Micron Technology Inc. (MU, Financial) filed Quarterly Report for the period ended 2009-03-05.
Micron Technology Inc. has established itself as one of the leading worldwide providers of semiconductor memory solutions. The company's quality memory solutions serve customers in a variety of industries including computer and computer-peripheral manufacturing consumer electronics CAD/CAM telecommunications office automation network and data processing and graphics display. The company's mission is to be the most efficient and innovative global provider of semiconductor memory solutions. Micron Technology Inc. has a market cap of $3.29 billion; its shares were traded at around $4.31 with and P/S ratio of 0.6.
DRAM joint ventures with Nanya Technology Corporation (“Nanya”): The Company has a partnering arrangement with Nanya Technology Corporation (“Nanya”) pursuant to which the Company and Nanya jointly develop process technology and designs to manufacture stack DRAM products. Each party generally bears its own development costs and the Company s development costs are expected to exceed Nanya s development costs by a significant amount. In addition, the Company has transferred and licensed certain intellectual property related to the manufacture of stack DRAM products to Nanya and licensed certain intellectual property from Nanya. As a result, the Company is to receive an aggregate of $207 million from Nanya through 2010. The Company recognized $26 million and $54 million of license revenue from this agreement in the second quarter and first six months of 2009, respectively, and since May 2008 through March 5, 2009 has recognized $90 million of cumulative license revenue. In addition, the Company expects to receive royalties in future periods from Nanya for stack DRAM products manufactured by or for Nanya.
Inotera: In the first quarter of 2009, the Company acquired a 35.5% ownership interest in Inotera, a publicly-traded entity in Taiwan, from Qimonda AG (“Qimonda”) for $398 million. The interest in Inotera was acquired for cash, a portion of which was funded from proceeds of a $200 million two-year term loan received by the Company from Nan Ya Plastics Corporation, an affiliate of Nanya, and an $85 million six-month term loan received from Inotera. The loans were recorded at their fair values, which reflect an aggregate discount of $31 million from their face amounts. This aggregate discount was recorded as a reduction of the Company s basis in the investment in Inotera. The Company also capitalized $10 million of costs and other fees incurred in connection with the acquisition. As a result of the above transactions, total consideration for the Company s equity investment in Inotera was $377 million. The Company s results of operations for the second quarter of 2009 reflect a $56 million net loss on equity method investments for the Company s share of Inotera s loss from the acquisition date to December 31, 2008.
Inventory Write-Downs: The Company s results of operations for the second and first quarters of 2009 and fourth, second and first quarters of 2008 included charges of $234 million, $369 million, $205 million, $15 million and $62 million, respectively, to write down the carrying value of work in process and finished goods inventories of memory products (both DRAM and NAND Flash) to their estimated market values.
Read the The complete ReportMU is in the portfolios of Charles Brandes of Brandes Investment, PRIMECAP Management.
Micron Technology Inc. has established itself as one of the leading worldwide providers of semiconductor memory solutions. The company's quality memory solutions serve customers in a variety of industries including computer and computer-peripheral manufacturing consumer electronics CAD/CAM telecommunications office automation network and data processing and graphics display. The company's mission is to be the most efficient and innovative global provider of semiconductor memory solutions. Micron Technology Inc. has a market cap of $3.29 billion; its shares were traded at around $4.31 with and P/S ratio of 0.6.
Highlight of Business Operations:
The semiconductor memory industry is experiencing a severe downturn due to a significant oversupply of products. The downturn has been exacerbated by global economic conditions which have adversely affected demand for semiconductor memory products. Average selling prices per gigabit for the Company s DRAM and NAND Flash products for the second quarter of 2009 decreased 30% and 13%, respectively, compared to the first quarter of 2009 after decreasing 34% and 24%, respectively, for the first quarter of 2009 as compared to the fourth quarter of 2008. Average selling prices per gigabit for the Company s DRAM and NAND Flash products in 2008 were down 51% and 67%, respectively, compared to 2007 and down 63% and 85%, respectively, compared to 2006. These declines significantly outpaced the long-term historical trend. As a result of these market conditions, the Company and other semiconductor memory manufacturers have reported negative gross margins and substantial losses in recent periods. In the first six months of 2009, the Company reported a net loss of $1.5 billion after reporting a net loss of $1.6 billion for 2008.DRAM joint ventures with Nanya Technology Corporation (“Nanya”): The Company has a partnering arrangement with Nanya Technology Corporation (“Nanya”) pursuant to which the Company and Nanya jointly develop process technology and designs to manufacture stack DRAM products. Each party generally bears its own development costs and the Company s development costs are expected to exceed Nanya s development costs by a significant amount. In addition, the Company has transferred and licensed certain intellectual property related to the manufacture of stack DRAM products to Nanya and licensed certain intellectual property from Nanya. As a result, the Company is to receive an aggregate of $207 million from Nanya through 2010. The Company recognized $26 million and $54 million of license revenue from this agreement in the second quarter and first six months of 2009, respectively, and since May 2008 through March 5, 2009 has recognized $90 million of cumulative license revenue. In addition, the Company expects to receive royalties in future periods from Nanya for stack DRAM products manufactured by or for Nanya.
Inotera: In the first quarter of 2009, the Company acquired a 35.5% ownership interest in Inotera, a publicly-traded entity in Taiwan, from Qimonda AG (“Qimonda”) for $398 million. The interest in Inotera was acquired for cash, a portion of which was funded from proceeds of a $200 million two-year term loan received by the Company from Nan Ya Plastics Corporation, an affiliate of Nanya, and an $85 million six-month term loan received from Inotera. The loans were recorded at their fair values, which reflect an aggregate discount of $31 million from their face amounts. This aggregate discount was recorded as a reduction of the Company s basis in the investment in Inotera. The Company also capitalized $10 million of costs and other fees incurred in connection with the acquisition. As a result of the above transactions, total consideration for the Company s equity investment in Inotera was $377 million. The Company s results of operations for the second quarter of 2009 reflect a $56 million net loss on equity method investments for the Company s share of Inotera s loss from the acquisition date to December 31, 2008.
Inventory Write-Downs: The Company s results of operations for the second and first quarters of 2009 and fourth, second and first quarters of 2008 included charges of $234 million, $369 million, $205 million, $15 million and $62 million, respectively, to write down the carrying value of work in process and finished goods inventories of memory products (both DRAM and NAND Flash) to their estimated market values.
Read the The complete ReportMU is in the portfolios of Charles Brandes of Brandes Investment, PRIMECAP Management.
