Micron
Know-how shares are modestly greater in late buying and selling Tuesday after the reminiscence chip firm posted financial results for its fiscal second quarter ended March 2 that had been about in keeping with expectations, as a weak marketplace for PCs and smartphones continued to weigh on the corporate’s outcomes. Micron additionally stated that as a part of its cost-reduction program, it is going to scale back employees by about 15%—up from a earlier plan to chop heads by 10%.
However there are some promising indicators for the reminiscence chip maker.
Sumit Sadana, Micron’s chief enterprise officer, famous in an interview with Barron’s that top buyer inventories, which have been weighing closely on the corporate’s outcomes, are displaying indicators of enchancment. He says there was “a number of progress” on stock reductions at PC distributors, and enchancment as nicely on inventories held by smartphone producers.
He says there’s “nonetheless extra wooden to cut” on inventories at knowledge middle computing firms, however that stock situations there ought to be more healthy by the tip of the calendar 12 months. “It was a troublesome quarter, however we’re seeing good, constructive indicators for the long run,” he stated.
Micron is up 1.6% greater, at $59.28.
For the quarter, Micron (ticker: MU) reported income of $3.69 billion, about in keeping with the Road consensus at $3.7 billion. Income was down 53% from a 12 months in the past, and 10% from the fiscal first quarter.
On an adjusted foundation, the corporate misplaced $1.91 within the quarter, worse than each the corporate’s forecast for a lack of 62 cents, and the Road consensus forecast for a lack of 86 cents. Micron stated it took a list write-down within the quarter of $1.34 billion, or $1.34 a share.
Underneath typically accepted accounting ideas, the corporate misplaced $2.12 a share. Utilizing adjusted Ebitda, or earnings earlier than curiosity, taxes, depreciation and amortization, the corporate misplaced $1.81 billion. Micron ended the quarter with $12.1 billion in money and marketable securities.
Regardless of the ugly outcomes, the corporate struck an upbeat tone in its press launch and convention name remarks, suggesting that higher occasions are forward.
“Micron delivered fiscal second-quarter income inside our steerage vary in a difficult market surroundings,” Micron CEO Sanjay Mehrotra stated in an announcement. “Buyer inventories are getting higher, and we count on gradual enhancements to the trade’s supply-demand stability. We stay assured in long-term demand and are investing prudently to protect our know-how and product portfolio competitiveness.”
In remarks ready for the corporate’s earnings name, Mehrotra stated that the reminiscence and storage trade is dealing with its worst downturn in 13 years, “with an exceptionally weak pricing surroundings.”
However he additionally thinks that stock days excellent has peaked, and that the corporate is “shut” to returning to sequential income development. “Past this downturn, we anticipate a return to normalized development and profitability in keeping with our long-term monetary mannequin,” he stated.
For the fiscal third quarter, Micron sees income of $3.7 billion, give or take $200 million, which matches Road estimates. The corporate sees non-GAAP gross margin of -21%, give or take 2.5 share factors, with a lack of $1.58 a share on an adjusted foundation, or $1.79 a share beneath GAAP.
Mehrotra asserted in his feedback that Micron believes the corporate’s addressable market will hit a document in calendar 2025, pushed partially by the reminiscence necessities to run the big language fashions required for synthetic intelligence software program. “We’re solely within the very early phases of the widespread deployment of those AI applied sciences and potential exponential development of their industrial use instances,” he stated.
The Micron CEO stated that he thinks knowledge middle income bottomed within the newest quarter. Micron thinks 2023 PC unit volumes shall be down by a mid-single-digit share, returning to PC unit quantity final seen earlier than the onset of the Covid-19 pandemic. The corporate’s earlier PC forecast referred to as for models this 12 months to be down within the low-to-mid single digits.
The corporate sees smartphone unit volumes down barely in calendar 2023; earlier steerage had referred to as for volumes to be flat to up barely.
Micron stated auto section income was up 5% within the newest quarter from a 12 months in the past, however famous that industrial market demand “continued to melt.”
Micron expects industrywide bit-demand development of about 5% in DRAM and within the low-teens for NAND, nicely under the corporate’s long-term forecast of midteens for DRAM and low 20s for NAND. “We count on that bettering buyer inventories will help sequential bit demand development for DRAM and NAND by way of the calendar 12 months,” the corporate stated. “China’s reopening can be a constructive issue for calendar 2023 bit demand.”
Micron stated it now expects fiscal 2023 capital spending of $7 billion, down 40% from the earlier 12 months; that compares to a forecast vary final quarter of $7 billion to $7.5 billion. The corporate expects additional reductions in wafer fab gear sending in 2024. The corporate additionally stated it now expects to scale back head depend by 15%, broadening its cuts from a beforehand anticipated 10% lower.
Write to Eric J. Savitz at eric.savitz@barrons.com
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