Memory chip maker Micron Technology, Inc. (MU) is scheduled to announce second-quarter results after the market close Thursday. On average, 19 analysts polled by Thomson Reuters expect the company to report a loss of $0.64 per share. Analysts' estimates typically exclude special items. Revenue is estimated to be $1.14 billion for the second quarter.
The company operates in two segments: Memory and Imaging. The Memory segment's primary products are dynamic random access memory or DRAM and NAND Flash, which are used in electronic applications, including personal computers, mobile phones and Flash memory cards.
The Imaging segment operates under the Aptina brand name and its primary products include CMOS image sensors, used in electronic applications, including mobile phones and web cams.
In recent days, the memory chip market has been facing a severe oversupply as well as price degradation that are threatening the viability of even the major players in the industry. Boise, Idaho-based Micron Technology, the largest U.S. memory chip maker, is no exception from these threats.
In response to the challenging global environment for technology products, Micron said in October 2008 that it would restructure its memory operations and it planned to reduce its global workforce by about 15% during the next two years. In February, Micron said it would phase out 200 mm wafer manufacturing operations at its Boise facility. As a result, the company would 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.
For the previous quarter, the company reported a loss that widened sharply from last year, hurt by an inventory write-down and significant decreases in average selling prices for memory products, thus marking the eighth consecutive quarter of loss for the company. The company's net loss for the first quarter was $706 million or $0.91 per share, compared to a net loss of $262 million or $0.34 per share for the year-ago period.
Excluding items, Micron Technology's net loss for the first quarter was $560 million or $0.72 per share, compared to a net loss of $201 million or $0.26 per share in the prior year quarter. Net sales for the first quarter fell 9% to $1.40 billion from $1.54 billion in the same quarter last year.
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.
The brokerage also added that the situation has shown improvement since mid-February. Based on the feedback from the Credit Suisse Asian Investment Conference in Hong Kong held last month, the firm said most semiconductor companies at the conference were seeing improved order flows since mid-February due to channel inventory re-stocking and favorable sales into China as a result of the recent stimulus package.
Research firm DRAMeXchange recently lowered its DRAM 2009 supply bit growth estimate to 2.43% from previous 17.82%, based on its assumption that some DRAM makers would continue to maintain low utilization rates or even conduct more production cuts due to tight cash levels and low DRAM prices.
DRAMeXchange also lowered DRAM 2009 demand bit growth to 13.84% from the previous 19.82% due to lower PC shipment growth and content per box growth. The 2.43% supply bit growth should bring the supply below the demand in the second half of 2009 and help the DRAM DDR2 prices move up to the range of $1.20-$1.50, if the inventory reduction goes well, feels the research firm.
The firm said in a recent report that most DRAM makers are facing cash sufficiency problems and may default payment due in the short term. DRAMeXchange believes that some DRAM makers will be forced to maintain low utilization rates of under 50% by end of 2009. This will lead to 2009 DRAM supply bit growth of just 2.43%, compared to 95% in 2007 and 66% in 2008.
MU is currently trading at $4.35, up $0.17 or 4.07%, on 1.09 million shares. For the past year, the stock traded in the range of $1.59-$8.97.
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