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上个季度美光管理层做了几次投资者宣讲，均表示前景乐观；
七月十号发布的信息显示上个季度并没有任何股票回购迹象；
该公司管理层的乐观估计无疑误导了投资者；
该公司管理层在股票回购上的动作表明，他们知道在三季度财报和消极的四季度预期发布后股票市场将陷入低迷；
该公司管理层在3季度财报发布时表示，此前没有人预见到PC市场的大幅衰减，然而事实并非如此，IDC和Gartner均作出过PC市场萎靡的预测。
- Micron management made several investor presentations during the quarter that were very bullish.
- The 3Q 10Q was released on July 10 and shows no share buybacks during the quarter.
- Management's bullishness has misled investors.
- Management's inaction on the share buyback may indicate they knew how poorly the stock would react after their 3Q earnings release and negative 4Q guidance.
- Management stated in the 3Q release that nobody had foreseen the PC collapse; IDC and Gartner did.
Micron Technology (NASDAQ:MU) made a number of executives available for investor presentations during the 3Q ended in May. The tone of each was bullish and optimistic for the 2H of the year that we now know will be a disaster. Had management really been bullish, they probably should have been acting on their previously authorized $1 billion stock buyback. The 10Q for the 3Q was released July 10. Page 20 states, "...$808 million of the authorization remained available for future stock repurchases." The 10Q for the 2Q was released on April 10. And Page 20 contains unfortunately similar language, "As of March 5, 2015, the repurchased shares were held as treasury stock and $808 million of the authorization remained available for future stock repurchases." No shares were repurchased in the quarter.
A bevy of happy talk presentations. Seeking Alpha has transcripts online for three presentations made by management during the quarter. Here's Kipp Bedard, VP of Investor Relations:
In DRAM, actually, I think, the year is shaping up pretty much like we thought. I think the supply/demand balance is still going to remain quite healthy this year, meaning about the same level of supply as demand.
And here is Ivan Donaldson, IR Manager:
And we do think there is obviously growth in the back half from just a seasonal standpoint in many of those segments. I would highlight mobile, clearly we see some of our bigger customers doubling demand second half versus first half, so a pretty good data points there driven primarily by just content growth of DRAM and memory profound which is pretty staggering as we go back into back of the year. So we're bullish on that opportunity.
And here is Ken Rivzi, Micron Treasurer:
As we look in the back half of the year, we're still optimistic in terms of back-to-school and holiday builds and our expectation as we move in the calendar year Q3, calendar year Q4 is that we should start to see a better PC environment especially versus the first half of the year
One might have thought that with this bullish outlook, and a largely untapped $1 billion share repurchase authorization, management might have been repurchasing shares and seeking additional authorizations for additional repurchases.
Nobody expected ... During the June 25 earnings call Mark Durcan made this remarkable statement:
Well, I think it's fair to say that probably nobody expected the PC segment to be as slow as it's been.
Yet on March 19th Barrons had this to say quoting Gartner's outlook:
Research firm Gartner this morning released its updated outlook for personal computers and other devices, showing a 2.4% decline in PC unit shipments this year, down from a projected 1.1% increase this year in Gartner's previous forecast.
The cut in forecast follows Intel (NASDAQ:INTC) last week warning its revenue this quarter will be a billion dollars less than it had previously expected, citing PC weakness.
So no, Mr. Durcan, its not correct to say "nobody expected" PC weakness. Just Gartner, Intel, and Barrons to name three.
Convertible Buyback. I've written a lot about the disastrous convertible bonds. They should be bought back when available and indeed they were in the quarter:
In the third quarter of fiscal 2015, the company recognized aggregate losses of $18 million primarily from repurchases of $269 million principal amount of the company's 2032 notes in a series of transactions for $782 million in cash.
Its a bit odd that management would elect to retire the shares underlying these converts in the high $20's per share while not directly repurchasing stock. The company's disclosure on the converts continues to be abysmal: no mention of which tranches were repurchased in the 6/25 earnings release, no 8k issued for the balance of the repurchases when done, etc.
Buyback Prescriptions: Here are some recommendations for convertible and share repurchases:
The existing $1 billion share repurchase authorization ($808mm remaining) should be completed now that the stock is down. An additional large authorization should be made. Regular reports should be made to shareholders on stock repurchase and timely and complete 8k's should be filed on convertible repurchases. These are not some big spooky secret.
An analysis of the stream of payments on the outstanding converts vs. the cost of straight debt should be done. Holders of converts should be made aware that the company may be willing to do repurchases from time to time that are at a premium to trading prices, but at a discounted NPV to the stated stream of payments to be made + the as converted underlying shares.
An analysis should be done on how many corporations hold our converts. Since life insurance companies and other corporate entities are likely large holders of our converts, they may in many cases be better off converting if a small dividend were to be established now, allowing them to take advantage of the Dividend's Received Deduction. Establishment of a dividend might also thwart the carrying costs of convertible arbitrageurs who are long the converts and short the appropriate number of underlying shares, who would now have to pay the dividend on the borrowed shares.
A Dutch Auction should be held for remaining converts. This mechanism doesn't compel a holder to sell but has been mighty enticing in cleaning up instruments of this type for other companies.
The capped calls should be examined. Perhaps a new, better constructed offsetting hedge should be explored, better matched to the tenor of the underlying converts, and protecting the higher stock prices we hope will happen again once 3D NAND and the new non-volatile memory are out in the market.
Conclusion. Management has materially misled investors, both individuals and large sophisticated hedge funds, with their many misleading investor presentations during the quarter. I can only suppose that bad news to come was well known by those responsible for the share repurchase program. Now that the stock is down significantly maybe we can buy back some shares? |
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