Through the magnifying glass
As was the case in the previous quarter, Micron fell short of consensus estimates. It reported a net loss of $135 million, or $0.14 a share. Revenues were $2.14 billion, a 14% decline over the same quarter last year. Gross margin came down to 15%, from 31% in the same quarter last year
The main reason for the dismal performance was a major decline in DRAM prices driven by sluggish demand and excess supply. Prices are expected to remain low in the future because of increasing demand for tablets, leading to a fall in PC demand. Manufacturers might need to rein in production to allow prices to normalize. Investors in companies such as Apple
A spoonful of sugar
Some good news here may be that Micron is looking at products other than DRAM chips. Intel
NAND prices have improved marginally, and the final quarter offered a surprise with total DRAM revenues being less than NAND revenues -- something that has never happened before in the company's history. This development suggests that the company should consider moving further into the NAND segment -- especially with the approaching holiday season, which usually sees a marked increase in demand for smartphones, solid-state drives, and tablets.
The Foolish bottom line
I don't think the near future looks very rosy for Micron. Falling DRAM prices could significantly affect the company's results in the near future and beyond. Until pricing dynamics change or Micron diversifies away from DRAM, I'd be cautious of investing in this stock. Investors, beware.