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11/25/2015 Micron Technology: Should You Stop Wasting Money? - InvestorGuide.com

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Micron Technology: Should You Stop Wasting Money?- Vinay Singh PUBLISHED ON: NOV 24, 2015

Micron Technology delivered weak results for the fourth quarter. The quarter saw revenue of $3.6 billion, which lies within the estimated range of $3.45 billion-$3.7 billion, and shows a downfall of 15% from $4.2 billion for the fourth quarter of 2014 and a downfall of 7% from $3.9 billion from the third quarter of 2015,driven by the headwind coming from the near-term market.

Moving ahead, the gross margin fell to $970 million from $1.4 billion for the same quarter, 2014. The selling, general, and administrative expenses dropped to$170 million from $180 million for the fourth quarter, and the Research and Development expenses went up to $379 million from $358 million from the fourthquarter, 2015.

Micron’s operating income skidded to $427 million from $828 million for the fourth quarter, last year.

Net income of Micron Technology dropped to $471 million from $1.2 billion for the fourth quarter, 2015. Furthermore, the Diluted Earnings per share skiddedto $0.42 from $0.96 for the same quarter, previous year.

Revenue on Segmental basis…Compute and Networking Business Unit: The revenue from this segment dropped 31.4% to $1.3 billion from the same period, last year. Its operatingincome dropped 80% to $99 million from the same period, 2014. The Declining performance of this segment was driven by the fall in the average pricesof Dynamic random access memory, as a result of slowing demand of personal computer segment.

Storage Business Unit: The revenue from this segment fell to $848 million from $901 million for the previous quarter, 2015. The quarter incurredoperating loss of $46 million compared to loss of $33 million for the previous quarter, this year. The falling revenue is driven by the fall in sales volumeas a result of shift in company’s flash production to markets like embedded products and mobile. The company continued to invest for the developmentflash storage for the next generation.



Mobile Business Unit: The revenue for this segment scaled up by 27% to $958 million from $910 million for the fourth quarter 2014, driven by the rise insales volume of mobile’s NAND flash gigabit. This segment was also benefitted by the evolving architectures of mobile systems. Its operating incomerose to $262 million from $204 million for the fourth quarter, 2014. Additionally, company combined portfolio of DRAM and NAND strengthenscompany’s competitive position.

Embedded Business Unit: The revenue for this segment went up by 13% to $475 million from the same period, previous year and its operating incomeincreased by 35% to $104 million from the same quarter, last year. The operating margin for the segment rose to 22% from 16.2% for the fourth quarter,2014. The company has a continued strong position in Industrial multi market business.

Micron’s impressive moves

In order to sustain its competitive edge, the company is talking various measures. The company by combining DRAM Performance with the NAND FlashReliability has introduced Persistent Memory Solution for addressing the Big Data Challenges.

In addition, Micron Technology has designed XTRMFlash memory, which will help the electronics industry for developing the systems in order to meet thedemand of fast system responsiveness and instant-on performance for industrial, consumer, and automotive application. Winbond, by entering into anagreement with the company will to proving XTRMFlash solutions to the company.

Valuation

Micron Technology has trailing P/E ratio of 6.17 and forward P/E ratio of 6.70. Additionally, Micron has PEG ratio of 11.57, indicating that the company willhave to pay very high for its future growth earnings. Moving ahead, company has Price/Sales ratio of 0.96 and Enterprise Value/Revenue of 1.19. Micron’sCurrent ratio went up to 2.20 from 2.13 for the same period, last year. Its Debt/Equity ratio was comparable at 0.55 with the same period, previous year.

Conclusion…

Micron Technology posted low results for the fourth quarter, 2015 against the fourth quarter, 2014, indeed its results were in line with the estimates. Thequarter delivered falling revenue, gross margin, operating profit and net profit against the same quarter, 2014. Further, the Diluted Earnings per share fell to



$0.42 from $0.96 for the fourth quarter, previous year. The company has a higher forward P/E ratio and PEG ratio, making it a risky investment.