Technology shares are trading modestly higher in late trading Tuesday after the memory chip company posted financial results for its fiscal second quarter ended March 2 that were about in line with expectations, and a weak market for PCs and smartphones continued to weigh on the company’s results. The company also said that as part of its cost-reduction program, it will reduce staff by about 15%—up from a previous plan to cut heads by 10%.
Micron is up 1.6% higher, at $59.28.
For the quarter, Micron (ticker: MU) reported revenue of $3.69 billion, about in line with the Street consensus at $3.7 billion. Revenue was down 53% from a year ago, and 10% from the fiscal first quarter.
On an adjusted basis, the company lost $1.91 in the quarter, worse than both the company’s forecast for a loss of 62 cents, and the Street consensus forecast for a loss of 86 cents. Micron said it took an inventory write-down in the quarter of $1.34 billion, or $1.34 a share.
Under generally accepted accounting principles, the company lost $2.12 a share. Using adjusted Ebitda, or earnings before interest, taxes, depreciation and amortization, the company lost $1.81 billion. Micron ended the quarter with $12.1 billion in cash and marketable securities.
Despite the ugly results, the company struck an upbeat tone in its press release and conference call remarks, suggesting that better times are ahead.
“Micron delivered fiscal second-quarter revenue within our guidance range in a challenging market environment,” Micron CEO Sanjay Mehrotra said in a statement. “Customer inventories are getting better, and we expect gradual improvements to the industry’s supply-demand balance. We remain confident in long-term demand and are investing prudently to preserve our technology and product portfolio competitiveness.”
In remarks prepared for the company’s earnings call, Mehrotra said that the memory and storage industry is facing its worst downturn in 13 years, “with an exceptionally weak pricing environment.”
But he also thinks that inventory days outstanding has peaked, and that the company is “close” to returning to sequential revenue growth. “Beyond this downturn, we anticipate a return to normalized growth and profitability in line with our long-term financial model,” he said.
For the fiscal third quarter, Micron sees revenue of $3.7 billion, give or take $200 million, which matches Street estimates. The company sees non-GAAP gross margin of -21%, give or take 2.5 percentage points, with a loss of $1.58 a share on an adjusted basis, or $1.79 a share under GAAP.
Mehrotra asserted in his comments that Micron believes the company’s addressable market will hit a record in calendar 2025, driven in part by the memory requirements to run the large language models required for artificial intelligence software. “We are only in the very early stages of the widespread deployment of these AI technologies and potential exponential growth in their commercial use cases,” he said.
The Micron CEO said that he thinks data center revenue bottomed in the latest quarter. Micron thinks 2023 PC unit volumes will be down by a mid-single-digit percentage, returning to PC unit volume last seen before the onset of the Covid-19 pandemic. The company said client inventory positions have “improved meaningfully,” and Micron sees increased bit demand in the fiscal second half. The company sees smartphone unit volumes down slightly in calendar 2023.
Micron said auto segment revenue was up 5% in the latest quarter from a year ago, but noted that industrial market demand “continued to soften.”
Micron expects industrywide bit-demand growth of about 5% in DRAM and in the low-teens for NAND, well below the company’s long-term forecast of midteens for DRAM and low 20s for NAND. “We expect that improving customer inventories will support sequential bit demand growth for DRAM and NAND through the calendar year,” the company said. “China’s reopening is also a positive factor for calendar 2023 bit demand.”
Micron said it now expects fiscal 2023 capital spending of $7 billion, down 40% from the previous year; that compares to a forecast range last quarter of $7 billion to $7.5 billion. The company expects further reductions in wafer fab equipment sending in 2024. The company also said it now expects to reduce head count by 15%, broadening its cuts from a previously expected 10% cut.
Write to Eric J. Savitz at email@example.com