Point72 Asset Management and Micron Technology
Point72 reduced its position in Micron Technology (MU) by selling 4,792,200 Micron shares during 4Q14. The fund held 1,138,400 Micron shares. The shares accounted for 0.28% of the fund’s total 4Q14 portfolio. Micron has an 0.89% exposure to the Technology Select Sector SPDR Fund (XLK). It also accounts for 6.69% of the iShares PHLX Semiconductor ETF (SOXX).
About Micron Technology
Micron Technology (MU) is a global leader in advanced semiconductor systems. Micron has a broad portfolio of high-performance memory technologies—including DRAM (dynamic random-access memory), NAND, and NOR flash.
Micron’s focus changed
Micron had a major focus on client computing during its earlier years, with a slight focus on the mobile segment. However, the company diversified its focus into embedded products, networking, server, mobile, client storage, and client computing products by fiscal 2014. The company is expected to grow its focus in the enterprise storage, networking, and server product segments.
Micron’s business segments include:
- CNBU (Computer and Networking Business Unit) – It includes DRAM and flash products sold to computer, networking, graphics, and Cloud server markets.
- SBU (Storage Business Unit) – It includes NAND flash components and SSDs (solid-state drives) for clients, enterprises, cloud, and removable storage markets. SSD is a storage device that consists of non-volatile flash memory and acts as a substitute for hard disks due to its significantly greater speed.
- MBU (Mobile Business Unit) – It’s a key segment for Micron that includes DRAM, NAND, and NOR flash products meant for the smartphone and tablet markets.
- EBU (Embedded Business Unit) – It includes DRAM, NAND, and NOR products for automotive and industrial applications.
Micron’s new offering – 3D NAND
Micron set up a joint venture (JV) with Intel (INTC) in 2006 to make NAND Flash. NAND Flash is mass storage device used for smartphones and tablets. The JV started 3D NAND production in 1Q15. In 2014, NAND Flash accounted for 28% of Micron’s revenue. According to DRAMeXchange, Micron is the fourth largest player in the NAND segment—after Samsung, Toshiba (TOSBF), and SanDisk (SNDK).
Recently, Micron revealed its intention to invest ~$4 billion to expand the company’s fabrication plant based in Singapore. This expansion will help the company efficiently implement the production of 3D NAND.
Solid fiscal 1Q15 earnings
Micron Technology reported strong 1Q15 results. The fiscal year for Micron ends in August. The company generated $4.6 billion in revenue. This represented an 8% increase over the prior quarter and 13% YoY (year-over-year). Growth in the DRAM and NAND market helped this growth. DRAM revenue grew 9% YoY. It was driven by an increase in the sales volume. Demand for DRAM chips for PCs was strong during the quarter. In 2014, DRAM contributed 70% of the total revenue.
NAND revenue was up 14% YoY. It was driven by a 20% increase in sales volume. It was offset by 6% decline in the selling price. EBU experienced the maximum growth of 13% over the prior quarter. It was followed by CNBU. It grew 10%.
The DRAM market is expected to grow by 20% in 2015. The NAND market is more volatile than DRAM. It’s expected to grow by 30% to mid-40% in 2015.
GAAP (generally accepted accounting principles ) net income was $1 billion, or $0.84 per share—compared to $358 million, or $0.30 per share, in 1Q14.
Micron’s board authorized to repurchase $1 billion of stock.
Narrow 2Q15 outlook
Revenue is expected to be $4.1–$4.3 billion. It expects DRAM production to be down sequentially for technology upgrade. The quarter usually has seasonally slower demand.
In the next part of this series, we’ll discuss Point72’s position change in Devon Energy.