(Reuters) – U.S. chipmaker Micron Technology Inc. on Wednesday said that there is a recovery in the memory chip market and reported a quarterly profit that beat estimates as cost control helped offset falling demand and prices, sending shares up nearly 5 percent.
The logo of the AMERICAN memory chip maker MicronTechnology is pictured at their booth at an industrial fair in Frankfurt, Germany, July 14, 2015. REUTERS/Kai Pfaffenbach
Micron makes NAND memory chips are used in phones and internet servers as well as DRAM chips that help the computer processors communicate with memory chips.
The company beat the revenue expectations for the second quarter ended Feb. 28. Although it gave a forecast for fiscal third quarter that was below Wall Street’s expectations, Micron said the question is likely to start growing again with its fourth quarter.
The results come against the backdrop of a glut in the global semiconductor industry caused by declining demand for smartphones and spotty purchasing behaviour by cloud computing suppliers, which are harmful for chipmakers such as Intel Corp earlier this year.
In the meantime, Micron trimmed its spending plans and said that it had idled some of the factory lines to the chip output in line with the lower demand, helping keep the profits flowing and a share buyback plan on the track.
For the second quarter, Micron generated nearly $1 billion of free cash flow and a profit of € 1.71 per share, excluding items. That was a decrease from $2.82 a year earlier, but above Wall Street expectations of $1.67, according to the IBES data of Refinitiv.
“Certainly Micron is not in a situation where it is able to deliver such a healthy profitability and cash flow in a negative industry environment,” Chief Executive Sanjay Mehrotra said in an interview with Reuters.
Kinngai Chan, an analyst at Summit Insights Group, said investors were focused on the prospects for a recovery in the second half of the calendar year, with the fiscal third quarter forecast representative of “the soil for the Micron is in the short term, the turnover and the gross margin.”
The Boise, Idaho-based company said on Wednesday it expects revenue between $4.6 billion and $5 billion for the fiscal third quarter, falling short of analyst expectations of $5.3 billion, according to the IBES data of Refinitiv. The company cut planned investment for the 2019 fiscal year, to $9 billion, Micron executives said, down from a previous forecast of between $9 billion and $9.5 billion.
Sales fell to $5.84 billion from $7.35 billion, beating the expectations of $5.3 billion.
The company said it purchased 21 million shares are ordinary shares, for $702 million euros during the quarter as part of the $10 billion share buyback program, leaving a net cash position of $2.99 billion.
Reporting by Sayanti Chakraborty in Bengaluru and Stephen Nellis in San Francisco; editing by Sriraj Kalluvila and Leslie Adler