Micron Technology Inc. (MU) reported adjusted second quarter 2011 earning per share of 7 cents, beating the Zacks Consensus Estimate of 4 cents. Micron shares rose 42 cents, or 4.0%, to $11.03 in extended trading yesterday.
Revenue
Total second quarter revenue was $2.25 billion, up 15.0% year over year and flat sequentially. The reported revenue was ahead of the Zacks Consensus Estimate of $2.09 billion.
Revenue from the sales of DRAM products fell 6.0% from the previous quarter as a result of a 23.0% decrease in average selling price, largely offset by an increase in volume. Revenue from sales of NAND Flash products was 8.0% higher than the previous quarter due to an increase in volume, partially offset by a 4.0% decline in average selling prices.
Operating Results
The company’s gross margin for the second quarter was 19.0%, which is lower than the 23.0% reported in the previous quarter and 32.7% reported in the year-ago quarter. The decline was primarily due to decreases in average selling prices, partially offset by decreases in manufacturing costs.
Selling, general and administrative expenses jumped 46.0% year over year to $146.0 million. Research and development expenses surged 25.6% year over year to $186.0 million. The operating margin was 7.9%, down from 21.1% in the prior-year quarter.
Net income attributable to Micron was $72.0 million or 7 cents per share, compared to $365.0 million or 39 cents in the year-ago quarter.
Balance Sheet & Cash Flow
Micron ended the second quarter with cash and short-term investments of $2.18 billion, down from $2.41 billion in the previous quarter. Receivables were $1.39 billion, compared with $1.36 billion in the previous quarter. Inventories increased 3.17% from the prior quarter to $1.95 billion. The company had $1.32 billion in long-term debt, up from $1.64 billion in the prior quarter.
Cash generated from operations was $809.0 million, compared to $732.0 million in the prior-year quarter. Capital expenditure increased significantly from the year-ago quarter to $840.0 million.
Our Take
The quarter’s top and bottom lines exceeded the Zacks Consensus Estimates. But the earthquake and tsunami in Japan have raised fears about companies with a substantial presence in that country, as the destruction to roads and transportation has crippled supply lines and factory closures have stalled production.
Moreover, ASP declines in the DRAM businesses noticed during the quarter and competetion from Sandisk (SNDK) remain a concern. The company also said that prices of DRAM chips, which are key components of personal computers, plunged 23.0% sequentially, while prices of NAND flash chips, which are used in MP3 players and a host of other consumer electronic devices, dropped 4.0%.
The company has a short-term Hold recommendation (Zacks Rank #3).
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