Micron’s Second-Quarter Sales Forecast Misses Estimates

Micron Technology Inc. gave a forecast for fiscal second-quarter sales that fell short of analysts’ estimates as increased supply and lower seasonal demand curb revenue at the biggest U.S. memory-chip maker.

Sales in the period that ends in February will be $4.1 billion to $4.3 billion, the Boise, Idaho-based company said in slides posted online to accompany its first-quarter earnings report. That was less than the $4.53 billion average estimate of analysts compiled by Bloomberg.

Average selling prices for Micron’s chips will be unchanged to down at a percentage in the low single digits this quarter, the company projected. Market conditions are different than a year ago, when a fire at a SK Hynix Inc. factory in Wuxi, China, limited supply and pushed prices higher, said Betsy Van Hees, an analyst at Wedbush Securities in San Francisco. With supply levels stabilizing, prices have come down, she said.

“We are in a different environment now -- we aren’t supply-constrained,” said Van Hees, who has the equivalent of a buy rating on the stock. The consolidation of the memory-chip market means producers will be able to cope with lower prices as long as the companies that remain can wring cost savings from their combinations.

Micron shares declined 2.3 percent in extended trading after the report and forecast. Earlier, they fell 2.7 percent to $32.87 at the close in New York. They gained 61 percent in 2014, making them the fifth-best performer in the Philadelphia Semiconductor Index.

First Quarter

“We’re not overly alarmed on the pricing trends” in the Nand flash-chip market, Micron President Mark Adams said in an interview. “There will be times that there might be some pressure.”

In the fiscal first quarter, which ended Dec. 4, profit excluding certain costs was 97 cents a share, the company said today in a regulatory filing. Analysts on average projected profit of 92 cents, according to data compiled by Bloomberg. Revenue rose 13 percent to $4.57 billion, missing the average analyst prediction of $4.61 billion.

Micron and other memory-chip makers such as Samsung Electronics Co. have benefited in recent quarters from more than two years of slowing investment in new production, easing the risk of supply gluts that in the past caused plunging prices and losses. Sales have also risen as computer and smartphone makers buy more of Micron’s chips that provide the short-term memory in electronic devices. Gross margin, a measure of profitability, widened to 36 percent for the first quarter, more than analysts projected.

First-quarter net income rose to $1 billion, or 84 cents a share, from $358 million, or 30 cents, a year earlier, the company said.

DRAM Market

Micron is the only remaining U.S. manufacturer of dynamic random-access memory, or DRAM, semiconductors that provide the main memory in personal computers. Micron has bought up the memory assets of companies such as Texas Instruments Inc. as they left the industry, narrowing the business to three main suppliers -- Micron, South Korea’s SK Hynix and market leader Samsung.

The U.S. company’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 SSDs are packaged with controllers and software, which improves their performance and reliability and lets the producers charge a premium.

Average selling prices for DRAM rose 1 percent in the first quarter, while Nand prices fell 6 percent on average, Micron said today. The company said prices for both kinds of chips will be “flat to down low single digits” in the current period.

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