MU's Mixed Results

For Faulkner's preview heading into the Micron Technology conference call, please click here.

Micron Technology (MU - commentary - Cramer's Take) reported results for its first quarter after the close last night that were quite mixed, with revenue beating consensus but the loss per share well above targets. Since Micron doesn't give guidance, it's anyone's guess as to February estimates, but expect them to come down.

Revenue in the quarter was $1.40 billion (down 9% year over year and 3% quarter over quarter), with a loss per share of 91 cents. Gross margin was negative once again after a $369 million inventory writedown and a gain of $157 million after the sale of previously written-down inventory. The net after these two events was 28 cents to the reported loss per share. The operating margin was negative for the seventh consecutive quarter.

Cash from operations was quite strong at $359 million. The company's cash accounts declined another $330 million, to about $1.0 billion after acquisitions. Accounts receivable was essentially unchanged, but days sales outstanding was up two days, to 66 days. Inventory declined $400 million, largely due to the writedown, but gigabits of inventory were down 15%. Days of inventory now stands at 43 days.

Despite the weak results, demand was actually strong. Gigabits shipped increased 35% sequentially and 40% sequentially for DRAM and NAND flash, respectively. Unfortunately, ASP declines were just as strong, with DRAM down 34% from the fourth quarter and NAND flash prices down 24% from the prior period. The strong shipment levels did not go into anyone's inventory as evidenced by the spike up in spot prices over the past week.

On the production side, DRAM gigabit output at Micron increased 14% sequentially vs. the expectation of "high teens" from the last call. On the NAND flash side, output increased only 8%from the fourth quarter, which had a target of midteens in the original guidance.

---

At the time of publication, Faulkner was Micron Technology stock, and The Telecom Connection model portfolio was long Micron calls.

Bob Faulkner has been in the investment business for 18 years with an exclusive focus on technology stocks. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Faulkner appreciates your feedback; click here to send him an email.

Interested in more writings by Bob Faulkner? Check out his newsletter, TheStreet.com The Telecom Connection. For more information, click here.