Micron Technology Inc, the largest US memorychip maker, reported fiscal second-quarter sales that beat analysts’ estimates as limited supply bolstered prices amid lackluster computer and phone demand.
Net income in the period that ended Feb. 27 was US$731 million, or US$0.61 a share, compared with a loss of US$286 million, or US$0.28, a year earlier, the Boise, Idaho-based company said in a statement on Thursday. Revenue almost doubled to US$4.11 billion. That compares with an average analyst projection for a profit of US$0.59 on sales of US$3.99 billion, according to estimates compiled by Bloomberg.
Micron, which has been seeking to consolidate the industry and make it less susceptible to supply gluts, acquired Japanese rival Elpida Memory Inc last year. While investors have fueled a rally that has more than doubled Micron’s shares in the past year, more evidence is needed on the company’s ability to remain profitable in periods of weak demand, according to Betsy Van Hees, an analyst at Wedbush Securities in San Francisco.
“Contract pricing is starting to come down,” said Van Hees, who recommends buying the stock. “It needs to come down in a fair and orderly fashion, where average selling price declines will not outpace cost declines. That will be the true test of whether the vicious cycle has been broken.”
Even with the return to production of a Chinese plant owned by SK Hynix Inc that was damaged by fire and continuing declines in PC shipments, the market for computing memory remains strong, Micron president Mark Adams said.
“It’s a pretty good time in memory right now,” he said. “This type of performance for the company has been better than we’ve had in the last decade.”
Micron is the largest remaining US manufacturer of DRAM, semiconductors that provide the main memory in PCs. That market has been hit by the first consecutive annual decline in its history as consumers increasingly embrace smartphones and tablets.
The Elpida purchase brought Micron a bigger chunk of the DRAM market to help it gain scale and provide more of a return for its technology investments. It also added production of a type of DRAM used in smartphones, which require less power-hungry chips.
Removing Elpida’s independence also limits the number of companies building new plants and curtails most of the industry’s output to just three companies: Samsung Electronics Co, SK Hynix and Micron.
The US chipmaker also makes NAND flash memory chips, semiconductors that are used for data storage in mobile devices. Those chips are also increasingly making their way into computers in the form of solid-state drives, or SSD.
SSDs need cheaper component prices before they become more widely used,Van Hees said.