Micron Technology Inc. ( MU Quick Quote MU - Free Report) is scheduled to report third-quarter fiscal 2021 results on Jun 30.
The company’s performance in the soon-to-be-reported quarter is likely to have gained from strong memory-chip demand from PC manufacturers, smartphone makers and data-center operators.
Solid Memory Chip Demand
The COVID-19 pandemic-induced lockdown and social-distancing measures are spurring demand for PCs and notebooks as more and more workers and students are now working and learning from their homes. This trend is likely to have continued in the fiscal third quarter as well, thereby aiding its top-line performance.
Per IDC data, first-quarter 2021 (January-March)
PC shipments jumped 55.2% to 84 million units. Lenovo was the top vendor, followed by HP Inc. ( HPQ Quick Quote HPQ - Free Report) , per IDC. Further, the market research firm forecasts 18.2% year-over-year PC shipment growth in 2021.
The work-and-learn-from-home necessity is also stoking demand for cloud storage. Furthermore, the social-distancing trend has boosted the usage of online services globally. Therefore, data-center operators are enhancing their cloud-storage capacities in a bid to accommodate the skyrocketing demand for cloud services, which is again fueling demand for memory chips.
Per the IDC data, first-quarter 2021
server revenues and shipments grew 12% and 8.3%, respectively, which is anticipated to have aided Micron. Notably, Dell Technologies ( DELL Quick Quote DELL - Free Report) was ranked as the top vendor by IDC followed by Hewlett Packard Enterprise ( HPE Quick Quote HPE - Free Report) .
Moreover, solid recoveries in sales across the smartphone and automotive industries are likely to have supported Micron’s overall financial performance during the quarter under review. According to the latest forecast by
Gartner, worldwide sales of smartphones will likely be up 11.4% year over year to 1.5 billion units in 2021. This suggests a sharp improvement from the 10.5% decline registered in 2020.
Nonetheless, Micron’s heavy dependence on China is a headwind due to the long-standing tit-for-tat trade spat between the United States and China. Restrictions on exports to Huawei might have hurt the top-line performance of this Zacks Rank #2 (Buy) company during the period in discussion.
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Furthermore, higher prequalification and labor expenses are likely to have negatively impacted Micron’s third-quarter bottom-line performance. During the fiscal second-quarter conference call, the company noted that it continues to forecast rise in operating expenses during the second half of fiscal 2021 due to higher prequalification and labor expenses.
In addition, higher mix of lower-margin NAND, along with low memory prices and minimal decline in manufacturing costs, might have strained margins.
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