Micron Sees Promising PC Industry Trends, Executive Says

Memory supplier Micron Technology is seeing several promising trends and said Q3 results improved from a year earlier. But shares fell 13 percent Tuesday and closed at $8.67 after it offered in an earnings call a conservative forecast for DRAM bit growth.

In the PC market overall, the company “started to see some pretty healthy indications on the back-to-school” sales front “in the second half of the year,” Vice President of Worldwide Sales Mark Adams said. In particular, the “server business has been very strong, the desktop business is very strong,” and June notebook results were also “very strong,” he said. “So, despite some concerns or questions early on in our quarter back in April, it’s still been fairly strong. We feel pretty good about it."

In Europe, aside from Greece and certain “smaller markets,” Micron has “actually seen some pockets of strength in retail,” Adams said. Margins have been “okay” in Europe overall, he said. “China retail has been up dramatically. So on a global footprint … whatever noise there might be in some smaller regions in Europe is more than offset by some other global success paths around China, India and other” unspecified regions, he said.

Micron swung to a $939 million profit, or 92 cents a share, from a $301 million, or 37 cents loss, in Q3 a year ago, it said Monday (CED June 29 p6). Revenue jumped to $2.29 billion from $1.11 billion. The results included $488 million in purchase accounting gains related to its recently-completed acquisition of Swiss memory supplier Numonyx. Revenue from sales of DRAM products increased 10 percent in its memory business versus Q2 this year because of a 9 percent increase in average selling prices and “a slight increase in unit sales volume,” it said.

Revenue from sales of NAND flash products rose about 16 percent from Q2 “due to a 21 percent increase in unit sales volume, partially offset by a 4 percent decrease in average selling prices,” the company said. Gross margin on sales of memory products improved from 35 percent in Q2 to 40 percent, mainly on “an overall increase in average selling prices and the benefit for price adjustments from suppliers of NAND products,” it said. In gross margin, specialty DRAM “continued to lead” Micron’s results in Q3, it said. That sector was followed by trade NAND, core DRAM, imaging and other, and Numonyx, it said.

Chief Financial Officer Ron Foster said DRAM cost reductions in fiscal Q4 are “expected to be down low single digits and bit production is expected to be flat to up slightly compared to Q3” this year. Some analysts expected much stronger DRAM growth.

The company “continued to see strong demand” for its memory products in Q3, Adams said. While Q3 “has historically been slower from a demand perspective” compared with other quarters, Micron’s NAND bit shipments increased 21 percent from Q2 and DRAM bit shipments were up 2 percent, he said. The company “consciously directed more of our bits towards higher margin products, including products [sold] to our server, networking and storage and automotive customers,” he said. Personal computing revenue, including desktop computers, notebooks and netbooks, edged up 3 percent from Q2 “as ASPs remained strong in our core DRAM business,” he said.

Micron’s networking and storage business had a 25 percent revenue gain from Q2, “driven by a double-digit bit shipment increase, as well as a 10 percent ASP increase quarter-over-quarter,” Adams said. Like its server business, “the forecast from our networking and storage customers continues to be strong heading into the back half of calendar year 2010,” he said. Overall DRAM demand “continues to remain very favorable as we look to optimize our production plans around these strategic growth markets, where we are uniquely positioned with a diversified product portfolio,” he said.

Micron’s retail business “had the best operating performance” since it bought Lexar Media in June 2006, Adams said. Lexar-branded flash memory card and USB products, along with the company’s Crucial-branded SSD and DRAM module solutions, “have continued to gain market share worldwide,” he said, without elaborating.