Micron (MU, Financial)'s second quarter report shows it is a company to be watched for a possible future upside. It is an American multinational company based in Boise, Idaho. The company offers dynamic random access memory products (DRAM) for the data storage and retrieval of customers. The company also provides NAND flash memory products. Its NAND flash memory products include flash memory cards and products used in mobile phones. Also, Micron provides NOR flash memory products that are electrically re-writeable. They are utilized in numerous industrial and automotive applications.
Financials
Micron markets its products to original equipment manufacturers and retailers through numerous channels. In the second quarter, Micron reported a net income of $731 million on net sales of $4.1 billion. On a non-GAAP basis, Micron’s net income for the second quarter was $989 million, which is $108 million higher than the first quarter. Micron’s gross margin improved to 34%, and its free cash was at $85 million. The free cash was based on an operating cash flow of $1.39 billion.
Positive Outlook
Micron’s outlook for the memory industry remains favorable. It forecasts a five-year DRAM demand compound annual growth rate in the mid 20% to 30% range. For its NAND sector, Micron is projecting industry growth in the low 40% range for 2014. However, it is forecasting a five-year NAND demand compound annual growth rate in the high 30% to low 40%. In its NOR sector, the company expects the revenue to be in the $100 million range. In the long term, Micron expects to see a growth in the sector’s gross margins.
Initiatives
In the last quarter, Micron continued with its program to convert DRAM to NAND. The result is that the company ended up with more products sold in component form compared to the company’s long-term target for its NAND business. Micron is also shifting its NAND production to its 16-nanometer technology. These transitions will enable a lower cost product mix for the company in the future.
In the DRAM sector, Micron is spreading the migration of its 25-nanometer beyond personal computers and the mobile segment. It is achieving this by focusing on server-level quality with its customers. Its 20-nanometer process migration is also on track. Micron believes these will improve the overall cost position of its business.
Head to Head
Micron competes with STMicroelectronics NV (STM, Financial), Samsung Electronics (SSNLF, Financial), and others. Compared to its peers, Micron has a diversification advantage. It trades in almost all the segments in the memory market. Founded in 1978, it has gained a lot of valuable experience in the sector.
International Wing
Micron is a multinational company in its operations. It has installations in Taiwan and Singapore and does extensive business in China.
The Singapore Market
During the quarter, Micron continued its DRAM to NAND conversion in its plant in Singapore. It is also expanding its production in its operations in the country.
A Look at Taiwan
The company has been engaged in the purchase of residual shares not owned by it in the company formerly known as Rexchip. As a result of the initiative, Micron has bought all but about 0.5% of the outstanding shares.
A Passage to China
Micron has strengthened its networking business for a gain in the Chinese market. In China, Micron is focused to make a profit from the increased demand for an LTE roll-out and continued cloud and data center growth.
Final Note
Micron is diversified across the major categories in the memory market. Consequently, it is positioned to meet changes in the industry. Also, it has not stopped investing in ventures to ensure even more shareholder value in the future. In conclusion, Micron is improving its financial situation. The company expects much growth in the next few years. I feel confident about this company’s future turnaround.
