Why Did Micron Post Negative Earnings in Fiscal 2Q16?



Micron’s fiscal 2Q16 earnings highlights

The March 2016 earnings season has arrived, with Intel’s (INTC) memory partner Micron Technology (MU) being the first to report its earnings for fiscal 2Q16 ended March 3, 2016.

The only US-based DRAM (dynamic random access memory) supplier reported its first quarterly loss since fiscal 2Q13, when it was hit by DRAM oversupply. However, Micron’s loss was narrower than expected, which saw its share rise by 1% in the after-hours trading session on March 30, 2016.

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Micron’s fiscal 2Q16 revenue and fiscal 3Q16 guidance both fell short of analysts’ estimates. The company expects growth to pick up in fiscal 2H16 as its technology ramp-up starts yielding results. In this series, we’ll look at the company’s financial performance and factors that will impact its future growth.

Micron reports loss in fiscal 2Q16

In fiscal 2Q16, Micron reported a non-GAAP (generally accepted accounting principles) net loss of $48 million compared to a net profit of $941 million in fiscal 2Q15. This equates to a non-GAAP loss per share of $0.05, which is better than analysts’ consensus estimate of -$0.09.

During the quarter, the company’s revenue fell 29.6% YoY (year-over-year) to $2.9 billion, below analysts’ consensus estimate of $3.1 billion. Its revenue was largely impacted by a fall in both volume and ASP (average selling price) of DRAM—a key product used in personal computers (or PCs). Seasonal weakness and a slowing PC market made matters worse.

Micron’s growth focus

Micron is behind its South Korean (EWY) rival Samsung (SSNLF) in terms of technology, which has affected its profitability in this commoditized market. Hence, the company is shifting its focus away from commodity chips and moving toward high-margin memory chips used in servers and embedded devices.

Micron has also entered the SSD (solid-state drives) market, which is currently dominated by SanDisk (SNDK).

In the next part of this series, we’ll look at Micron’s profit situation.


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