10-QPeriod: Q3 FY2011

MICRON TECHNOLOGY INC Quarterly Report for Q2 Ended Mar 3, 2011

Filed April 12, 2011For Securities:MU

Summary

Micron Technology Inc. reported net sales of $2.257 billion 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 million 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 billion and $2.9 billion for fiscal year 2011, signaling a focus on future growth and technology development amidst a challenging pricing environment.

Financial Highlights

51 data points
Beta

Revenue

$2.14B

22.3% Gross Margin

Net Income

$75.00M

3.5% Net Margin

EPS (Diluted)

$0.07

Total Assets

$14.57B

Cash & Equivalents

$2.40B

Free Cash Flow

$96.00M

Financial Statements
Beta
Revenue$2.14B
Cost of Revenue$1.66B
Gross Profit$478.00M
R&D Expenses$211.00M
SG&A Expenses$151.00M
Operating Income$237.00M
Interest Expense$28.00M
Net Income$75.00M
EPS (Basic)$0.07
EPS (Diluted)$0.07
Shares Outstanding (Basic)998.90M
Shares Outstanding (Diluted)1.04B

Key Highlights

  • 1Net 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.
  • 2Net 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.
  • 3Gross margin declined significantly from 33% in Q2 2010 to 19% in Q2 2011, primarily due to a 37% drop in DRAM average selling prices.
  • 4The company continues aggressive capital investment, with expected capital expenditures for fiscal year 2011 in the range of $2.6 billion to $2.9 billion.
  • 5Cash 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.
  • 6Micron is actively managing its debt, having completed several debt restructure transactions in the previous quarter, including debt exchanges and repurchases.

Frequently Asked Questions

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.

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.

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.

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.