This summary is based on the first quarter fiscal 2009 earnings call conducted by Micron Technology Inc. (MU) on December 23, 2008.
- VP Worldwide Sales:
- President & COO:
- VP IR:
Key Investors Issues
- Revenue decreased 9% to $1.4 billion compared to $1.54 billion in the prior year.
- The firm realized a net loss of $706 million or 91 cent per share compared to a loss of $262 million or 34 cents a share in 2007.
First Quarter Highlights
Revenue decreased 9% to $1.4 billion compared to $1.54 billion in the prior year and gross margin declined to minus 32% as megabit DRAM and NAND ASP declines outpaced cost reductions.
- Memory revenues included $36 million in royalty and technology fees.
- The sharp declines in memory ASPs triggered a $369 million non-cash write-down of memory inventories to estimated market value, resulting in a net loss of $706 million or 91 cent per share compared to a loss of $262 million or 34 cents a share in the prior year.
- The net loss also includes restructuring costs of $22 million related to employee severance and an $88 million credit for termination of the Boise supply agreement related to the joint venture with Intel.
In the DRAM space quarterly ASPs declined by an unusually high 34% while cost per gigabit declined by 12% due to successful process node migrations and manufacturing efficiencies.
- In NAND average selling prices also declined significantly by 24% while cost per gigabyte declined by 14% as the successful ramp of the new 34-nanometer MLC NAND product helped.
- Energy and raw materials were flat quarter to quarter with consistent positive gross margin performance.
- SG&A expenses were $102 million, a decline of 5% in absolute terms versus last quarter due to the company’s cost cutting and restructuring activities.
- R&D expenses of $178 million also came in below projections due to ongoing cost management efforts and progress moving key development products into production.
Given the challenging market environment, Micron has undertaken additional cost savings measures to enable it to increase competitiveness.
- These actions include reductions in executive and employee salaries, and elimination of bonuses, a continued hiring freeze, and reduction of other discretionary costs such as outside services, travel, and overtime.
- These actions are anticipated to save an additional $200 million of manufacturing and operating cash costs in the remainder of 2009.
- Headcount declined nearly 7% to 21,888 quarter to quarter.
- The firm ended with just over $1 billion in cash and short-term investments and operating cash flow contributed $359 million increasing by 48% through improved working capital management in inventory and trade accounts receivable.
Micron received strategic financing of $285 million with favorable terms as part of the $400 million acquisition of Qimonda’s 35.6% stake in Inotera which was completed on November 26.
- Through this acquisition Micron will receive 50% of wafers produced by Inotera once fully transitioned.
- This will represent capacity of over 60,300 mm wafers per month for Micron.
- Total debt increased by $140 million to $2.87 billion and capital expenditures for the totaled $334 million, down significantly from $759 million in the fourth quarter of 2008.
- Micron and Intel have agreed to delay the IMFS fab build out in Singapore until market conditions improve.
- In addition the capital contributions previously committed to our Maya joint venture with Nan Ya have been deferred.
- Despite continued industry oversupply and the global economic downturn Micron was able to drive DRAM bit shipment growth of 35% and NAND bit shipment growth of 40%.
- While PC desktop systems showed signs of weakening demand going into the holidays the notebook segment continued to show positive growth.
The server and networking shipments were flat quarter over quarter though the firm remains optimistic that it can increase its leadership position in these segments due to competitive reduction in output for these products.
- Shipments of MCPs, multi [chip] packages, were 1.9 million units, a dramatic increase quarter over quarter and the firm began shipping the 34-nanometer 32-gigabit flash memory product in high volume production.
- Lexar announced a number of industry leading performance products in photography, mobile, and gaming for the holiday season.
Key questions and answers from the first quarter earnings call conducted by Micron Technology Inc. (MU) on December 23, 2008.
Betsy Van Hees (Caris & Company): Could you give us a little bit of color in terms of fiscal Q2 what type of reductions we’re going to see in bit growth, bit supply?
Given the market conditions and the slowdown we already have in place throughout the holidays we want to try and stay away from precise bit guidance this quarter.
We are going to be pretty reactive on a go forward basis and see what plays out in the marketplace.