Summit's Sundararajan: Now We Know Tsinghua-Micron Bid Is 'Real And Credible'

In a report published Friday, Summit Research analyst Srini Sundararajan maintained a Buy rating on

with a price target of $34, saying that Senator Chuck Schumer's objection to Chinese government-controlled Tsinghua-Unigroup's offer indicated that the deal was "real and credible." Senator Chuck Schumer has urged the US CFIUS to block any potential sale of Micron to Tsinghua-Unigroup. This is proof that Tsinghua-Unigroup's bid to acquire Micron "is real and credible and is being discussed at the highest levels in the U.S. government," analyst Srini Sundararajan said. Tsinghua Unigroup is controlled by the Chinese government, which means that a potential acquisition, if submitted to CFIUS, "would likely automatically trigger a lengthy investigation," Sundararajan stated, while adding that the Chinese entity's investment was "more likely" to be a stake in Micron that "specifically forbids certain IP to be made available in order to protect national security interests." Referring to Micron's upcoming analyst day, the Summit Research report said that the company would be eager to "prove that they will not be caught somewhat flat-footed" as in the case of the ongoing DRAM downturn, which started impacting the company in late 1Q15. Sundararajan believes that Micron would try to MU present a strategy to avoid "being caught in the cross-hairs of Samsung trying to flood the market in Micron's sweet spot of production." Sundararajan also expects Micros to reduce its guidance for FY16 in an attempt to reset expectations that it can beat through the year, in view of easier comps.