Micron May Need to Go on a Treasure Hunt

Micron(MU - Cramer's Take - Stockpickr) lost nearly a quarter of its value since it reported yet another round of resoundingly crummy financial results Tuesday.

But at this point, it's not enough for jaded analysts to engage in their now-ritual post-earnings estimate cuts -- they're also starting to buzz about when the company will have to hit up the markets for a cash infusion.

In trading Wednesday, shares skidded $2.99, or 22.5%, to $10.29.

Among the painful takeaways from the first fiscal quarter's results, analysts say, is that Micron is likely to hit up the debt or equity markets for more capital sometime in the current fiscal year. Right now, nobody sees how Micron can pare its losses enough to avoid it -- although management yesterday insisted to a skeptical audience that it will reduce cash burn going forward.

"Looking ahead to the remainder of FY03, our model estimate is that cash flow from operations will be minimal," wrote Banc of America's Doug Lee. His firm has no banking relations with Micron. He expects cash burn to be about equal to quarterly spending on capital investments, which should range between $500 million and $900 million over the remaining three quarters.

Deutsche Bank's Ben Lynch likewise expects Micron to seek more capital, whether it's to shore up a weakening balance sheet or raise money to spend on new manufacturing technology.

"At the current rate, Micron has only two quarters before its cash runs dry," he said in a note. In the last quarter, the company drew down its cash balance by a whopping $328 million, following on several quarters' burn rates of up to $250 million.

Deutsche Bank hasn't done recent banking for Micron.

Micron management asserted Tuesday that cash burn will fall in the second and third fiscal quarter. But that assumes that DRAM selling prices stabilize or increase slightly, Lynch notes -- an outlook he considers unlikely.