By Wallace Witkowski
Micron Technology Inc. shares rose in the extended session Wednesday after the Boise, Idaho-based chip maker’s earnings and outlook topped Wall Street estimates and its CEO defended its capital spending amid a worldwide chip shortage.
Micron’s stock /zigman2/quotes/205710729/composite MU +0.81% rose 3.5% after hours, following a 1.9% gain in the regular session to close at $88.21, boosted by a Wall Street Journal report that Micron is exploring a deal to buy Japanese chip maker Kioxia. The stock was up 5% premarket Thursday.
On a conference call, analysts were concerned that Micron’s capital expenditure spending appeared light, given not only shortages in chip supply but in the fab capacity, or the factories that make chips. The company said it plans to invest about $9 billion in capex in fiscal 2021.
“I think it is important to understand that we do remain disciplined with respect to capex,” said Micron Chief Executive Sanjay Mehrotra on the call. “We want to make sure we manage it prudently.” Mehrotra added that the $9 billion earmarked is “really almost the highest capex that the company has spent in its history.”
While fabrication capacity is strapped worldwide amid the shortage, building such facilities not only takes a lot of money, but time too, in terms of years rather than months. Just a few years ago, Micron and other chip makers had the opposite problem, and were left holding the bag with massive inventories after many customers bought more chips than they would normally, when prices were skyrocketing.
For the fiscal second quarter, Micron reported net income of $603 million, or 53 cents a share, compared with $405 million, or 36 cents a share, in the year-ago period. Adjusted earnings, which exclude stock-based compensation expenses and other items, were 98 cents a share, compared with 45 cents a share in the year-ago period.
Revenue rose to $6.24 billion from $4.8 billion in the year-ago quarter. Mehrotra said on the call that the company would have probably had higher revenue were it not for component shortages. Analysts surveyed by FactSet had forecast adjusted earnings of 95 cents a share on revenue of $6.19 billion.
Micron said DRAM sales made up 71% of revenue, or $4.43 billion, in the fiscal second quarter, while NAND accounted for 26% of revenue, or $1.62 billion.
Analysts on average expected DRAM sales of $4.3 billion, up from $3.08 billion in the year-ago period, and NAND sales of $1.6 billion, up from last year’s $1.51 billion, according to FactSet.
DRAM, or dynamic random access memory, is the type of memory commonly used in PCs and servers, while NAND chips are the flash memory chips used in smaller devices like smartphones and USB drives.
Compute and network sales rose 34% to $2.64 billion, while mobile sales surged 44% for $1.81 billion in revenue for the quarter.
Micron had upped its forecast considerably earlier in the month with an earnings outlook of 93 cents to 98 cents a share on revenue of $6.2 billion to $6.25 billion.
The company expects adjusted fiscal third-quarter earnings of $1.55 to $1.69 a share on revenue of $6.9 billion to $7.3 billion, while analysts had forecast earnings of $1.32 a share on revenue of $6.83 billion.
Over the past 12 months, Micron shares have gained 110%, compared with a 107% increase by the PHLX Semiconductor Index /zigman2/quotes/210598361/realtime SOX +1.25% , a 54% rise by the S&P 500 index /zigman2/quotes/210599714/realtime SPX +1.17% and a 72% gain by the Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP +0.74% .