Memory-chip maker Micron Technology late Tuesday beat Wall Street's targets for its fiscal fourth quarter, but its outlook was light. The Micron earnings news pushed MU stock lower in extended trading.
The Boise, Idaho-based company earned an adjusted $1.08 a share on sales of $6.06 billion in the quarter ended Sept. 3. Analysts expected Micron earnings of 99 cents a share on sales of $5.89 billion. On a year-over-year basis, Micron earnings jumped 93% while sales rose 24%.
With its fiscal fourth-quarter results, Micron returned to earnings growth after six straight down quarters. Micron's sales turned positive in its fiscal third quarter after five consecutive quarters of decline.
For the current quarter, Micron expects to earn an adjusted 47 cents a share on sales of $5.2 billion. That's based on the midpoint of its guidance. Wall Street predicted Micron earnings of 69 cents a share on sales of $5.31 billion in the company's fiscal first quarter. In the year-earlier period, Micron earnings were 48 cents a share on sales of $5.14 billion.
Cloud Computing, PCs, Game Consoles Boost Sales
"Micron delivered solid fiscal fourth-quarter revenue and EPS (earnings per share) resulting from strong DRAM sales in cloud, PC and gaming consoles and an extraordinary increase in QLC (quad-level cell) Nand shipments," Chief Executive Sanjay Mehrotra said in the Micron earnings news release.
Micron makes two main types of memory chips: DRAM and Nand. Dynamic random-access memory, or DRAM, accounted for 72% of Micron's revenue in its fiscal fourth quarter. Nand flash memory accounted for 25% of its revenue during the period.
DRAM chips act as the main memory in PCs, smartphones and other devices, working closely with central processing units. Nand flash provides longer-term data storage. QLC Nand is a high-capacity storage technology designed for massive read-centric workloads.
Expects Improving Market Conditions In 2021
"We look forward to improving market conditions throughout calendar 2021, driven by 5G, cloud and automotive growth, and we are excited by the continued momentum in our product portfolio," Mehrotra said.
On the Micron earnings conference call with analysts, Mehrotra said demand for memory chips for cloud computing and laptop computers continues to be healthy. The work-from-home and e-commerce trends are boosting those segments, he said. Plus, demand for memory chips for video game consoles has been robust, he said.
"However, our short-term outlook has weakened due to a combination of factors," Mehrotra said. "First, the ongoing pandemic is taking a toll on certain segments of the economy. Consequently, enterprise demand has weakened due to lower IT (information technology) spending and somewhat higher inventories at certain customers."
Micron Earnings Impacted By Huawei Trade Ban
In addition, Micron has been hurt by the U.S. trade ban on exports to Chinese telecom gear maker Huawei. Micron halted its shipments to Huawei on Sept. 14. In its fiscal fourth quarter, Huawei accounted for about 10% of Micron's sales.
"Given that we only had a one-month notice before halting shipments, we had limited ability to shift supply to other customers," Mehrotra said. "As a result, we expect a negative impact to fiscal Q1 sales, and to a lesser extent, fiscal Q2 sales. Our well-established relationships with mobile customers worldwide will allow us to offset the impact of these restrictions by the end of fiscal Q2."
In after-hours trading on the stock market today, MU stock dropped 3.5%, near 48.95. During the regular session, ahead of the Micron earnings report, MU stock rose 2% to 50.71.
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