Micron expected to announce higher earnings March 31

Micron is scheduled to release its next quarterly results on March 31, and the company recently raised expectations on those results.

The company announced that revenue, which it initially expected to be from $5.6 billion to $6.0 billion, would be from $6.0 billion to $6.25 billion; that gross margins, which were initially expected to be from 24%-26%, would be 26%-27% and that expected diluted earnings per share were expected to increase from $0.34-$0.48 per share to $0.51-$0.56 per share.

Micron’s chip manufacturing is primarily in two areas. Dynamic random access memory chips are typically used in computers, while nonvolatile NAND flash memory is used in solid state hard disk drives.

CFO David Zinsner, speaking at the Morgan Stanley Technology, Media & Telecom Virtual Conference, attributed the increase to increased volume in both chip families, and higher than expected average selling price for DRAM.

“On the DRAM side, volume is definitely better than we anticipated coming into the quarter. And in addition, ASPs are better than we anticipated coming into the quarter,” Zinsner said, according to a transcript of the interview, published on the Micron website. “On the NAND front, I would say volume is definitely running more positively than we expected. ASPs are generally somewhat in line with our expectations coming into the quarter.”

This is an improvement over 2019, when the company’s earnings dropped sharply due to reduced chip pricing.

In addition, Micron’s automotive unit, though it’s a small part of the company overall, it has a higher profit margin than the other divisions, according to Investing.com. The automotive sales unit is based in Manassas, Virginia, where Micron invested $3 billion in an expansion in 2018.

And further increases could be in store. Under the auspices of the Semiconductor Industry Association, a number of U.S. chip manufacturers — including Sanjay Mehrotra, Micron president and CEO — sent a letter to President Joe Biden in early February asking for “substantial funding for incentives for semiconductor manufacturing, in the form of grants and/or tax credits, and for basic and applied semiconductor research.”

Later that month, Biden signed an executive order pledging up to $37 billion, as well as a 100-day review into the supply chains of products such as semiconductor chips, particularly in the automotive area.

Although Micron recently announced that it was writing off its 3D XPoint project and selling its chip manufacturing plant in Lehi, Utah — which Micron paid $1.5 billion for just two years ago — it likely isn’t much of a problem, said Jim Handy, a veteran Micron analyst and general director of Objective Analysis, based in Los Gatos, California.

Micron said it was dropping the project because it wasn’t making enough money.

“Micron has now determined that there is insufficient market validation to justify the ongoing high levels of investments required to successfully commercialize 3D XPoint at scale to address the evolving memory and storage needs of its customers,” the company said in a statement.

Instead the company said it intends to focus its attention on memory products that leverage the Compute Express Link, a recently introduced industry standard interface that is intended to enable flexible connection between compute, memory and storage.

Mehrotra said in an analysts’ call that the company was in discussion with several potential buyers and that it expected to sell the Lehi plant sometime this year.

“Investors who watch them carefully have probably been watching this loss of $150 million a quarter and wondering when this is going to stop,” Handy said.

The main interesting factor about the Lehi facility is that it was one of Micron’s first moves to diversify outside of Boise, but now Micron has facilities in a number of other locations, Handy said. Staffers at the Lehi facility will probably not go back to Boise, he added. “Most of them are likely to follow the buyer.”

“We expect that the overwhelming majority of our team members in Lehi will find strong career opportunities with the buyer of the fab,” Mehrotra confirmed during the call.