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How Micron’s Storage Business Will Drive 3D NAND Growth

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Micron’s exposure in the storage space

In the previous part of the series, we saw that Micron Technology’s (MU) revenue and profits were largely affected by its mobile and compute and networking businesses, which together accounted for 53% of the company’s revenue. While these two business units moved from profits to losses, Micron’s storage business improved by reducing its losses.

The data storage market is growing rapidly with the emergence of the cloud. Like Intel (INTC), Micron has been increasing its exposure in the storage space. The storage business’s contribution toward the company’s overall revenue rose from 23% in fiscal 2Q15 to 31% in fiscal 2Q16.

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Storage Business Unit

Revenue from Micron’s SBU (storage business unit) fell 5.6% YoY (year-over-year) to $901 million in fiscal 2Q16. Its operating margin rose from -3.8% in fiscal 2Q15 to -2.0% in fiscal 2Q16.

Sales of client and consumer SSDs (solid-state drive) rose 13% quarter-over-quarter as their adoption in notebooks increased due to a fall in SSD prices. Profits in data center SSDs were affected by pricing pressures arising from intense competition.

Key SSD supplier SanDisk (SNDK) also reported falling revenues and profits in fiscal 4Q15. SNDK posted weaker guidance for fiscal 1Q16.

Micron’s design wins

Storage is a key segment for Micron’s NVM (non-volatile memory) products such as 3D NAND (negative AND) and 3D XPoint. The company is sampling its 3D NAND integrated PCIe NVMe client SSDs with Tier-1 OEMs (other equipment manufacturers). It plans to ship these client SSDs and 2 TB (terabyte) client OEM drives in fiscal 2H16. With these products, the company is targeting the gaming market.

Micron has witnessed increasing demand for its energy-efficient, high-performance trade NAND among OEM enterprise and webscale customers. It will start mass production of its S600 Series SaaS (software as a service) drive, which was developed in collaboration with Seagate (STX). in fiscal 3Q16.

In the next part of the series, we’ll look at the performance of Micron’s embedded segment in fiscal 2Q16.

The iShares Russell 1000 Value ETF (IWD) has holdings in large-cap stocks across various industries. It has a 0.11% stake in MU, a 1.5% stake in INTC, and a 0.16% stake in SNDK.

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