Intel deal boosts Micron income: NAND flash memory helps firm diversify
Tuesday Apr 11 2006 12:42:35 EDT
Apr 11, 2006 (The Idaho Statesman - Knight Ridder/Tribune Business News via COMTEX) --
Micron Technology Inc.'s joint-venture company with Intel Corp. helped boost the company's net income in its second quarter.
The Boise-based semiconductor company beat analyst expectations for the quarter, posting $193 million, or 27 cents a share, in net income.
That means many of Micron's employees will receive bonuses through the company's profit-sharing program. A Micron spokesman said the company cannot be more specific because bonuses depend on each employee's position and performance.
On average, 16 analysts estimated Micron would earn 6 cents a share this quarter, according to Thomson First Call.
Analyst expectations were low because many did not factor in the cash Micron received from its joint venture with Intel, said Bill Dezellem, president of investment firm Tieton Capital Management. He has followed Micron for about 10 years.
Micron's net income this quarter compares with $118 million, or 17 cents a share, earned during the same period last year.
The company posted $1.2 billion in sales for the quarter, down from $1.3 billion in sales during the second quarter of 2005.
The earnings were released after the market closed Monday. Micron's stock was down more than 2 percent to close at $14.91 on Monday.
"With the things they can control, it seems like they are doing a pretty good job," Dezellem said.
IM Flash Technologies, Micron's joint venture with Intel, started up during Micron's second quarter that ended March 2.
Micron and Intel announced in November they were investing $5.2 billion to create a joint-venture to produce more NAND flash memory, which is used in iPods, MP3 players and other electronic devices. This was the first quarter Micron has reported financials for IM Flash.
Intel contributed $500 million in cash to IM Flash in the second quarter, and Micron gained about $230 million in operating income after selling some of its flash memory designs and related technology to Intel during the quarter.
"I view that as a one-time phenomenon, but it sure is nice to have a one-time phenomenon that has cash coming in the door," Dezellem said.
Micron officials expect IM Flash to help the company financially in the future as it starts to ramp up production of flash memory.
"It will result in much higher revenue growth and hopefully profitability growth than would probably be the case," said Mike Sadler, vice president of worldwide sales for Micron. Intel also will be sharing in the research and development costs related to flash memory, he said.
Micron diversified its portfolio in recent years to move away from its staple product, DRAM, or dynamic random access memory, and produce more NAND flash memory and image sensors. Flash memory and image sensors are fast-growing markets and have greater profit margins than DRAM, a memory product mostly used in personal computers.
The DRAM market also is subject to volatile ups and downs in its prices. DRAM pricing in the second quarter was a "roller coaster," Sadler said.
"Demand was weak and prices were plummeting, and then halfway through the quarter, unexpectedly, DRAM prices increased dramatically," he said.
The DRAM market is expected to continue to perform well with sales estimated to rise 6.2 percent in 2006, according to iSuppli Corp., a technology research firm.
The continued strong demand for DRAM will help Micron do better in its next quarter, Dezellem said.
Even when DRAM prices are up, Micron still wants to reduce its dependence on the PC memory chips and move toward NAND flash memory and image sensors.
The NAND flash memory industry is estimated to grow about 29 percent over last year, according to iSuppli.
NAND flash memory made up about 10 to 15 percent of Micron's total revenues for the quarter, Sadler said. |
