Memory market likely to recover this year: Micron Technology

Although its second quarter profits have beaten analysts’ estimate, its profit forecast for the third quarter is well below Wall Street’s expectations.

U.S. chipmaker Micron Technology Inc stated, it sees a recovery in the memory chip market in the coming months; it has also reported a quarterly profit that beat analysts’ estimates in the wake of cost controls which helped offset falling prices and demand.

With the news reaching the market, it shares went up by 5%.

Micron’s NAND storage chips are used in a wide array of devices, including internet servers, phones and DRAM chips.

Micron’s revenues beat analysts’ average expectations for the fiscal second quarter ended Feb. 28. Its revenue forecast for the third quarter is well below Wall Street’s expectations. Micron stated, it expects to grow by its fourth quarter.

Its results come in the backdrop of a glut in the global semiconductor industry that was triggered by waning demand for smartphones and spotty purchasing patterns by cloud-computing vendors, which in turn hurt chipmakers, including Intel Corp, earlier this year.

Micron has aligned its expenses with market conditions and has trimmed its spending plans saying it had idled a few factory lines to bring its chip output in line with lower demand; this is aimed at keeping its profits flowing as well as keeping it on track for a share buyback plan.

For its second quarter, Micron generated nearly $1 billion in free cash flow and a profit of $1.71 per share, excluding items. That was down from $2.82 a year earlier but above Wall Street expectations of $1.67, according to IBES data from Refinitiv.

“Certainly Micron has not been in a situation before where it’s been able to deliver such healthy profitability and cash flow in an adverse industry environment,” said Sanjay Mehrotra, Micron’s Chief Executive.

According to Kinngai Chan, an analyst with Summit Insights Group, investors were focusing on the outlook for a recovery in the second half of the calendar year, with the fiscal third quarter forecast representing “the bottom for Micron’s near-term sales and gross margin.”

On Wednesday, Micron had stated, it expects revenues to be in the range of $4.6 billion to $5 billion for its third quarter, which falls short of analyst expectations of $5.3 billion according to Refinitiv IBES data. Micron has cut its planned capital expenditures for the 2019 fiscal year to $9 billion, down from a previous forecast of between $9 billion and $9.5 billion, said Micron executives.

Its revenues have fallen to $5.84 billion from $7.35 billion, beating expectations of $5.3 billion.

Micron has also reported that it has repurchased 21 million shares of its common stock for $702 million during the quarter as part of its $10 billion share buyback program, leaving it a net cash position of $2.99 billion.

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