10-QPeriod: Q2 FY2019

MICRON TECHNOLOGY INC Quarterly Report for Q2 Ended Feb 28, 2019

Filed March 21, 2019For Securities:MU

Summary

Micron Technology Inc. reported a sequential decline in revenue for the second quarter of fiscal year 2019, with total revenue reaching $5.835 billion, down from $7.351 billion in the prior year's second quarter. This decrease was primarily attributed to unfavorable market conditions, including inventory adjustments by customers, CPU shortages, and a weaker smartphone market, leading to lower average selling prices (ASPs) for both DRAM and NAND products. Despite the revenue dip, the company has made strides in its strategic initiatives, notably exercising its option to acquire Intel's stake in their joint venture, IMFT. This move positions Micron for greater control over future 3D XPoint technology development and production. The company also continued its share repurchase program, demonstrating a commitment to returning capital to shareholders. While facing near-term market headwinds, Micron remains focused on its long-term technology roadmap and market diversification. Financially, the company reported a diluted EPS of $1.42 for the quarter, a decrease from $2.67 in the prior year's second quarter, reflecting the challenging market dynamics. Gross margin also compressed to 49% from 58% year-over-year, impacted by the decline in ASPs. Cash flow from operations remained robust, indicating strong underlying business performance despite cyclical industry pressures. The company maintained a solid liquidity position with substantial cash and investments on hand.

Financial Highlights

51 data points
Beta

Revenue

$5.83B

49.1% Gross Margin

Net Income

$1.62B

27.7% Net Margin

EPS (Diluted)

$1.42

Total Assets

$47.49B

Cash & Equivalents

$6.43B

Free Cash Flow

$786.00M

Financial Statements
Beta
Revenue$5.83B
Cost of Revenue$2.97B
Gross Profit$2.86B
R&D Expenses$601.00M
SG&A Expenses$209.00M
Operating Income$1.96B
Interest Expense$27.00M
Net Income$1.62B
EPS (Basic)$1.45
EPS (Diluted)$1.42
Shares Outstanding (Basic)1.11B
Shares Outstanding (Diluted)1.14B

Key Highlights

  • 1Revenue decreased by 21% year-over-year to $5.835 billion due to unfavorable market conditions and declining average selling prices (ASPs) for DRAM and NAND.
  • 2Diluted Earnings Per Share (EPS) fell to $1.42 from $2.67 in the prior year's second quarter, reflecting the impact of market headwinds.
  • 3Gross margin declined to 49% from 58% year-over-year, primarily driven by lower ASPs that outpaced manufacturing cost reductions.
  • 4Micron exercised its option to acquire Intel's interest in the IMFT joint venture, signaling a strategic shift towards independent control of 3D XPoint technology.
  • 5The company continued its significant capital expenditure program, with an estimated $9 billion for 2019, focusing on technology transitions and product enablement.
  • 6Share repurchases remained active, with $702 million spent on repurchasing approximately 21 million shares in the second quarter of 2019.
  • 7The Compute and Networking Business Unit (CNBU) experienced the largest revenue decline, down 35% year-over-year, reflecting broader market challenges.

Frequently Asked Questions

The primary drivers of the revenue decline were unfavorable market conditions, including ongoing inventory adjustments by customers for DRAM, CPU shortages, a weaker premium smartphone market, and weaker demand in certain other markets. These factors led to lower average selling prices (ASPs) for both DRAM and NAND products.

Exercising the option to acquire Intel's interest in IMFT is a significant strategic move. It allows Micron to gain full control over the development and production of 3D XPoint memory technology, enabling them to better align it with their product roadmap and maximize benefits for their customers and shareholders, rather than continuing a joint development approach with Intel.

Micron maintained a strong liquidity position with $9.15 billion in cash and marketable investments as of February 28, 2019. The company expects its cash from operations, investments, and available financing (including a $2.5 billion revolving credit facility) to be sufficient to meet its needs. They also continue to actively repurchase shares, demonstrating confidence in their financial health and commitment to shareholder returns.

Micron is involved in several significant legal proceedings, including patent infringement lawsuits in China and the US, antitrust investigations and class-action lawsuits alleging price-fixing of DRAM products, and securities fraud litigation. The company also faces numerous risks, such as volatility in average selling prices, intense competition, the need for continuous innovation, potential disruptions in the supply chain, and regulatory changes. These factors could materially adversely affect the company's business, results of operations, or financial condition.