Summary:
Micron reported mixed first-quarter fiscal 2015 results wherein bottom line surpassed the Zacks Consensus Estimate but the top line missed the same. However, year-over-year revenues and earnings compared favorably. The results were primarily boosted by improving market conditions as well as an encouraging operating performance. Also, better-than-expected demand for both DRAM and NAND contributed to the overall revenue growth. However, Micron provided tepid revenue guidance for the forthcoming quarter. Going forward, the company is optimistic about supply/demand balance for DRAM and NAND memory chips in 2015, which should support prices. However, it may not be easy for Micron to capture share from SanDisk Corp. a key NAND player. Thus, we reiterate our Outperform recommendation for the stock.
Overview:
Idaho-based Micron Technology (MU) is a provider of advanced semiconductor solutions. Through its worldwide operations, Micron manufactures and markets Dynamic Random Access Memory (DRAM), NAND flash memory, CMOS image sensors, other semiconductor components and memory modules used in leading-edge computing, consumer, networking and mobile products. A major portion of the revenues is derived from DRAM sales. The company also provides CMOS image sensor solutions to the handset camera, digital still camera and PC video camera markets. On Dec 29, 2009, Micron voluntarily transferred its stock exchange listing from The New York Stock Exchange to the Nasdaq Global Select Market, a market of The NASDAQ OMX Group.
The company used to report under four segments namely, DRAM Solutions Group (DSG) which includes DRAM products sold to the PC, consumer electronics, and networking and server markets NAND Solutions Group (NSG) which constitutes high-volume NAND Flash products sold into data storage, personal music players, and the high-density computing market Wireless Solutions Group (WSG) which deals with DRAM, NAND Flash and NOR Flash products, including multi-chip and Embedded Solutions Group (ESG) which includes DRAM, NAND Flash and NOR Flash products used in automotive and industrial applications, as well as NOR and NAND Flash sold to consumer electronics, networking, PC and server markets.
The company reorganized its business units in the third quarter of 2014 into four reportable segments namely, Compute and Networking Business Unit (CNBU) comprising of DRAM and NOR Flash products that are sold to the computer, networking, graphics, and cloud server markets, and NAND Flash products sold in the networking market Storage Business Unit (SBU) accounts for the NAND Flash components and Solid State Drives (SSDs) sold in enterprise and client storage markets, and cloud and removable storage markets Mobile Business Unit (MBU) comprise Micron's DRAM, NAND Flash, and NOR Flash products that are sold to smartphone, feature phone, and tablet mobile-device manufacturers. Embedded Business Unit (EBU) which includes DRAM, NAND Flash and NOR Flash products from Micron sold to automotive and industrial applications providers and other consumer electronics manufacturers.