Micron Beats the Street?

Micron, the Gollum of the Semiconductors, has somehow turned things around. Execs at the company must have been chanting, "Margins, my precious!" as they doubled their margins this quarter. I never thought I'd see the day. Here is the news from Reuters:

(Reuters) - Micron Technology Inc (MU.N) delivered its first quarterly profit in nearly three years as rising memory chip prices lifted sales beyond Wall Street's expectations.

Shares of Micron, which have rallied more than 20 percent in the three weeks leading up to Tuesday's earnings report as expectations for a sector demand recovery mounted, rose about 1 percent in after-market trading on Tuesday.

Micron executives said that the popularity of smartphones and a new crop of personal computers running on Microsoft Corp's (MSFT.O) latest Windows operating system were helping to improve demand for its chips.

Chipmakers are emerging from a bruising and protracted industrywide downturn. Micron is not experiencing the typical post-holiday season pullback in demand from PC customers, said Mark Adams, Micron vice president of worldwide sales.

"We're seeing strong demand coming out of the holiday end of the year," Adams said.

Micron posted a $204 million net profit, or 23 cents per share, for its fiscal first quarter, ended Dec. 3. Analysts, on average, were expecting 7 cents, according to Thomson Reuters I/B/E/S, but it was not immediately clear if the estimate was comparable to net income.

ThinkEquity analyst Vijay Rakesh said that even excluding $1.3 billion of convertible senior notes that Micron accounted for in its EPS under newly adopted accounting standards, the company still delivered 20 cents a share in earnings.

"Either way, they're beating the Street by a mile and a half," Rakesh said.

Strong results were telegraphed last week when memory chip module maker Smart Modular Technologies Inc (SMOD.O) delivered higher-than-expected revenue and profit, he added.

On Tuesday, German chipmaker Infineon Technologies (IFXGn.DE) raised its first-quarter sales outlook on strong demand.

MARGINS DOUBLED

Micron said that revenue in its fiscal first quarter totaled $1.74 billion, compared with $1.4 billion in the year-ago period. Analysts, on average, expected $1.6 billion

The company said that the sales volume of its DRAM chips increased 25 percent during the fiscal first the quarter, while the average selling price increased 21 percent. Sales volume of the NAND flash memory chips used in products like Apple Inc's (AAPL.O) iPod jumped 16 percent while prices ticked up 5 percent.

The rising prices shored up Micron's gross profit margin in the first quarter to 27 percent, more than double the 12 percent of the fourth quarter.

Micron makes the DRAM and NAND flash memory chips that are key components in consumer electronics devices from PCs to cell phones. An oversupply of memory chips during the past two years resulted in a severe industry-wide downturn, pushing some memory makers into bankruptcy while others, like Micron, racked up a string of quarterly losses.

Continue Article at Reuters