Micron Cuts Plans for Spending, Chip Production
Chip maker’s quarterly profit up 23%, but weaker outlook sends stock down after-hours
Micron Technology Inc.’s MU 0.68% profit rose 23% in the most recent period but the memory-chip maker’s stock sank late Tuesday after the company gave a more tepid outlook for earnings and capital spending.
Micron cut its full-year spending plans by about $1.25 billion and pledged to reduce production of chips used in everything from cars to smartphones to data centers as a result of weaker-than-expected demand from customers.
Shares in Micron, which closed slightly up Tuesday, fell 9% to $31.07 in after-hours trading. The weakness in Micron’s stock in after-hours trading extended to companies in the technology sector including Nvidia Corp. , Lam Research Corp. , and Applied Materials Inc. amid worries that the supply overhang would be more pronounced, and more long-lasting than company executives have indicated.
Chief Executive Sanjay Mehrotra sought to reassure Wall Street that demand would pick up in the second half of 2019.
“We’re just going through an air pocket,” Mr. Mehrotra said, blaming the slowdown on inventory adjustments and some seasonal weakness, including from high-end smartphones.
The Boise, Idaho-based company is the last U.S.-based maker of dynamic random access memory, or DRAM, a key component in personal computers, and has become a major maker of NAND flash memory chips, used for storing data in phones, cameras and other devices.
Micron expects its profit this quarter to fall to about $1.75 a share and revenue to fall to a range of $5.7 billion to $6.3 billion, well short of analysts’ expectations.
Micron’s new forecast calls for spending up to $9.5 billion on capital expenditures. Part of that reduction, company officials said, would come from the lower production along with a tighter rein on head count.
To adjust to current market conditions, Mr. Mehrotra said, Micron will make fewer DRAM and NAND chips. Mr. Mehrotra said he expects to grow DRAM bit production by about 15% for 2019, down from an earlier view of about 20%. NAND market demand is expected to grow about 35% from this year, down from an earlier view of 35% to 40%.
Overall, Micron’s quarterly profit rose 23% to $3.29 billion, or $2.81 a share.
Excluding stock-based compensation and other items, profit rose to $2.97 a share.
Revenue rose 16% to $7.91 billion, booking record quarterly sales in mobile, automobile and industrial businesses.
Gross profit margin improved to 58.3% from 55.1% a year earlier.