Why Elpida helped Micron achieve better-than-expected earnings (Part 3 of 7)
Micron’s DRAM segment’s revenue declined at a slower-than-expected rate
Micron’s DRAM segment contributes about 70% revenues to Micron (MU), so this is by far the most important business for the company. Within the DRAM segment, the PC business contributes 40%, Mobile contributes 30%, and Server contributes about 15%, making PC the most important business line for Micron. In fiscal Q3 2014, DRAM segment revenues declined about 2% sequentially, driven mainly by a lower average selling price (ASP) for these products. However, the bit growth for DRAM products was stable despite the fact that the PC market is undergoing a structural decline. Let’s try to find the reason why the results were better than expected.
A slower-than-expected decline in PC shipments
According to IDC, worldwide PC shipments declined by 10% in 2013 compared to 2012. Analysts widely predicted that the PC market would continue to see a rapid decline due to the emergence of smartphones and tablets as the preferred household device. However, the PC market defied this trend in Q1 2014. Gartner came out with a report claiming that the PC market declined only 1.7% in Q1 2014 compared to Q1 2013. As the chart above shows, Lenovo (LNVGY), HP (HPQ), and Dell (DELL) lead the worldwide PC market with double-digit market shares, while Acer and Asus maintained their market shares in single digits.
PC shipments are boosted by the end of Microsoft’s Windows XP support
The Gartner report mentioned that the withdrawal of Microsoft’s (MSFT) Windows XP support on April 8 played an important role in a slower-than-expected decline of PC shipments. The report also mentioned, “All regions indicated a positive effect since the end of XP support stimulated the PC refresh of XP systems. Professional desktops, in particular, showed strength in the quarter. Among key countries, Japan was greatly affected by the end of XP support, registering a 35 percent year-over-year increase in PC shipments. The growth was also boosted by sales tax change. We expect the impact of XP migration worldwide to continue throughout 2014.”
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