Bloomberg News

Micron Sales Top Estimates on Supply Constraints

June 23, 2014

Micron Technology Inc. (MU:US), the largest U.S. maker of memory chips, reported fiscal third-quarter profit and sales that exceeded analysts’ estimates as limited supply industrywide bolstered prices.

Net income (MU:US) rose to $806 million, or 68 cents a share, from $43 million, or 4 cents, a year earlier, the Boise, Idaho-based company said in a statement today. Revenue in the three months ended May 29 climbed 72 percent to $3.98 billion. Analysts on average had projected earnings of 61 cents a share on sales of $3.9 billion.

After years of losses (MU:US) in a market where prices fluctuated along with unsteady supply and demand, the company has bought out competitors to help balance the industry and prevent gluts. This year, Micron and rivals such as Samsung Electronics Co. are also benefiting from increased corporate demand for computers, giving prices a further boost.

“The bigger picture is all about supply constraints,” said Mark Newman, an analyst at Sanford C. Bernstein. He has the equivalent of a buy rating on Micron’s stock. Newman said that prices are gaining for both computer memory and chips used as storage in mobile phones and tablets.

Micron’s stock (MU:US), up 44 percent this year, traded as high as $32 in extended trading following the announcement. It had earlier declined 1.9 percent to $31.26 at the close in New York.

PC Optimism

Micron is reporting earnings less than two weeks after Intel Corp., the world’s largest chipmaker, raised its projection for second-quarter revenue on stronger demand for corporate personal computers. The upbeat forecast bolstered optimism for results at other PC-related companies.

The company is getting increasing demand for all of its products, including for memory that goes into server computers, networking equipment and mobile phones, Mark Adams, Micron’s president, said in a telephone interview.

“We continue to feel pretty good about the demand profile of the business,” Adams said.

Micron has no plans to build factories, which is limiting supply. New manufacturing plants would soon become obsolete as the industry shifts to new types of memory chips, Micron Chief Executive Officer Mark Durcan said on a conference call with analysts. The company anticipates that its competitors will also hold off on expansion, he said.

Micron, which doesn’t forecast profit or sales, said DRAM prices are on course to be flat this quarter. Improvements in production will lower the cost by ‘low single digits,’ in percentage terms, the company said.

Production Scale

Micron is the only remaining U.S. manufacturer of DRAM semiconductors that provide the main memory in PCs. The purchase of Japanese rival Elpida Memory Inc. last year gave Micron a bigger chunk of the dynamic random-access memory market, helping it gain scale and providing a greater return on its technology investments.

Acquiring Elpida also limited the number of chipmakers building new plants and curtailed most of the industry’s output to just three companies: Samsung Electronics Co., SK Hynix Inc. and Micron.

Micron’s other main business is producing and selling Nand flash chips. While prices in that market vary based on demand for tablets and phones, Nand is increasingly finding its way into storage for computers, replacing spinning magnetic disks. Nand chips sold for these solid-state drives are more expensive than those for mobile devices.

Nand flash prices will decline by ‘low to mid-single digits’ in the current fiscal quarter, with production costs remaining unchanged, Micron said.

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

To contact the editors responsible for this story: Pui-Wing Tam at ptam13@bloomberg.net Jillian Ward, Reed Stevenson, Ben Livesey


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Companies Mentioned

  • MU
    (Micron Technology Inc)
    • $33.42 USD
    • -0.46
    • -1.38%
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