Micron Earnings Hurt by Lower Prices as Demand for Chips Slumps

Micron Technology Inc., the U.S.’s largest maker of memory chips, reported sales for the fiscal first quarter that fell short of estimates on slowing demand for components of personal computers and smartphones.

Revenue in the period ended Dec. 3 declined 27 percent to $3.35 billion, the company said in a statement Tuesday. Profit excluding certain items was 24 cents a share. Analysts had projected profit of 23 cents on sales of $3.47 billion, according to estimates compiled by Bloomberg.

Micron’s results reflect the challenges facing chipmakers as they seek to squeeze out earnings from a commoditized memory-chip business: factory output is ramping up across the industry, while demand stagnates. Personal-computer shipments continue to slump as consumers and businesses turn to mobile devices and Web-based software, crimping orders of dynamic random access memory, or DRAM. At the same time, the smartphone business that has driven demand for Nand storage chips is showing signs of slower growth.

“You’ve had oversupply for the whole year,” said Daniel Amir, an analyst at Ladenburg Thalmann & Co. “Those demand drivers are not there to absorb the additional capacity.”

Micron shares fell as much as 6.8 percent in extended trading. The stock declined 1.1 percent to $14.61 at the close in New York, leaving them down 58 percent for the year. That decline has made them the second-worst performer on the Philadelphia Stock Exchange Semiconductor Index this year. First-quarter net income fell to $206 million from $1 billion a year earlier.

Micron forecast fiscal second-quarter sales of $2.9 billion to $3.2 billion and a loss of 5 cents to 12 cents a share, according to a presentation posted on its website. Gross margin, the percentage of sales remaining after deducting the cost of production, will be 17.5 percent to 20 percent. Analysts had predicted profit excluding certain items of 23 cents a share on revenue of $3.48 billion.

The Boise, Idaho-based company is the last U.S. major manufacturer of memory chips. It competes with South Korea’s Samsung Electronics Co. and SK Hynix Inc. Together, the three companies control more than 90 percent of the market after years of losses forced other suppliers out of the business.

Micron’s management have been trying to reduce its dependence on commodity chips and into more profitable areas like memory for servers and other specialist devices. It’s also making solid-state drives, replacements for hard disk drives made of chips, as a more profitable outlet for its products.

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