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Micron Tech sees DRAM glut, flags margin concerns
September 29, 2011 / 8:26 PM / 6 years ago

Micron Tech sees DRAM glut, flags margin concerns

(Reuters) - Micron Technology (MU.O) warned that continued oversupply of DRAM chips will weigh on its margins, adding to investor worries about tepid PC sales and casting a shadow on expectations for the upcoming holiday season.

Sales of PCs, which use DRAM chips as primary memory, have grown at a slower pace than expected in recent quarters as some consumers worried about a tough economy hold off on large purchases and others choose tablets such as Apple’s (AAPL.O) iPad and over laptops.

DRAM supply has built throughout the year, causing an oversupply and leading to average selling prices declining faster than the slowdown in PC sales, Avian Securities analyst Win Cramer told Reuters.

The company’s competitors, including Hynix Semiconductor Inc (000660.KS), Japan’s Elpida 6665.T and South Korea’s Samsung Electronics Co (005930.KS), have been shifting production to NAND flash chips used in tablets and smartphones.

Micron’s DRAM revenue fell 12 percent in the fourth quarter from the third quarter.

NAND sales rose 11 percent but they account for only a fourth of the company’s sales compared to DRAMs which contribute more than half.

The company expects the upcoming Halloween and Christmas holiday seasons -- which traditionally boosts sales of PCs and consumer electronic products -- to spur NAND sales.

“I think on the NAND front we are still pretty bullish going into the holiday season, as demand remains relatively strong for smartphones, SSDs, tablets,” Ronald Foster, chief financial officer, said on a conference call.

Analyst Cramer reckons DRAM pricing will continue hurt.

“DRAM is going to be problematic for them for the next several quarters. I don’t think anytime in the near term NAND would be completely able to offset DRAM problems.”


Micron, America’s sole maker of dynamic random-access memory chips, also posted a surprise quarterly loss.

Net loss for the fourth quarter was $135 million, or 14 cents a share, while analysts on average had expected a profit of 1 cent a share, according to Thomson Reuters I/B/E/S.

Revenue came in at $2.14 billion, compared with analysts’ expectations of $2.11 billion.

On Wednesday, Advanced Micro Devices AMD.N, the No. 2 PC chipmaker, slashed its revenue growth forecast for the current quarter, hurt by manufacturing issues at a supplier.

Micron shares fell nearly 4 percent to $5.66 in after-market trade on Thursday, after closing at $5.87 on Nasdaq.

Reporting by Siddharth Cavale and Himank Sharma in Bangalore; Editing by Sriraj Kalluvila, Unnikrishnan Nair

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