SAN FRANCISCO (MarketWatch) � Shares of Micron Technology Inc. and SanDisk Corp. came under selling pressure on Friday as investors focused on the companies� weakened price position in a steadily growing segment of the memory chip market.
The two were among the top decliners on the S&P 500 index SPX , their losses triggered by Micron�s quarterly financial results reported late Thursday. Micron MU �traded down 3.6% to close at $8.40, while SanDisk SNDK �shed 3% to close at $49.40.
/quotes/zigman/75433/quotes/nls/mu MU 6.55, +0.24, +3.80% /quotes/zigman/1468249 SOX 384.79, -0.67, -0.17%
Micron pointed to signs of weaker pricing for NAND Flash chips, used in a growing range of devices from smartphones to tablets.
RBC Capital analyst Doug Freedman said Micron�s report suggested that the company had focused more heavily on the low end of the NAND market, precipitating heightened competition with SanDisk that in turn led to pricing pressures.
That could also be the factor behind SanDisk�s share decline, he said.
�They got into the lower end of the market,� Freedman said in an interview. �It shows that they were more competitive with SanDisk.�
Solid-state spilloverMicron also tamped down expectations for the solid-state drive market, which is based on NAND technology. Demand for solid-state drives picked up as a result of the hard disk drive shortage following the Thailand flooding disaster last year.
But on a conference call with analysts, Micron President Mark Adams said the company has seen �slightly decelerating growth as we work through the inventory� in solid-state drives, sometimes called SSDs.
�I think this is a short-term phenomenon, and I think you�ll see our SSDs continue to grow, and I think maybe another quarter of right around this level is reasonable, but I think it�s just a work-through out of the over-excitement around preholiday SSDs given the hard drive issues,� he told analysts.
The comment apparently also was the reason for a decline in shares of OCZ Technology OCZ �which designs and makes solid-state drives. OCZ was down 2.5% at last check.
Betsy Van Hees, a Wedbush Securities analyst, cited �overexuberance� for solid-state drives when the hard-drive crisis hit. But higher solid-state pricing will likely be a hurdle for products based on that technology from taking off, she said.
Micron itself reported mixed results for the second quarter ended March 1, posting a net loss of $224 million, or 23 cents a share, on revenue of $2.07 billion. Analysts had been expecting a loss of 19 cents a share on revenue of $2.02 billion, according to the consensus in a survey compiled by FactSet Research. Read more on Micron Technology�s loss and lower quarterly sales.
The Boise, Idaho-based company said it was seeing stronger pricing for DRAM products and a �generally healthy supply/demand outlook� for NAND Flash.
Van Hees wrote clients that while the quarter was �more challenging than we had estimated,� it was overall �in-line with our expectations,� noting that �management provided encouraging commentary on the memory market.�
She has an outperform rating with a 12-month price target of $12.50.
JMP Securities� Alex Gauna maintained a market outperform rating with a price target of $10, even as he noted a �lackluster earnings report.�
�We continue to recommend buying the stock, as signs of cyclical upturn continue to broaden throughout the semiconductor industry, including with Micron where both NAND and DRAM revenues have turned the corner and are now growing sequentially despite adverse seasonality,� Gauna wrote.
In a note, Freedman of RBC also wrote, �Investors need to be careful not to be disappointed that share gains were in lower [average selling price] markets given market dislocations and seasonal softness of electronic production.�
He added: �We do not believe Micron�s servicing the lower end of the NAND and DRAM markets is a signal of lost competitiveness at the high end of the market.�
Freedman has an outperform rating and an $11 price target on Micron.
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