Now Hear This!

The Dow rocketed 940 points today -- its biggest single-day point gain since the Great Depression -- after one hell of a slide.

But don't let the rally fool you. We're far from out of the woods. Today's uplift provided an 11% climb, but the 8-day preceding decline saw the Dow drop 2,400 points or 22%.

The rally came as banks execs went to Washington to work out a plan to get loans back on track and European governments committed nearly $2 trillion to protect their own banks.

The rally also came as Q3 financial statements begin to trickle out of board rooms and as financial analysts in the tech sector began downgrading Q4 growth estimates for bellwethers like Intel on the macro environment.

Are these analysts wrong in doing so? We'll see what Intel has to say about its Q4 when it reports tomorrow afternoon. But even if Intel comes out with stellar numbers and, although it wouldn't, throws caution to the wind and forecasts tremendous growth for the December quarter, make no mistake, this industry is in for an uphill battle to regain and sustain substantial growth.

It's the smart that will survive and the savvy that will actually gain ground during the now-indisputable recession. Check out what Micron did Sunday. The company took advantage of a bad market and a floundering competitor, Qimonda, snatching up its Inotera Memories stake for $400 million and leaving Qimonda with an almost equal investment loss. In doing so, Micron gained a 35.6% share in Inotera, a DRAM venture Qimonda formed in 2002 with Nanya, but will take home 50% of Inotera 's capacity, some 60k wafer capacity per month. (See "Micron pays $400M for Qimonda's Inotera stake, shuffles MeiYa resources" for our news coverage.)

And those wafers will come off of established 300-mm production lines, offering Micron cost savings opposed to building additional plants for capacity or upgrading its 200-mm manufacturing. This follows Micron announcement last week that it plans to close its 200-mm Idaho plant. According to Objective Analysis, manufacturing costs in a 300-mm plant are about 30% lower than they are for the same process running in a 200-mm plant.

"While other companies are converting plants from 200 mm to 300 mm, Micron is taking the approach of closing 200 mm capacity and purchasing 300 mm capacity at bargain-basement prices, and this deal is indeed a bargain!" Jim Handy, an analyst with the research firm said. 

Handy pointed out that the $400 million that Micron is paying for half of Inotera’s 300-mm line is way below the $550 million the company had planned to invest in the MeiYa Technology, a DRAM joint venture it announced in April with Nanya.

When Micron announced its purchase from Qimonda, it tightened its ties with Nanya, and the two companies will now rework their plans for MeiYa, focusing resources on Inotera and consolidating the DRAM market and its ASP (average selling price)-damaging oversupply situation that much more.

Micron also gave trench DRAM the kiss of death with its move, which will see it share its stack DRAM technology with Inotera and Nanya. According to Handy, Qimonda is the last company to continue to support a trench cell process for DRAM, as all other DRAM makers use a stacked-capacitor approach. Qimonda will still support trench as well as stacked through its buried wordline design.

The one negative for Micron is that the deal was in cash, not stock, and the company had to take out a $285 million loan to pay Qimonda. Simply put by Handy, "In today’s market that cannot have been easy."

What are your thoughts on Micron's Inotera move? Was it sound considering the turbulent macro economic environment and the DRAM market's shrinking ASPs? Voice your opinion below.