Micron posted record sales and profit leaps in the third quarter and also gave a higher forecast for the fourth quarter than market analysts. Micron will sell its Utah plant for $ 900 million to Texas Instruments as it shifts its efforts to develop a new industry standard.
Micron Technology (MU) on Wednesday reported stronger-than-expected results for Wall Street’s third fiscal quarter, which ended in May.
Micron’s earnings per share rose to $ 1.88 from $ 0.82 a year ago, above the analyst average of $ 1.71. Total net income nearly tripled to $ 1.74 billion from $ 803 million a year earlier.
Micron CEO Sanjay Mehrotra said this was “the largest consistent profit growth in the company’s history,” thanks to several high-value product sales records.
Micron manufactures DRAM (dynamic memory) memory chips that are commonly used in data center servers, PCs and other computing devices, accounting for 73% of the company’s total revenue.
24% of Micron’s revenue comes from NAND (flash memory chips) chips used in small devices such as smartphones and USB drives.
Like most semiconductors, memory chips were in high demand during the COVID-19 pandemic, and their prices soared.
Micron’s total quarterly revenues rose 36% from a year earlier to $ 7.42 billion, beating analysts’ forecasts of $ 7.23 billion. Micron’s quarterly revenues and earnings statistics for the last 2 years are available here.
Micron Forecast for Q4 Fiscal 2021
Mehrotra said that as the global semiconductor shortage shrinks, demand for memory will continue to be strong.
“As the shortage of semiconductors will decrease over time, this will actually create more demand for memory chips,” Mehrotra said.
Micron expects DRAM demand to grow more than 20% over the year, with NAND growth of about 30%.
Micron’s 4Q forecast is $ 2.20 – $ 2.40 earnings per share, better than Wall Street’s expectations of $ 2.18. The forecast for revenues of $ 8 billion – $ 8.4 billion is also higher than the estimates of market experts at $ 7.88 billion.
At the same time, Micron has warned investors that its fiscal 2021 capital expenditure will exceed $ 9.5 billion as it begins acquiring ultraviolet lithography (EUV) machines from Dutch manufacturer ASML Holding NV.
These machines should reduce the cost of the chip production technology. Micron will start using EUV machines in production in 2024.
Micron sells its Utah plant for $ 900 million Texas Instruments
Micron sells its Utah specific memory chip factory to Texas Instruments (TXN), explaining this by moving to a different standard in the design and manufacture of chips.
Micron plans to shift its efforts to a new industry standard for connecting memory chips to computing chips called Compute Express Link.
As the carrying amount of the Micron plant was above $ 900 million, the company wrote off an impairment loss of $ 435 million.
Chief Commercial Officer Sumit Sadana told Reuters that the plant could have caused nearly $ 500 million in losses this year because it was underutilized.
Micron Stock Analytics
Micron shares are up nearly 65% over the past year, with the bulk of the gains coming from late 2020 to early 2021.
However, Micron shares were down 3.66% in the last quarter, well behind general market trends, with the PHLX Semiconductor Index SOX up 7% over the same period and the Nasdaq Composite up 9.5%.
Why did Micron’s stock tumble after the report?
Micron released its report and forecasts after the close of trading on Wednesday, with stocks responding with a 2.27% decline in non-trading hours.
This may be due to the words of the company’s management that the supply of NAND and DRAM will remain limited until 2022.
Earlier, the company noted some supply disruptions related to the pandemic in Malaysia, where the suppliers’ factories are located.
In addition, investors are assessing how the global semiconductor shortage will affect Micron’s sales. The inability of Micron’s automotive, computer and industrial customers to obtain enough other types of chips means they cannot manufacture all of the end devices that are in demand.
Some investors are also worried that the rise in orders for laptops needed for work and study at home during the pandemic will slow as people return to offices.