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Analysis: Can Micron hold on to its good fortune?

Posted: 06 Jul 2010 ?? ?Print Version ?Bookmark and Share

Keywords:Micron market rebound? DRAM? flash memory? memory market?

In just one year, Micron Technology Inc. doubled its quarterly revenue, turned a $300 million net loss into a $940 million net income, splurged on what has turned out to be an extremely profitable acquisition!albeit only on paper for now!and appears poised for more giddy growth over the next year.

With pricing trends remaining positive and unit shipment continuing strong, Micron executives see only bright and sunny days for the immediate future. Analysts have also said the company's quarterly sales will improve not only year-over-year!a normal expectation in a recovery!but on the average the forecast calls for double-digit sequential growth for Micron's fiscal fourth quarter ending August 10.

Not even Apple Inc., the doyen of technology turnarounds, can lay claim to numbers as amazing as the ones Micron is forecast to post by the end of its current fiscal year. The company's annual sales are expected to climb 80 percent to $8.64 billion in fiscal 2010 from $4.8 billion in fiscal 2009 and then shoot up to $10.9 billion in fiscal 2011.

After three years of losses, the company is seen reporting strong profits for fiscal 2010 and 2011. The losses of the last years as well as the savage sales declines are fading into distant memory.

"We feel the market will trend to higher density chips and that bit consumption will continue to grow throughout 2010. We remain optimistic that market segments such as mobile, consumer electronic devices such as tablets and the SSDs (solid-state drives) will drive demand for higher cycling performance requirements," said Mark Adams, VP of worldwide sales at Micron during the company's recent conference.

Such wild swings are not only expected but have become a normal feature of the DRAM and flash memory market. It's both a blessing and a curse for the memory market, a segment that appears to have too much in common with deep sea king crab fishing; sometimes you hit the mother lode and return with a huge catch while at other times the nets just keep coming up empty with the raging sea threatening to lop off limbs or even sink the boat. Memory manufacturers have not had it so good in years.

For once, all the elements!pricing, inventory, demand, production capacity utilization and even consumer sentiments!appear perfectly lined up. Micron is on a roll, hauling in amazing profits on surging demand, rising capacity utilization, strong volume shipment growth, rising average selling prices, lean supplies across the market and even tighter inventory management by distributors, OEMs and even retail outlets.

"As we come to the end of our fiscal 2010, we are encouraged by the strong demand signals across our channel segments," added Adams. "Our customers continue to seek expanded supply partnerships with us as we continue to lead from a technology and portfolio scale perspective. We see the demand-supply equilibrium in the memory business continuing to work in our favor as we look for continued strong operating performance going forward."

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