3D XPoint was an ambitious idea that never really gained traction in the marketplace.
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Micron Technology shares are trading higher Wednesday, one day after the company announced plans to end production of 3D XPoint, a memory technology Micron had been jointly developing with Intel since 2015.
Blending some of the advantages of both DRAM and NAND chips, 3D XPoint was an ambitious idea that never really gained traction in the marketplace. Micron simply decided to cut its losses.
Micron (ticker: MU) also said that in connection with the move, it has begun discussions on selling a chip fab in Lehi, Utah, that had been dedicated to 3D XPoint production. Micron said it would increase investment in memory products that leverage a new industry standard called Compute Express Link, which is intended to provide more flexible connections between memory, processors and storage.
“Memory and storage are critical to the data economy, and the need for data center memory innovation has never been greater,” Micron CEO Sanjay Mehrotra said in a statement. “As a leader in memory and storage, Micron is committed to leading innovation to unleash the next generation of data centers. Today’s announcement reflects our focus to invest in high-value solutions for customers that also deliver strong shareholder returns.”
In a research note, Morgan Stanley analyst Joseph Moore wrote that the moves should provide “cost savings and more opportunity down the road” for Micron.
Moore explains that 3D XPoint combines the nonvolatile nature of NAND (meaning data remains in memory when the power turns off) with some the higher-performance characteristics of DRAM. “While the technology has appeared promising at various points in time,” Moore writes, “the technology was never driven to a competitive price point versus NAND. Intel (INTC) has commercialized the technology in solid state drive form, but has seen very limited adoption for compute applications, thus far, and Micron does not appear to have driven material revenue out of the technology.”
Meanwhile, Moore notes that Compute Express Link is “an open standard for connecting microprocessors and memory,” and adds that “interconnect technologies are becoming critical, so the pivot makes sense to us.”
Moore estimates that the costs of the Lehi fab were above $400 million a year, and that divesting the facility should boost profits by about 35 cents a share. He notes that Micron said there are several potential buyers for the facility. Moore keeps his Overweight rating and $105 price target on Micron shares.
Intel continues to sell 3D XPoint products under the Optane brand. In a statement, Intel said that “Micron’s announcement doesn’t change our strategy for Intel Optane or our ability to supply Intel Optane products to our customers.”
Meanwhile, Citigroup analyst Christopher Danely on Wednesday repeated his Buy rating on Micron shares, lifting his price target to $130 from $116. Danely’s note was more focused on February-quarter financial results, which will be reported on March 31. He reports that checks find that DRAM pricing could be up as much as 20% sequentially in the June-calendar quarter. Danely says that due to rallying DRAM pricing, Micron remains his top pick.
Micron shares are up 3%, at $94.14, in recent trading. The S&P 500 is up 0.1%.
Write to Eric J. Savitz at [email protected]
