Micron’s business segments
Micron (MU) has four segments: CNBU (compute and networking business unit), SBU (storage business unit), MBU (mobile business unit), and EBU (embedded business unit). The company’s overall results were affected by the poor performance of the computing and storage units, which contribute ~60% towards overall revenue.
On a YoY (year-over-year) basis, CNBU’s revenue fell 31.4% to $1.3 billion in fiscal 4Q15 and operating income fell 80% to $99 million. The segment was hit by a 7% decline in the average selling price of DRAM (dynamic random access memory) driven by the continued slowdown in demand from the PC (personal computer) segment. Softness in PC shipments also affected semiconductor giant Intel (INTC), whose revenue from its computing segment fell 14% YoY in fiscal 2Q15.
Computing segment: PCs
According to Gartner, global PC shipments fell 9.5% YoY to 68.4 million units in 2Q15. Hewlett-Packard (HPQ), a key customer of Micron’s DRAM products, reported a 9.5% YoY decline in its PC shipments in 2Q15. This adversely impacted Micron’s sales.
In the fiscal 4Q15 earnings call, Micron’s president, Mark Adams, stated that the company has reduced its production in the PC segment by approximately 20% and shifted it towards other more stable segments such as mobile. The company will continue to reduce its reliance on the PC segment in fiscal 1Q16.
Computing segment: enterprise
Meanwhile, CNBU saw strong demand from the enterprise segment, where the sales volume of its DRAM product “DDR4” more than doubled from fiscal 3Q15. The company anticipates demand from this segment to grow in the future and its transition to the 20-nanometer (or nm) technology to support the growth. Samsung (SSNLF) has already started mass production on the 20-nm technology.
The networking segment reported stable performance. Micron anticipates more demand in this space driven by increasing adoption of LTE (long-term evolution), a wireless network technology, in emerging markets. Transparency Market Research forecasts the Asia Pacific LTE market to reach $244.3 billion by 2019, growing at a compounded annual rate of 88.7% between 2013 and 2019. QQQ (QQQ) has a 0.34% exposure to Micron.