01—Abstract
Summary
Summary of the 10-Q filed December 20, 2019. Cited figures are marked; the original filing is the authoritative source.
Micron Technology Inc. (MU) reported a significant year-over-year decline in revenue for the first quarter of fiscal year 2020, driven by a substantial decrease in DRAM average selling prices and a moderate decrease in NAND average selling prices.
Revenue fell by 35% to $5.14 billion compared to $7.91 billiona in the prior year's first quarter. Despite the revenue drop, the company demonstrated efforts to manage costs, with cost of goods sold increasing at a slower pace than revenue. However, gross margin significantly compressed from 58% to 27% year-over-year due to pricing pressures.
Net income attributable to Micron also saw a sharp decline, from $3.29 billion to $491 millionb. The company is navigating a challenging market environment characterized by price volatility and supply-demand imbalances, particularly in the DRAM market.
02—Key points
Key Highlights
- Revenue for the first quarter of fiscal year 2020 decreased by 35% year-over-year to $5.14 billion, primarily due to significant declines in DRAM average selling prices.
- Gross margin contracted significantly to 27% from 58% in the prior year's first quarter, reflecting the impact of lower average selling prices.
- Net income attributable to Micron shareholders decreased to $491 million ($0.43 per diluted share) from $3.29 billion ($2.81 per diluted share) in the same period last year.
- The Compute and Networking Business Unit (CNBU) experienced a substantial revenue decline of 45% year-over-year, indicating weakness in the PC and server memory markets.
- Micron acquired Intel's noncontrolling interest in IMFT (now MTU) on October 31, 2019, for $1.25 billion, leading to its full ownership.
- Capital expenditures for property, plant, and equipment are projected to be $7 billion to $8 billion for fiscal year 2020, signaling continued investment in technology and capacity.
- The company has an active share repurchase program, with approximately $7.29 billion remaining under its $10 billion authorization as of November 28, 2019.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2020, Micron Technology Inc kept $0.10.
- Revenue$5.14B100.0%
- Cost of revenue−$3.78B73.4%
- Gross profit$1.37B26.6%
- Operating costs−$848.0M16.5%
- Operating income$518.0M10.1%
- Interest, other & tax−$27.0M0.5%
- Net income$491.0M9.5%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2020filed December 20, 2019Financial Statements
Q1 FY2020 against Q1 FY2019
| Line item | Q1 FY2020Q1 FY2019 | Change |
|---|---|---|
| Revenue | $5.14B$7.91B | −35.0% |
| Cost of Revenue | $3.78B$3.30B | +14.6% |
| Gross Profit | $1.37B$4.62B | −70.4% |
| R&D Expenses | $640.00M$611.00M | +4.7% |
| SG&A Expenses | $211.00M$209.00M | +1.0% |
| Operating Income | $518.00M$3.76B | −86.2% |
| Interest Expense | $47.00M$33.00M | +42.4% |
| Net Income | $491.00M$3.29B | −85.1% |
| EPS (Basic) | $0.44$2.91 | −84.9% |
| EPS (Diluted) | $0.43$2.81 | −84.7% |
| Shares Outstanding (Basic) | 1.11B1.13B | −2.3% |
| Shares Outstanding (Diluted) | 1.13B1.17B | −3.8% |
05—Questions
Frequently Asked Questions
What were the primary drivers of the revenue decline in Q1 FY2020?
The primary driver of the revenue decline was a significant decrease in average selling prices (ASPs), particularly in the DRAM market where ASPs fell in the low-50-percent range year-over-year. NAND ASPs also declined in the mid-30-percent range. While bit shipments increased in both DRAM and NAND segments, this growth was not enough to offset the price erosion.
How is Micron managing profitability amidst falling prices?
Micron is focusing on cost management and operational efficiency. The company revised the estimated useful lives of equipment in its NAND fabrication and R&D facilities, which reduced non-cash depreciation expense. This change had a positive impact on cost of goods sold and inventories. Additionally, the company is implementing continuous improvement initiatives to reduce production costs. However, underutilization costs at MTU, which began in Q1 FY2020, are expected to impact gross margins.
What is the significance of the acquisition of Intel's stake in IMFT (now MTU)?
The acquisition of Intel's noncontrolling interest in IMFT (now MTU) on October 31, 2019, for $1.25 billion makes MTU a wholly-owned subsidiary. This simplifies operations and control, though the company noted that MTU incurred underutilization costs in Q1 FY2020 which are expected to increase. This move indicates Micron's strategy to have full control over key manufacturing assets and technologies.
What is the outlook for capital expenditures?
Micron plans significant capital expenditures of $7 billion to $8 billion for fiscal year 2020, primarily focused on technology transitions and product enablement. This indicates a commitment to investing in future growth and maintaining technological leadership despite the current market downturn.
06—Continue