The leading memory chipmaker, Micron Technology (MU, Financial), reported its second-quarter earnings for the fiscal year 2015 on April 1, and the number mix was a fabulous one that exceeded the Street expectations. Backed by solid demand for the DRAM and NAND products of the company, the earnings and revenue topped the analysts’ estimates. The shares of the company also rose over 4% in after-hours trading soon after the earnings were released by the management. Let’s quickly jump into the major highlights of the quarter.
The quarter recap
The company reported a jump of 1% in quarterly revenue when compared on a year over year basis to $4.17 billion. This exceeded the Street’s expectations of $4.15 billion in revenue for the second quarter. Net income posted for the quarter stood at $934 million, which saw whopping increase of about 28% from the year ago quarter when the net income reported was $731 million. Earnings for the quarter were $0.78 per share, up from $0.61 per share reported in the year-ago quarter.
Diversified product portfolio and balanced customer base aided in the jump of top and bottom line for the company during the quarter. In fact, the earnings of the quarter surpassed the analysts’ expectations by $0.05 a share. The improving market conditions have led to improved demand in NAND which contributed to the overall growth in the topline of the company during the quarter.
Revenue for NAND Flash products grew 3% sequentially, primarily driven by the 12% rise in bit sales volume which was partially offset by declining average selling prices. The Storage Business unit (SBU), however, saw revenue marginally down on a sequential basis at $954 million during the quarter.
Due to the rising demand of mobiles, the Mobile Business Unit (MBU) performed well and revenue from this unit stood at $856 million at the end of the second quarter. Driven by the growth in the automotive segment, the revenue from the embedded business came in at $502 million, slightly up on a sequential basis.
There was a drop seen in gross margins that stood at 33.7% compared to 34.2% reported a year back, and this was attributed to lower average selling prices for NAND and DRAM and the higher cost of sales. Operating expenses improved by 20 basis points on a year-over-year basis, and this led to a drop of operating income which came in at $855 million, from $869 million reported in the year-ago quarter.
Share repurchase continues
The company strongly believes in rewarding its investors and hence repurchased approximately $200 million shares during the quarter, based on the prevailing $1 billion stock repurchase program. In fact, this looks like a cherry on the pie for the investors as the technologically driven company generated free cash flow of $400 million for the quarter and reported $1.25 billion as cash generated from operations.
Guidance for the third quarter is tepid
The company has provided weak revenue guidance for the forthcoming quarter pegging it in the range of $3.8 billion-$4.1 billion. In fact, the highest part of the range falls below the analysts’ estimates of $4.27 billion as revenue for the third quarter.
The management expects the DRAM revenue to be down in high single digits in the coming quarter as PC DRAM sales remains weak and due to the unfavorable pricing environment. However, to offset this challenge, the NAND sales is being expected to be up in mid-single digits as the client SSD market conditions remain stable and the mobile segment is exhibiting a favorable mix.
Final word
As the demand for Micron’s SSD products remains high, the company is positive on its future product launches that could boost its revenue. To date, the chipmaker’s performance has been up to the mark and investors should wait and watch for its upcoming quarter results to assess the company’s growth momentum in the days to come.
