SanDisk Corporation (SNDK): Can Micron Technology, Inc. (MU) Hold On to Its Momentum?

Impressively, however, NAND revenue shot up 8%, which was offset by continued struggles in the NOR segment, which fell 14% year over year. Management, however, made up for this weakness in profitability. Gross margin arrived at 18%, a 6% improvement sequentially and 5% better year over year. This resulted to a 76% sequential improvement in operating loss, which arrived at $23 million.

Ordinarily, investors would take issue with a company like Micron that still operating at a loss. But signs of improvement are everywhere. The Street loved the improved inventory position, which Micron was able to reduce by $360 million year over year. This, along with the growing margins, indicates that profitability could be just around the corner. While management has been beaten up in the past, today, the team deserves credit for a solid second-quarter performance.

You’ve got our attention, now what?
For this momentum to continue, Micron can’t let its foot off the throttle. Management has done a great job diversifying the memory business, but it needs to continue. To that end, the completed acquisition for bankrupt chip maker Elpida should help. This should position Micron for stronger growth in other end markets, such as servers and mobile devices.

Plus, Elpida should help propel Micron to the second-largest player in the DRAM market. Micron will be ahead of names like Hynix, a South Korean chip maker, but will remain behind Samsung. But the good news, though, is that Elpida will help Micron Technology, Inc. (NASDAQ:MU) build leverage with Apple Inc. (NASDAQ:AAPL).

Needless to say, Apple would have an interest in helping Micron improve its memory business against Samsung. In the meantime, with new device launches from Apple and Samsung spurring the growth in mobile, Micron’s NAND business should grow commensurately. But that can also be said about SanDisk, and other names like RF Micro Devices, Inc. (NASDAQ:RFMD) and (of course) QUALCOMM, Inc. (NASDAQ:QCOM).

What of the stock?
With continued margin and cash flow improvements, as well as better diversification, there’s still a lot of value here. However, the negative earnings stand out like a sore thumb. That said, based on fiscal 2014 estimates, which is when the company is expected turn profitable, these shares are only trading at 14 times forward earnings, which is not too demanding in this sector.

The article Can Micron Hold On to Its Momentum? originally appeared on Fool.com.

Fool contributor Richard Saintvilus owns shares of Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and Qualcomm.

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