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Micron Reports in Red Yet Again

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Micron Technology Inc. (MU - Free Report) reported adjusted fourth quarter fiscal 2012 loss per share of 24 cents, wider than the Zacks Consensus Estimate of 22 cents loss per share. The miss was mostly due to lower average selling price (ASP) and macro uncertainty.


Micron reported revenues of $1.96 billion, down 8.3% year over year. The quarter’s revenue came well below the Zacks Consensus Estimate of $2.10 billion. The decline was mainly due to lower DRAM and NAND shipment and flat ASP. Contribution from NOR Flash product was modest.

Operating Results

The company's gross margin for the fourth quarter was 11.2%, down from 15.0% in the year-ago quarter. The decline was primarily due to DRAM pricing.

Selling, general and administrative (SG&A) expenses decreased 10.3% year over year to $139.0 million. The decline was mainly attributable to lower legal and personnel costs. Research and development (R&D) expenses grew 12.4% year over year to $235.0 million. Operating margin was (7.1%) versus (2.4%) in the year-ago quarter.

Micron suffered a net loss of $243.0 million or 24 cents per share, compared with loss of $135.0 million or 14 cents in the year-ago quarter.

Balance Sheet & Cash Flow

Micron ended the fourth quarter with cash and short-term investments of $2.56 billion, up from $2.33 billion in the previous quarter. Receivables were $1.29 billion, down from $1.33 billion in the previous quarter. Inventories decreased 4.3% from the prior quarter to $1.81 billion.

The company had $3.26 billion in long-term debt, slightly up from $3.20 billion in the prior quarter. Cash generated from operations was $450.0 million, compared with $686.0 million in the prior quarter.


Micron did not provide any specific guidance for revenue or earnings. But the company asserted that it will remain focused on cost cutting initiatives, new product introductions and manufacturing efficiencies. The company also said that it expects more NAND consumption following the growing demand for smartphones and tablets.

Apart from this, management expects SG&A expense in the first quarter 2013 to be between $135.0 million and $145.0 million. R&D expense is expected to be between $220.0 million and $230.0 million.

Our Take

Micron’s fourth quarter results were disappointing as the net loss per share was wider than the Zacks Consensus Estimate. The quarter’s revenue lagged our estimate. Lackluster demand for desktop PCs will remain an overhang over the DRAM fundamentals.

However, we remain encouraged by Micron’s Elpida buyout (a bankrupt Japanese chipmaker) that could bring in a larger DRAM market share. Also, Apple Inc.’s (AAPL - Free Report) reliance on Elpida would be a win-win situation for Micron, going forward.

On the other hand, we believe that it won’t be easy for Micron to capture share from SanDisk Corp. , a key player in the NAND zone. However, the renewal of operations in Thailand may help the company going forward.

Micron Technology has a Zacks #3 Rank, implying a short-term Hold rating.

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