Micron Technology Earnings Benefit from Higher Memory Prices

Perennial money-loser Micron Technology (MU) reported its first quarterly profit in three years. Higher average selling prices on DRAM and NAND flash drove these surprising results:

“Revenue from sales of DRAM products increased 50 percent in the first quarter compared to the fourth quarter due to a 25 percent increase in sales volume and a 21 percent increase in average selling prices. Revenue from sales of NAND Flash products increased 21 percent in the first quarter compared to the fourth quarter due to a 16 percent increase in sales volume and a five percent increase in average selling prices. The company’s gross margin on sales of memory products improved from 12 percent in the fourth quarter of fiscal 2009 to 27 percent in the first quarter of fiscal 2010 due primarily to the increases in average selling prices.”

These results are particularly notable given that memory prices historically follow a persistent downward trajectory (for example, see this chart). While Micron describes market conditions as “improving,” it of course remains to be seen whether the industry can sustain these price hikes (PC World predicts that prices will indeed increase in 2010). If so, such a milestone will speak volumes about inflationary pressures building in the economy.

The stock market responded strongly to these results: MU rose 6% on the news hitting fresh 2-year highs.

Micron Technology Hits Fresh 2-Year Highs On Higher Memory Prices

Micron Technology Hits Fresh 2-Year Highs On Higher Memory Prices

Advertisements


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s