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Micron’s Misery

Posted on Tuesday, Jan 13th 2009

On December 23, Micron Technologies, with annual revenue of $5.8 billion, reported results for the first quarter of fiscal 2009. Results were mixed, with stronger-than-expected sales and a wider-than-expected loss as DRAM and NAND ASP declines outpaced cost reductions.

Revenue was $1.4 billion, down 8.7% y-o-y and 3% q-o-q. Net loss was $706 million or $0.91 per diluted share versus loss of $344 million or $0.45 per share last quarter. Net loss included a $369 million non-cash write-down of memory inventories to estimated market value, triggered by sharp declines in memory ASPs during the quarter. Excluding these charges, net loss per share was $0.72 versus analyst estimates of loss of $0.45 per share.

Gross margin declined to -32% as megabit DRAM and NAND ASP declines outpaced cost reductions. Memory revenues decreased 4% q-o-q and included $36 million in royalty and technology fees. Despite steep declines in ASPs, DRAM and NAND Flash products gigabit sales increased 35% and 40%, respectively as the notebook segment continued to show positive growth.

Micron generated $359 million in cash flow from operating activities and ended the quarter with $1 billion in cash and investments. Total debt increased by $140 million to $2.87 billion. Capital expenditures were down significantly from $759 million last quarter to $334 million through reductions in executive and employee salaries and a continued freeze on hiring. Headcount declined nearly 7% q-o-q to 21,888. Micron expects to save an additional $200 million through 2009.

In our last post on Micron, we referred to a rumor that Micron may be buying Infineon’s stake in ailing DRAM maker Qimonda. In November, Micron completed the $400 million acquisition of Qimonda’s 35.6% stake in Inotera and would be receiving 50% of wafers produced by Inotera after the transition. In the Semiconductor Sector Overview, we looked at the downslide in the memory market and how Micron’s increasing focus on the memory business would affect it.

Further on the development front, Micron and Intel have agreed to delay the Intel-Micron Flash Singapore (IMFS) fab build out till market conditions improve. Also, the capital contributions that were previously committed to its Maya joint venture with Nanya have been deferred.

Micron is currently trading around $3 with a market cap of around $2.45 billion. The stock hit a 52-week low of $1.59 on November 20.

Chart for Micron Technology Inc. (MU)

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