Chip flinger Micron reels in production, expenses as revenue growth comes to crashing halt

DRAM and NAND output to take a hit as demand slides

Chip maker Micron has slammed the brakes on production and expenses entering calendar 2019 in anticipation of falling demand.

The admission came as the company reported revenues of $7.9bn for Q1 of fiscal '19 ended 29 November, up 16 per cent year-on-year but an abrupt slowdown from the 40 per cent expansion in the previous quarter and down 58 per cent on the one before that. Q1 net profit was $3.29bn, 23 per cent higher than a year ago.

The mobile business unit sales grew 62 per cent to $2.21bn, but the compute & networking and embedded divisions grew 12 per cent each to $3.6bn and $933m respectively. Storage fell 17 per cent to $1.1bn.

In the earnings call, CFO Dave Zisner said: "Revenue was adversely impacted by inventory adjustments at key customers in the cloud, graphics, and enterprise markets. Offsetting these headwinds, we delivered record revenue in the mobile, industrial, and automotive markets."

The outlook for next quarter is dire: revenues should be between $5.7bn and $6.3bn - $6bn at midpoint - which is an 18.3 per cent drop on the year-ago's $7.35bn.

Zinser said that "due to the weaker demand environment, we expect fiscal second quarter sequential bit shipments to be down meaningfully for both NAND and DRAM."

"We are taking appropriate steps to manage production and spending in order to deliver healthy profitability and cash flows."

2019 production spending will be cut to match output to the estimated market bit growth in DRAM (approximately 15 per cent; it was 20 per cent before) and NAND (around 35 per cent). Planned capex for FY 2020 is down $1.25bn to between $9.0bn and $9.5bn, and this will affect both DRAM and NAND production.

Zisner said: "We're actively managing opex by implementing expense controls across the company, including tighter controls on headcount, holiday work schedule slowdowns, and reductions in discretionary spending."

President and CEO Sanjay Mehrotra remained in glass half-full mode.

"Despite weak near-term industry supply-demand dynamics entering calendar 2019, Micron is well positioned to deliver healthy profitability throughout the year. We remain bullish on the long-term secular growth trends driving the memory and storage industry."

Back in September when Micron filed its Q4 fiscal '18 numbers it blamed Intel shortages for slowing sales, something that others including HP Inc has also done. ®

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