01—Abstract
Summary
Summary of the 10-Q filed March 21, 2019. Cited figures are marked; the original filing is the authoritative source.
Micron Technology Inc. reported a sequential decline in revenue for the second quarter of fiscal year 2019, with total revenue reaching $5.835 billiona, 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 $1.42b 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%c 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.
02—Key points
Key Highlights
- Revenue 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.
- Diluted Earnings Per Share (EPS) fell to $1.42 from $2.67 in the prior year's second quarter, reflecting the impact of market headwinds.
- Gross margin declined to 49% from 58% year-over-year, primarily driven by lower ASPs that outpaced manufacturing cost reductions.
- Micron exercised its option to acquire Intel's interest in the IMFT joint venture, signaling a strategic shift towards independent control of 3D XPoint technology.
- The company continued its significant capital expenditure program, with an estimated $9 billion for 2019, focusing on technology transitions and product enablement.
- Share repurchases remained active, with $702 million spent on repurchasing approximately 21 million shares in the second quarter of 2019.
- The Compute and Networking Business Unit (CNBU) experienced the largest revenue decline, down 35% year-over-year, reflecting broader market challenges.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2019, Micron Technology Inc kept $0.28.
- Revenue$5.83B100.0%
- Cost of revenue−$2.97B50.9%
- Gross profit$2.86B49.1%
- Operating costs−$907.0M15.5%
- Operating income$1.96B33.5%
- Interest, other & tax−$338.0M5.8%
- Net income$1.62B27.7%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2019filed March 21, 2019Financial Statements
Q2 FY2019 against Q2 FY2018
| Line item | Q2 FY2019Q2 FY2018 | Change |
|---|---|---|
| Revenue | $5.83B$7.35B | −20.6% |
| Cost of Revenue | $2.97B$3.08B | −3.6% |
| Gross Profit | $2.86B$4.27B | −32.9% |
| R&D Expenses | $601.00M$523.00M | +14.9% |
| SG&A Expenses | $209.00M$196.00M | +6.6% |
| Operating Income | $1.96B$3.57B | −45.1% |
| Interest Expense | $27.00M$88.00M | −69.3% |
| Net Income | $1.62B$3.31B | −51.1% |
| EPS (Basic) | $1.45$2.86 | −49.3% |
| EPS (Diluted) | $1.42$2.67 | −46.8% |
| Shares Outstanding (Basic) | 1.11B1.16B | −3.6% |
| Shares Outstanding (Diluted) | 1.14B1.24B | −7.8% |
05—Questions
Frequently Asked Questions
What were the primary drivers of the revenue decline in this quarter?
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.
What is the significance of Micron exercising its option to acquire Intel's stake in IMFT?
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.
How is Micron managing its liquidity and capital resources given the market downturn?
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.
What legal proceedings and risks are highlighted in this filing?
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.
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