Micron Technology Inc. (MU) reported adjusted second quarter fiscal 2012 loss per share of 23 cents, wider than the Zacks Consensus Estimate of loss per share of 18 cents.
Revenue
Micron reported revenues of $2.07 billion, down 8.4% year over year. The company witnessed sequential improvement in revenues from sales of NAND Flash products and DRAM products during the quarter. This can be attributed to a 20.0% increase in sales volumes, which is offset to a certain extent by decreases in average selling prices.
Operating Results
The company’s gross margin for the second quarter was 12.9%, down from 19.3% in the year-ago quarter. The decline was primarily due to significant drop in average selling price.
Selling, general and administrative expenses increased 19.2% year over year to $174.0 million. Research and development expenses grew 19.4% year over year to $222.0 million, mainly due to higher labor costs. The operating margin was (7.2%) as against 7.9% in the year-ago quarter.
Micron suffered a net loss of $224.0 million or 23 cents per share, compared to net income of $72.0 million or 7 cents in the year-ago quarter.
Balance Sheet & Cash Flow
Micron ended the second quarter with cash and short-term investments of $2.09 billion, down from $1.92 billion in the previous quarter. Receivables were $1.24 billion, down from $1.38 billion in the previous quarter. Inventories increased 0.8% from the prior quarter to $2.1 billion.
The company had $2.16 billion in long-term debt, up from $1.97 billion in the prior quarter. Cash generated from operations was $574.0 million, compared with $429.0 million in the prior quarter.
Our Take
Micron’s second quarter results were disappointing as the net loss per share was wider than the Zacks Consensus Estimate. The quarter’s revenue too came below the year-ago level. The quarter even saw declines in ASPs.
The cost-cutting measure could mitigate the adverse effect of ASP declines to some extent, going forward. Additionally, the drop in demand for laptops and desktop PCs may affect the demand for DRAM and RAM to a certain extent.
On the other hand, we believe that it won’t be easy for Micron to capture share from SanDisk Corp. (SNDK), as SanDisk is a key layer in the NAND zone. However, the renewal in operation in Thailand may help the company going forward.
Micron Technology has a Zacks #3 Rank, implying a short-term Hold recommendation.
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