Bloomberg News

Micron Sales Top Analysts’ Estimates, Helped by Elpida, Prices

October 11, 2013

Micron Technology Inc. (MU:US), the largest U.S. maker of memory chips, reported fiscal fourth-quarter sales that exceeded analysts’ estimates as higher average prices helped make up for lackluster personal-computer demand.

Net income in the period that ended on Aug. 29 was $1.71 billion, or $1.51 a share, helped by the acquisition of Elpida Memory Inc. Revenue rose 45 percent to $2.84 billion, the Boise, Idaho-based company said yesterday in a filing. Excluding certain items, profit was 29 cents a share, compared with analysts’ average estimate (MU:US) for 28 cents in profit on sales of $2.7 billion, according to data compiled by Bloomberg.

Micron, which completed its $2 billion purchase of Elpida in July, is trying to reshape the industry so that supply doesn’t regularly outrun demand, causing prices to plunge below the cost of production. Manufacturing constraints are keeping chip prices steady even as PC shipments decline, according to Betsy Van Hees, an analyst at Wedbush Securities.

“We think demand is weak, but it’s being more than offset by the price rises,” she said. Van Hees has the equivalent of a buy rating (MU:US) on the stock.

Micron’s shares, which have almost tripled this year amid an anticipated increase in chip prices, were little changed in extended trading after the report. They had gained 1.5 percent to $18.43 at yesterday’s close in New York. Micron is the best performer in the Philadelphia Semiconductor Index for 2013.

Elpida Gains

Elpida added $355 million to Micron’s revenue in the fourth quarter, the company said. Revenue from dynamic random-access memory, or DRAM, products rose 50 percent from the previous period, Micron said, buoyed by a 42 percent gain in sales volume and a 5 percent jump in average selling prices.

Worldwide PC shipments fell in the third calendar quarter, reaching their lowest level for the period since 2008, amid lower demand from students returning to school, market researcher Gartner Inc. said earlier this week. In the sixth consecutive quarterly decline, global unit sales fell 8.6 percent.

The DRAM market “remains tight” and inventories are extremely low, President Mark Adams said on a conference call. He said he expects market conditions to remain favorable for the rest of the year.

Fourth-quarter net income included an accounting gain of $1.48 billion, or $1.31 a share, related to the acquisition of Elpida, Micron said. It also included other one-time items, such as the cost of job cuts and the writedown of certain assets.

Average Prices

Micron said the average selling price of DRAM is up at a percentage in the mid-single digits so far for the current period. Manufacturing costs are projected to decline by a percentage in the low single digits this quarter. Nand flash-memory pricing has fallen on average in the high single digits this quarter, with a similar decline predicted in production costs for those chips over the course of the period, Micron Chief Financial Officer Ron Foster said on the call.

In September, SK Hynix Inc. (000660) suspended operations at a factory in China after a fire. The plant makes DRAM for mobile phones and PCs, and the shutdown helped push prices to their highest in more than two years. SK Hynix was the second-largest producer behind Samsung Electronics Co. until Micron’s acquisition of Elpida.

While DRAM provides the main memory in PCs, an increasing amount of supply is being diverted to smartphones as the devices become more like computers. Memory-chip makers also make Nand flash memory, chips that provide the storage in mobile gadgets.

To contact the reporter on this story: Ian King in San Francisco at ianking@bloomberg.net

To contact the editor responsible for this story: Pui-Wing Tam at ptam13@bloomberg.net


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Companies Mentioned

  • MU
    (Micron Technology Inc)
    • $23.91 USD
    • 1.43
    • 5.98%
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