Micron Technology Inc.
) is scheduled to announce its first-quarter fiscal 2013 results
after markets close on December 20, 2012. In the run up to the
earnings release, we notice no movements in estimates.
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Fourth Quarter Overview
Micron delivered fourth-quarter 2012 adjusted loss per share of
24 cents, wider than the Zacks Consensus Estimate of a loss of 22
cents per share. The dismal performance was due to lackluster
average selling prices (ASP) per unit and macro uncertainty.
The company's reported revenue dropped 8.3% year over year to
$1.96 billion. The decline was mainly due to lower DRAM and NAND
shipment. Contribution from the NOR Flash product was modest.
Rising costs and a significant drop in DRAM ASP resulted in a
decline in gross margin. Operating costs improved moderately as
selling and general expenses reduced. Operating loss margin in
the quarter was 7.1% compared with operating loss margin of 2.4%
in the year ago period.
Micron did not provide any specific guidance for revenue or
earnings. However, the company asserted that it will remain
focused on cost cutting initiatives, new product introductions
and manufacturing efficiencies. The company also noted that it
expects more NAND consumption based on the growing demand for
smartphones and tablets.
In addition, Micron expects to benefit from the necessary supply
adjustments as some NAND suppliers stabilize the supply/demand
Agreement of Analysts
The analysts expect that the emerging demand for ultrabooks,
smartphones and tablets will increase the demand for Micron's
NAND business. DRAM is also gaining popularity in both the
low-end and high-end smartphones. Increasing adoption of the
high-end smartphones and tablets has consequently increased the
demand for mobile DRAM.
Analysts also expect that the expansion of NAND in Singapore will
benefit the flash market pricing from fiscal 2013 onwards. Also a
potential boost in the PC market due to
) Windows 8 operating system could boost the demand for DRAM.
Analysts expect the demand for SSD to rise in the coming
quarters, which will eventually contribute to Micron's success.
However, the pricing of the DRAM and NAND chips and their
respective end-market demand remain the key concerns for the
analysts. A lackluster PC market will continually pressurize
All the 24 estimates for the first quarter 2013 and fiscal 2013
were maintained in the last 30 days. However, out of the 19
estimates for fiscal 2014, only one estimate moved upward in the
last 30 days.
Magnitude of Estimate Revisions
The Zacks Consensus Estimate for the first quarter and fiscal
2013 remained unchanged at a loss of 19 cents per share and a
loss of 26 cents per share, respectively, over the past 30 days.
However, the estimate for the first quarter and fiscal 2013
dropped 14 cents and 44 cents, respectively, in the past 90 days.
This significant drop, since the fourth quarter earnings,
reflects concerns relating to DRAM pricing.
We believe that pricing would act as a deciding factor for
Micron's first quarter. Also, lackluster demand for desktop PCs
will remain an overhang over the DRAM fundamentals.
However, we remain encouraged by Micron's pending Elpida buyout
(a bankrupt Japanese chipmaker) that could bring in a larger DRAM
market share. Also,
) reliance on Elpida would be a win-win situation for Micron,
On the other hand, we believe that it will not be easy for Micron
to capture market share from
), a key player in the NAND zone.
Currently, Micron has a Zacks #3 Rank (Hold).