Home / Business / Micron recognizes reality and receives a relief rally

Micron recognizes reality and receives a relief rally

Micron Technology Inc. is finally accepting the reality of the downturn in memory chips, and investors seem to need to breathe again.

On Wednesday, Micron

MU, -0.59%

posted a gain of $ 5.8 billion in the second quarter, down 21% from a year ago, with "both as unexpectedly expected price trends" for Both dynamic random access memory chips (DRAM) and NAND flash memory were given a sharp contrast to the last two years as sales and profits soared amidst a boom of memory chips.

More information about Read more about Micron's strong performance in 201


Although the forecast for the third quarter of the fiscal year was actually worse than expected, the Micron Shares in the stock market business close to 5% of the company's call with analysts. The Boise, Idaho-based company said it would limit its production of memory chips as the industry works through the oversupply of chips already on the market. In addition, investments will be reduced by $ 1.5 billion for the remainder of the year.

Analysts say the reduction in production is good for Micron and the industry as a whole.

"They reduce capacity utilization by 5%, which is generally perceived as a very good thing to bring the market back into balance (and thus, suitable for the recovery of prices)," said Mark Newman, an analyst at Bernstein Research. in an e-mail.

Micron's reduction in capital expenditure was also a shift in CEO Sanjay Mehrotra's stance, which has classed the current slowdown as a temporary downturn in a non-cyclical industry due to a large number of demand drivers. With this step, he showed that he is ready to respond to the big changes in the market instead of fighting the continued slowdown.

Read a MarketWatch interview with Mehrotra about the structural difference of the memory chip market in a post-PC world.

"Many investors see the slow start-up of the wafers and the reduction in investment as a realization of Micron's management that this is a downturn (mini in our view) and that they focus on reducing supply, instead of ignoring it, "said Eric Ross, an analyst with Cascend Securities. In addition, the company continues to point to a strengthening in the second half of the calendar year.

In what was the usual mantra for semiconductor executives this quarter, Mehrotra and Micron CFO David Zinsner said they both expect to be better in the second half of 2019, though recognizing that "visibility remains low and the environment remains difficult in the short term. "

All chip makers say the second half will be better, but at least investors are now aware that Micron's top executives are ready to change based on the facts and their beliefs.

Want to send this type of analysis to your inbox? Subscribe to MarketWatch's free MarketWatch First Takes newsletter. Sign up here.

Source link