Memory chipmaker Micron Technology Inc. (MU), Thursday reported a narrower net loss for the second quarter, due to a goodwill impairment charge in the year-ago. However, the company's quarterly results were heavily affected by slumping demand and significant decreases in average selling prices for its memory products.
The Boise, Idaho-based Company posted a net loss of $751 million or $0.97 per share for the second quarter, compared to a net loss of $777 million or $1.01 per share in the prior year quarter. Result for the quarter under review included charges of $120 million, while the year-ago result mainly included a goodwill impairment charge of $463 million.
On average, 19 analysts polled by Thomson Reuters expected a loss of $0.64 per share for the second quarter. Analysts' estimate typically excludes special items.
Second quarter net sales declined 27% to $993 million from $1.36 billion in the same quarter of last year. Eighteen analysts had a consensus revenue estimate of $1.14 billion for the second quarter.
Micron noted that the imbalance of supply and demand for semiconductor memory products continued in the second quarter, resulting in significant decreases in the company's per gigabit average selling prices compared to the previous quarter.
Revenue from sales of DRAM products decreased about 30% from the first quarter, hurt by a 30% decrease in selling prices, partially offset by relatively stable sales volumes. Second quarter revenue from sales of NAND Flash products decreased 20% from the first quarter, due to a 13% decrease in selling prices and an 8% decrease in sales volume.
DRAM chips are most widely used in personal computers, while NAND Flash memory chips are used in iPods, digital cameras and other portable devices.
Memory production in the second quarter was relatively flat compared to the preceding quarter, the company said.
The company's gross margin on sales of memory products improved 11% in the second quarter over the prior quarter, helped by decreases in per gigabit manufacturing costs and the benefit in the second quarter from sales of products previously written-down, partially offset by decreases in selling prices.
Sales of CMOS image sensors in the second quarter decreased 54% from the previous quarter, as a result of lower unit sales, reflecting the weakness in consumer markets.
For the first half of fiscal 2008, Micron reported a net loss of $1.5 billion or $1.88 per share, compared to a loss of $1.0 billion or $1.35 per share in the previous year period.
Net sales for the year-to-date period declined to $2.40 billion from $2.89 billion in the preceding year period.
In recent days, the memory chip market is facing a severe oversupply as well as price degradation that are threatening the viability of even the major players in the industry. Micron Technology, the largest U.S. memory chipmaker, is no exception from these threats.
In response to the challenging global environment for technology products, Micron said in October that it would restructure its memory operations and that it planned to reduce its global workforce by about 15% during the next two years.
In February, the company said it would phase out 200mm wafer manufacturing operations at its Boise facility. The company noted that it would reduce as many as 2,000 jobs by the end of its fiscal year.
Micron said that slumping demand for its 200-millimeter (mm) specialty DRAM products has forced it to phase out its Boise manufacturing operations. As a result, the company will cut about 500 jobs at its Idaho sites in the near term and as many as 2,000 positions by the end of its fiscal year. The company said it will provide severance and outplacement services to the affected employees.
The company also said it will continue to operate its 300mm research and development fabrication facility at the Boise site. Following these changes, Micron will employ more than 5,000 people in the state.
Yet, analysts are not completely pessimistic about the company. Credit Suisse said on April 1 that although Micron's second-quarter shipments were weak, pricing could positively surprise. The firm estimates that bit shipments declined by high teens in DRAM and mid teens in NAND, driven by weak demand and capacity shutdown at Boise.
Credit Suisse believes that ASP strength during the quarter could provide upside to revenue and margins. Reiterating its Outperform rating on the company, the brokerage said it continues to view the company as a cyclical winner in memory with appropriate presence in both DRAM and NAND, advanced technology roadmap and manageable liquidity position.
Micron closed Thursday's regular trading session at $4.63, up 45 cents or 10.77% on a volume of 28.55 million shares. However, in the after-hours, the shares lost 6 cents or 1.30%. The stock has been moving in a range of $1.59 - $8.97 for the past 52 weeks, with an average daily volume of about 21.88 million shares for the past three months.
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