01—Abstract
Summary
Summary of the 10-Q filed April 12, 2011. Cited figures are marked; the original filing is the authoritative source.
Micron Technology Inc. reported net sales of $2.257 billiona for the second quarter of fiscal year 2011, a 15% increase compared to the same period in the prior year.
However, net income attributable to Micron decreased significantly, falling from $365 million in Q2 2010 to $72 millionb in Q2 2011, resulting in diluted earnings per share of $0.07 compared to $0.39 in the prior year. This decline in profitability was primarily driven by a substantial decrease in average selling prices (ASPs) for DRAM products, which declined by 37% year-over-year, impacting gross margins. The company saw strong growth in its Wireless Solutions Group (WSG) and Embedded Solutions Group (ESG) segments, largely attributed to the acquisition of Numonyx in May 2010.
However, the DRAM Solutions Group (DSG) experienced a significant sales decline due to falling ASPs, despite an increase in gigabits sold. Micron continues to invest heavily in capital expenditures, with expected spending between $2.6 billionc and $2.9 billion for fiscal year 2011, signaling a focus on future growth and technology development amidst a challenging pricing environment.
02—Key points
Key Highlights
- Net sales increased by 15% year-over-year to $2.257 billion, driven by growth in WSG and ESG segments, partly due to the Numonyx acquisition.
- Net income attributable to Micron decreased sharply by 80% year-over-year to $72 million, leading to a diluted EPS of $0.07 compared to $0.39 in the prior year.
- Gross margin declined significantly from 33% in Q2 2010 to 19% in Q2 2011, primarily due to a 37% drop in DRAM average selling prices.
- The company continues aggressive capital investment, with expected capital expenditures for fiscal year 2011 in the range of $2.6 billion to $2.9 billion.
- Cash and equivalents decreased to $2.184 billion from $2.913 billion at the end of the previous fiscal year, reflecting significant investing and financing activities.
- Micron is actively managing its debt, having completed several debt restructure transactions in the previous quarter, including debt exchanges and repurchases.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2011, Micron Technology Inc kept $0.04.
- Revenue$2.14B100.0%
- Cost of revenue−$1.66B77.7%
- Gross profit$478.0M22.3%
- Operating costs−$241.0M11.3%
- Operating income$237.0M11.1%
- Interest, other & tax−$162.0M7.6%
- Net income$75.0M3.5%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2011filed April 12, 2011Financial Statements
Q3 FY2011 against Q3 FY2010
| Line item | Q3 FY2011Q3 FY2010 | Change |
|---|---|---|
| Revenue | $2.14B$2.29B | −6.5% |
| Cost of Revenue | $1.66B$1.44B | +15.3% |
| Gross Profit | $478.00M$848.00M | −43.6% |
| R&D Expenses | $211.00M$142.00M | +48.6% |
| SG&A Expenses | $151.00M$190.00M | −20.5% |
| Operating Income | $237.00M$540.00M | −56.1% |
| Interest Expense | $28.00M$44.00M | −36.4% |
| Net Income | $75.00M$939.00M | −92.0% |
| EPS (Basic) | $0.07$1.06 | −93.4% |
| EPS (Diluted) | $0.07$0.92 | −92.4% |
| Shares Outstanding (Basic) | 998.90M885.40M | +12.8% |
| Shares Outstanding (Diluted) | 1.04B1.05B | −0.7% |
05—Questions
Frequently Asked Questions
What is the primary driver behind the significant decrease in net income and earnings per share?
The primary driver for the sharp decline in net income and EPS is the substantial decrease in average selling prices (ASPs) for DRAM products, which fell by 37% year-over-year. This decrease in revenue outpaced the company's ability to reduce costs, leading to lower gross margins and profitability.
How is Micron managing its significant capital expenditure plans in the current market environment?
Micron is maintaining a robust capital expenditure plan, expecting to spend between $2.6 billion and $2.9 billion in fiscal year 2011. This investment is crucial for developing new technologies, supporting future growth, and improving operational efficiencies to remain competitive. The company's liquidity appears sufficient to support these plans, though they are also dependent on market conditions and potential joint venture partner contributions.
What is the impact of the Numonyx acquisition on Micron's business segments?
The acquisition of Numonyx in May 2010 has significantly boosted the Wireless Solutions Group (WSG) and Embedded Solutions Group (ESG) segments, leading to increased sales and operating income in these areas. However, the company's overall results are still heavily influenced by the volatile DRAM market, which is facing pricing pressure.
Are there any significant legal or contingent liabilities that investors should be aware of?
Micron is involved in several significant legal proceedings, including antitrust matters related to alleged DRAM price-fixing and patent litigation, most notably with Rambus. While the company has settled some indirect purchaser cases for $67 million, the outcome of other ongoing litigation, particularly the Rambus patent cases and upcoming antitrust trial, remains uncertain and could potentially have a material adverse effect on the company's financial condition.
06—Continue