Weak DRAM Prices Impacted Micron's Fiscal 1Q16 Earnings
Falling revenue
In the last part of the series, we saw that Micron Technology’s (MU) revenue is highly sensitive to DRAM (dynamic random-access memory) and NAND (negative AND) prices. The company sells these products in four major markets. Compute and networking accounted for 34% of the total revenue in fiscal 1Q16. It was followed by storage with a 26% share, mobile with a 25% share, and embedded with a 14% share. All of the business segments reported a double-digit fall in the revenue during the quarter. Let’s look at the performance of each of the four segments in detail.
Compute and networking business
The segment’s sales fell 45% YoY (year-over-year) to $1.14 billion. The operating margin fell to 1.8% in fiscal 1Q16 from 29.8% in fiscal 1Q15.
The networking segment’s sales were impacted by the delay in LTE (long-term evolution) deployment in China (FXI) and seasonal weakness in demand. The demand is expected to grow in the near future.
The computing segment was impacted by softness in PC demand. It also impacted Intel’s (INTC) sales. However, growth opportunities exist in areas like the enterprise and cloud segments. Micron expects annual bit growth of more than 40%—driven by the increasing need for memory to support heavy workloads like virtualization and real-time analytics.
Technology upgrade
The company is set to tap this growth with its DDR4 (double data rate fourth generation) and DIMM (dual in-line memory module) portfolio. It will face tough competition from Samsung (SSNLF). It’s already selling DDR4 at lower prices.
Storage business
The segment’s sales fell 10.2% YoY to $884 million. The operating margin fell to negative 3.1% in fiscal 1Q16 from positive 2.6% in fiscal 1Q15. During the quarter, the segment posted double-digit growth in storage components, client and consumer SSD (solid-state drive), and enterprise SSD. This growth was offset by a fall in datacenter SSD.
Technology upgrade
The company is developing its own SSD products integrated with 384 gigabyte 3D TLC (triple-level cell) and 256 gigabyte 3D MLC (multi-level cell) NAND. The company expects to make them available in the second half of fiscal 2016. SanDisk (SNDK) and Toshiba are also developing similar products. They expect to launch the products in 2016.
Currently, Micron is sampling the new S600 Series of SaaS-based SSDs. It expects to start volume production in fiscal 1H16.
We’ll look at the performance of the mobile and embedded units in the next part of the series.