10-QPeriod: Q2 FY2012

MICRON TECHNOLOGY INC Quarterly Report for Q1 Ended Dec 1, 2011

Filed January 10, 2012For Securities:MU

Summary

Micron Technology Inc. reported a net loss of $187 million, or $0.19 per diluted share, for the quarter ended November 30, 2011. This contrasts sharply with a net income of $155 million, or $0.15 per diluted share, in the same quarter of the prior year. The decline was driven by a significant decrease in net sales, which fell to $2.09 billion from $2.25 billion year-over-year, and a substantial increase in cost of goods sold. The company's gross margin contracted considerably, impacting overall profitability. The company's financial performance reflects the challenging dynamics within the semiconductor memory market, characterized by declining average selling prices for its key products, DRAM and NAND Flash. While the company made efforts to reduce manufacturing costs, these were insufficient to offset the revenue pressures. Micron's balance sheet shows total assets of $14.21 billion and total liabilities of $4.50 billion, with a notable decrease in cash and equivalents to $1.92 billion from $2.16 billion at the prior quarter end. Significant investments in property, plant, and equipment continue, highlighting the capital-intensive nature of the business.

Financial Highlights

51 data points
Beta

Revenue

$2.01B

10.5% Gross Margin

Net Income

-$282.00M

-14.0% Net Margin

EPS (Diluted)

$-0.29

Total Assets

$14.14B

Cash & Equivalents

$2.09B

Free Cash Flow

$182.00M

Financial Statements
Beta
Revenue$2.01B
Cost of Revenue$1.80B
Gross Profit$210.00M
R&D Expenses$222.00M
SG&A Expenses$174.00M
Operating Income-$204.00M
Interest Expense$35.00M
Net Income-$282.00M
EPS (Basic)$-0.29
EPS (Diluted)$-0.29
Shares Outstanding (Basic)982.80M
Shares Outstanding (Diluted)982.80M

Key Highlights

  • 1Reported a net loss of $187 million for the quarter, a significant decline from a net income of $155 million in the prior year's comparable quarter.
  • 2Net sales decreased by 7% year-over-year to $2.09 billion, primarily due to lower average selling prices in DRAM and NOR Flash products.
  • 3Gross margin significantly declined to 15% from 23% year-over-year, indicating pressure on profitability due to falling prices and rising costs.
  • 4DRAM Solutions Group (DSG) experienced a 27% sales decline and a shift to an operating loss of $139 million, primarily due to falling DRAM average selling prices.
  • 5NAND Solutions Group (NSG) showed resilience with a 36% year-over-year sales increase, driven by higher volumes, though average selling prices also declined.
  • 6The company continues to invest heavily in property, plant, and equipment, with capital expenditures of $697 million during the quarter.
  • 7Cash and equivalents decreased to $1.92 billion from $2.16 billion in the prior quarter.

Frequently Asked Questions

The primary reason for the sharp decline in profitability is the significant decrease in net sales, driven by falling average selling prices for DRAM and NAND Flash products. This, coupled with an increase in the cost of goods sold, led to a substantial contraction in gross margin from 23% to 15% year-over-year.

The DRAM Solutions Group (DSG) is facing significant challenges, with sales down 27% and a substantial operating loss. The NAND Solutions Group (NSG) is performing better, with a 36% increase in sales year-over-year due to higher volumes, despite declining average selling prices. The Wireless Solutions Group (WSG) saw a 27% sales decrease, while the Embedded Solutions Group (ESG) had relatively stable sales.

Micron's cash and equivalents decreased to $1.92 billion. The company is heavily investing in its future, as evidenced by capital expenditures of $697 million during the quarter, primarily for property, plant, and equipment. This investment reflects the ongoing need to maintain and advance its manufacturing capabilities in the capital-intensive semiconductor industry.

The company is involved in several ongoing legal proceedings, including patent infringement litigations (notably with Rambus and others) and antitrust matters, particularly related to DRAM price-fixing allegations. While a jury recently found in Micron's favor on one antitrust claim, and a settlement was reached for US indirect purchaser cases, these matters carry inherent risks and could potentially result in significant liabilities or require material changes to business operations if outcomes are adverse.