Wednesday, May 14, 2008

Memory vendors investment thesis: timely call.

Here’s an interesting video which shows the advantages of a Solid State Drive over a Hard Disk.

The article I had written earlier about the impending upturn in the memory sector turned out to be quite timely (Here’s the Seeking Alpha version).

  • Citigroup upgraded Sandisk on Tuesday. SanDisk Corporation (NASDAQ:SNDK) is Citi's mid-cap top pick on contract pricing and EPS revision catalysts.
  • Trade radar posted a summary on the industry coverage. It talked about the Citigroup upgrade, reports by the DRAM Exchange, the Korea Times, and the
  • Applied Materials, Inc. (NASDAQ:AMAT) on their conference call talked about a sharp slowdown in DRAM and NAND flash spending. (A sure sign of price stabilization.) The memory vendors, Micron Technology, Inc. (NYSE:MU), SanDisk Corporation (NASDAQ:SNDK) and Qimonda AG (NYSE:QI) rallied on the news.
  • [EDIT]: There was a Sandisk upgrade from Needham as well.

One consequence of any stabilization in memory pricing would be a minor erosion in the margins of companies like Hewlett-Packard Company (NYSE:HPQ) and Apple Inc. (NASDAQ:AAPL). These guys have been helped thus far by a favorable commodity pricing environment, which might be tough to repeat going forward.

While this rally may turn out to be short lived, and we may very well retest the January -March bottom, the consensus is slowly but surely turning around to the fact that the worst in the memory sector is probably behind us.

Full Disclosure: No positions.