion ratio: | 84.832
|
| Ratings: | B2/B-
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| Call: | Feb. 6, 2006
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| Call price: | 101.429
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