Things aren’t looking too hot for Micron Technologies these days, and while the company trades at depressed multiples, the industry wide effect of excessive DRAM/flash storage supply continues to catch up to the company’s sales/earnings fundamentals. Over the long-term I anticipate the supply/demand imbalance to eventually work itself out following a series of CAPEX reductions, which implies that wafer supply capacity for flash storage/memory will work itself down to a more reasonable level in the next refresh cycle. Source: RBC Capital Markets As you can tell, DRAM capital expenditures were most elevated in 2014 at $12.186 billion, which doubled 2013 figures. 2015 CAPEX trends sustained industry wide growth of 6% as many were moving to more advanced 16nm FinFET nodes, which translated into massive over supply. RBC estimates are pointing to an industry wide reduction of 20%, but perhaps more. Some of the memory capacity originally intended for PCs is now being shifted to mobile/tablet devices. However, I think these estimates could be a little more aggressive as the next capital build-out phase for 10nm technologies isn’t here yet, as wafer fab equipment (WFM) technologies need to transition to EUV patterning technologies. Therefore, CAPEX will likely level off even more quickly, which has some questionable implications for some of the WFM names that are more exposed to storage. Of course, some of the integrated device manufacturers are looking to transition to 10nm nodes with current lithography technologies (Intel), so the CAPEX roadmap will vary among semiconductor names. Micron reported negative ($2.259) FCF, which is expected to level off to $63.1 million in positive FCF over the course of FY’16 due to a 2.115 billion reduction to capital expenditures, according to Wedbush Securities. So, DRAM specific CAPEX could come down a lot more than 8%. I view the industry moving to healthier supply/demand fundamentals in the 2016 and 2017 timeframe. However, timing of recovery is going to be weighted more heavily in the first half of 2017 as capacity growth needs to decline for a number of months before supply starts to normalize. Wedbush is less upbeat on the upcoming earnings conference call scheduled for March 30th:MU guided FQ2 pro forma EPS to a loss of -$0.12 to -$0.05, GM to range of 17.5% to 20% (down -780bps to -530bps Q/Q), OI to a loss of -$60MM to a profit of $20MM (-$20MM loss at midpoint), and revenue to a range of $2.9B to $3.2B (down -13% to -4% Q/Q). We believe with demand trends and memory pricing weak, particularly PC DRAM that the FQ2 print will come in at the low end of the guidance ranges and below the Street (-$0.08/$3.05B) and our (-$0.07/$3.06B) estimates (see Figure: 1). We also look for MU to guide FQ3 below the Street ($0.05/$3.21B) and our lower (-$0.02/$3.18B) estimates. Given the weak back drop of company and industry specific fundamentals, investors could easily get routed by another wave of selling. Industry pricing of memory/storage won’t recover to a more profitable level for a while. Micron will likely disappoint on its upcoming earnings conference call, so betting against the name could make more sense. I'll offer a price target following the earnings call.