Micron Technology, Inc. (MU): How To Play the Growing Demand for Flash Memory

Micron Technology, Inc. (NASDAQ:MU) is a leading maker of memory products for use in a variety of electronic devices.  Although revenues are almost triple what they were ten years ago, Micron’s earnings have not reflected that (see below), and the company has actually lost money during five out of the last ten years, with a loss projected for the current fiscal year as well.  With recently declining revenues, is there a bright future on the horizon for Micron Technology, Inc. (NASDAQ:MU), or should investors just stay away?

Micron Technology, Inc. (NASDAQ:MU) produces dynamic random access memory (DRAM) and flash memory for electronic devices including computers, smartphones, and mp3 players.  The company’s general strategy is to diversify its product line, especially by developing its flash memory products.

The market for memory is a tough one to crack.  While the demand for memory has increased significantly every year in recent history, this is offset by the fact that memory prices have declined by an average of 20% per year.

Where the real opportunity exists for Micron Technology, Inc. (NASDAQ:MU) is in the recent emergence of handheld devices such as tablet PCs and smartphones.  An additional area is in the increasing sales of Ultrabooks (which use solid-state drives) and the increasing popularity of solid-state drives in general as prices become more competitive with traditional hard disk drives.

Also, to share in the costs of building and operating their plants, Micron has formed partnerships with some other big tech companies, most notably Intel Corporation (NASDAQ:INTC).

Intel and Micron have teamed up in a joint venture called IM Flash Technologies.  The company aims to combine Micron’s leadership in process and product technology with Intel’s history of innovation in Flash memory technology to successfully compete in the NAND Flash memory business. This venture began in 2006; however, just last year the companies announced their agreement to expand the operation.  If you believe in the emergence of new flash technologies, Intel might be a less risky way to play it, with its stable track record of earnings growth, not to mention its yield of over 4%.