Micron Slips After Memory-Chip Maker Provides Weak Predictions

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(Bloomberg) – Micron Technology Inc., America’s largest memory chip maker, fell late in the session after slowing demand from personal computer makers hurt its forecast. Sales will hit around $ 7.65 billion in the period ending November, Micron said in a report Tuesday. That compares to an average analyst estimate of $ 8.57 billion, according to data compiled by Bloomberg. Excluding certain items, earnings will be $ 2 to $ 2.10 per share, versus a projection of $ 2.56.

The darker outlook suggests slowing demand among PC makers is taking its toll. The memory chip industry is known for its dramatic boom and bust cycles, which make profits hard to predict. But Micron CEO Sanjay Mehrotra argued that the wild swings between shortages and glut have eased as a wider variety of devices now use the company’s chips.

The stock fell 7% to $ 67.99 in extended trading after the announcement. It had fallen 2.8% this year, against a 19% increase in the semiconductor index of the Philadelphia Stock Exchange.

A slowdown in orders from PC makers is a short-term problem, according to Mehrotra. Some of its customers struggle to get other types of components, which means they can’t build all the laptops and desktops ordered. This caused them to reduce the memory inventory. The situation will reverse when shortages across the industry ease over the next few months, he said.

“The PC is just one market, but we also have all of these other strong markets,” Mehrotra said in an interview. “Industry – memory and storage – today is a different place from the past. “

Mehrotra said Micron does not expect PC growth to continue at the breakneck pace of last year, but will settle at a much higher level of unit shipments than in the past. And other markets, such as automotive and industrial equipment, are growing rapidly. Data centers have already overtaken the PC to become the biggest user of memory, Mehrotra noted.

Even before Tuesday’s news, Micron shares were lagging behind a wider rise in chip shares. Investors have remained cautious about the long-term outlook for companies in the historically most volatile part of the $ 400 billion industry.

Micron just saw a big increase in fiscal 2021, when strong demand allowed the company to charge more. Its sales were $ 27.7 billion over the period, a record high and more than double the total from five years ago. Over the years, the Boise, Idaho-based company has seen sales declines of over 20% and gains of up to 80%.

In the fiscal fourth quarter, Micron reported sales of $ 8.27 billion, up 36% from the previous year. Net income was $ 2.72 billion, or $ 2.39 per share, in the period ending Sept. 2. Micron is part of a global semiconductor supply chain that is struggling to keep pace with orders – in part because of the pandemic. The shift to working from home has spurred the need for technology, and production has also been disrupted by new outbreaks of Covid-19, which have caused plant closures in centers like Malaysia.

Investors expressed concern that the memory chip boom was fueled in part by panic among customers buying the products and hoarding inventory. Micron’s CEO said inventory levels are good at his customers and low at memory producers.

Micron competes with South Koreans Samsung Electronics Co. and SK Hynix Inc., and Japan’s Kioxia Holdings Corp. in a memory chip market that has consolidated over the past decade. Samsung dominates the production of the two main types of chips, making it the second-largest chipmaker in the world, behind Intel Corp. DRAM chips temporarily hold data, helping processors process data. Nand-style flash memory, on the other hand, serves as permanent storage in phones and computers.

(Updates with CEO comments beginning in fifth paragraph.)

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