Micron Earnings Show Chipmakers Benefiting From Restraint

  • Memory prices higher on limited supply, diverse demand
  • New CEO says aiming to make Micron more cost competitive

Micron Technology Inc. has been promising investors the memory chip industry was about to become more sensible for years. Its earnings and outlook show that may finally be the case.

After building too much factory capacity for many years and tanking the price of the commodity components, the few remaining suppliers have held back expansion and balanced supply with demand, creating higher prices.

Profit will be $1.73 to $1.87 a share in the fiscal fourth quarter, the Boise, Idaho-based company said late Thursday. That compares with the average analyst estimate of $1.57. Revenue will be $5.7 billion to $6.1 billion in the current period, Micron said. On average, analysts had estimated sales of $5.6 billion.

After decades of struggling to remain profitable, Micron and other memory makers are enjoying a surge in earnings after forcing competitors to give up and reining in their expansion of supply. Micron’s stock has surged this year and the company is on course to report record revenue and profit.

Micron shares rose 2.5 percent in extended trading following the announcement. They’d earlier closed down 2.4 percent Thursday. The stock has been the best performer on the Philadelphia Stock Exchange Semiconductor Index this year.

Chief Executive Officer Sanjay Mehrotra is taking the top spot at the company as the use of its chips spreads beyond their traditional place in personal computers and phones, helping make the market less volatile. Micron competes against Samsung Electronics Co. and SK Hynix Inc. in computer memory and against those Korean companies and Japan’s Toshiba Corp. in the market for flash memory chips that store data in mobile devices. Micron needs to improve its cost relative to those companies and continue to diversify offerings to take advantage of a broader set of end markets, Mehrotra says.

“No longer is it just about PC and mobile, it’s about server and cloud,” he said in a telephone interview. “At least what we’ve seen so far, over the course of recent times, the suppliers have been disciplined.”

The company predicted that supply growth will be lower than historical levels and will trail demand increases into next year.

Fiscal third-quarter profit was $1.65 billion, or $1.40 a share, compared with a loss in the same period a year earlier. Revenue increased 92 percent to $5.57 billion from the quarter a year earlier. Analysts had predicted a profit of $1.41 on sales of $5.4 billion.

    Before it's here, it's on the Bloomberg Terminal.