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Micron: Fiscal 3Q16 Financial Results

-25% for revenue and $215 million loss, workforce reduction to come

(in $ million) 3Q15 3Q16 9 mo. 16 9 mo. 16
Revenues 3,853 2,898 12,592 9,182
Growth   -25%   -27%
Net income (loss) 491 (215) 2,428 (106)

Micron Technology, Inc. announced results of operations for its third quarter of fiscal 2016, which ended June 2, 2016.

Revenues for the third quarter of fiscal 2016 were $2.90 billion and were slightly lower compared to the second quarter of fiscal 2016 and 25% lower compared to the third quarter of fiscal 2015.

Cash flows from operations were $389 million for the third quarter of fiscal 2016.

GAAP Income and Per Share Data: On a GAAP basis, net loss attributable to shareholders for the third quarter of fiscal 2016 was $215 million, or ($0.21) per diluted share, compared to net loss of $97 million, or ($0.09) per diluted share, for the second quarter of fiscal 2016.

Non-GAAP Income and Per Share Data: On a non-GAAP basis, net loss attributable to shareholders for the third quarter of fiscal 2016 was $79 million, or ($0.08) per diluted share, compared to net loss of $48 million, or ($0.05) per diluted share, for the second quarter of fiscal 2016.

Although we have made good progress in deploying our advanced DRAM and NAND technologies, we continue to face challenging market conditions,” said CEO Mark Durcan. “To address the current market environment and strengthen our competitive position, we are implementing a number of initiatives to reduce costs, drive greater efficiencies, and increase focus on our strategic priorities.”

The initiatives, which include a global workforce reduction, are expected to save the company over $300 million in fiscal 2017.

Revenues for the third quarter of fiscal 2016 were slightly lower compared to the second quarter of fiscal 2016 as increases in sales of DRAM products were offset by decreases in sales of trade non volatile products.

DRAM revenues increased in the third quarter of fiscal 2016 as a result of a 22% increase in unit sales partially offset by an 11% decline in ASPs.

Sales of trade non-volatile products decreased due to a 10% decrease in units sales and a 6% decline in ASPs.

The company’s overall consolidated gross margin of 17% for the third quarter of fiscal 2016 was 3% lower compared to the second quarter primarily due to lower ASPs partially offset by manufacturing cost reductions.

Investments in capital expenditures for the third quarter of fiscal 2016 were $1.69 billion.

The company ended the third quarter of fiscal 2016 with cash and marketable investments of $5.65 billion.

Comments

Abstracts of the earnings call transcript:

Mark Durcan, CEO:
"Top line results were primarily impacted by continued weakness in the PC segment and the mobile qualifications we discussed last quarter.
"With recent data points indicating some improvement in channel pricing, an expectation of finalizing our mobile qualifications and continued progress on our technology and operational milestones, we remain confident about our opportunities.
"(.) our Storage business unit is in the midst of refreshing its SSD portfolio with a higher capacity 3D NAND memory technology.
"For NAND, we estimate 2016 industry bit supply growth in the mid 30% to low 40% range with a similar range in 2017 as early 3D conversions create some temporary supply constraints. Over the last several quarters, we have experienced strong demand coupled with aggressive pricing as suppliers have been driving to increased penetration rates and densities. Similar to DRAM, the current channel pricing environment appears to be improving, but has not yet significantly impacted across other segments. Our long-term bit demand forecast is in the low 40% range as lower cost and higher performance 3D NAND solutions enter the market.
"We still expect to achieve 3D bit crossover by this fall, which will allow us to take advantage of the cost benefits that this technology provides. Our second generation 3D product is also on track with initial production this quarter. Equally exciting is that we expect TLC to be the majority of our 3D bit output within the next few quarters. In aggregate, we are forecasting Micron’s fiscal year 2016 and 2017 NAND bit growth in the 30% to 40% range. We expect to be somewhat below the market in 2016 and somewhat above the market in 2017.
"We are also evaluating a number of mobile product opportunities for 3D NAND in 2017.
"Relative to 3D XPoint, we are working with market enablers across a number of market segments and continue to believe this innovative technology will be a strong contributor to Micron’s future success with revenue in 2017 and beyond."

Ernie Maddock, CFO:
"In our non volatile memory business, trade revenue represented 31% of total revenue represented 31% of total revenue with the following segmentation; Consumer, which includes memory cards, USB and components, represented about 55%. Mobile and SSDs each represented approximately 13%. And as a reminder, eMCPs are accounted for in the mobile segment. The automotive, industrial, multi market and other embedded applications were in the high-teens percent range.
"As we transition to lower cost 3D NAND products, we continue to optimize our product mix. In clients and consumer SSD, consecutive quarter bits sold were down 20% as we reduced production of planar NAND based SSDs while ramping volume production of 3D NAND based SATA and PCIe clients and consumer SSDs. These new products will enable the company to enhance its competitive position. In the enterprise and data center SSD segments consecutive quarter bits sold were down 10%. As we have previously noted, our 3D NAND solutions will improve our product portfolio in this segment, enabling us to participate more significantly in this important growth business for the company.
"Moving on to our guidance for the fourth quarter, on a non-GAAP basis we expect the following: consolidated revenue in the range of $2.9 billion to $3.2 billion, gross margin in the range of 15.5% to 18%, operating expenses between $580 million and $630 million and operating loss ranging between $135 million and $55 million and an EPS loss ranging between $0.24 and $0.16 per share based on 1.036 billion diluted shares."

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