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US chipmaker Micron Technology has said it sees a recovery in the memory chip market coming and reported a quarterly profit that beat estimates as cost controls helped offset falling demand and prices, sending its shares up nearly five per cent.
Micron makes NAND storage chips that are used in phones and internet servers as well as DRAM chips that help computer processors communicate with those storage chips.
The company beat revenue expectations for the fiscal second quarter ended 28 February. Although it gave a forecast for its fiscal third quarter that was below Wall Street's expectations, Micron said demand is likely to begin growing again by its fourth quarter.
The results come against the backdrop of a glut in the global semiconductor industry triggered by waning demand for smartphones and spotty purchasing patterns by cloud-computing vendors, which hurt chipmakers such as Intel earlier this year.
Meantime, Micron trimmed its spending plans and said it had idled some factory lines to bring its chip output in line with lower demand, helping keep profits flowing and a share buyback plan on track.
For its fiscal second quarter, Micron generated nearly US$1 billion in free cash flow and a profit of US$1.71 per share, excluding items. That was down from US$2.82 a year earlier but above Wall Street expectations of US$1.67, according to data from Refinitiv.
"Certainly Micron has not been in a situation before where it's been able to deliver such healthy profitability and cash flow in an adverse industry environment," chief executive Sanjay Mehrotra said in an interview with Reuters.
Kinngai Chan, an analyst with Summit Insights Group, said investors were focusing on the outlook for a recovery in the second half of the calendar year, with the fiscal third quarter forecast representing "the bottom for Micron's near-term sales and gross margin".
The Boise, Idaho-based company said on Wednesday it expects revenue between US$4.6 billion and US$5 billion for its fiscal third quarter, falling short of analyst expectations of US$5.3 billion according to IBES data from Refinitiv.
The company cut planned capital expenditures for the 2019 fiscal year to US$9 billion, Micron executives said, down from a previous forecast of between US$9 billion and US$9.5 billion.
Revenue fell to US$5.84 billion from US$7.35 billion, beating expectations of US$5.3 billion.
The company said it bought back 21 million shares of its common stock for US$702 million during the quarter as part of its US$10 billion share buyback program, leaving a net cash position of US$2.99 billion.
(Reporting by Sayanti Chakraborty in Bengaluru and Stephen Nellis in San Francisco; editing by Sriraj Kalluvila and Leslie Adler)
