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SEOUL (Reuters) – Shares of South Korean chip giants jumped on Thursday after U.S. chipmaker Micron Technology Inc forecast recovery in a memory market saddled with oversupply as device demand sags.
FILE PHOTO: Memory chip parts of U.S. memory chip maker MicronTechnology are pictured at their booth at an industrial fair in Frankfurt, Germany, July 14, 2015. REUTERS/Kai Pfaffenbach
The world’s second-biggest memory chip maker, SK Hynix Inc, saw its shares surge nearly 7 percent by 0330 GMT, while technology giant Samsung Electronics Co Ltd gained 4.3 percent.
Micron said on Wednesday it saw recovery in the memory chip market, after reporting quarterly profit that beat analyst estimates as cost control helped offset falling demand and prices.
“Micron’s projection on growing memory chip demand from data center operators set up a positive outlook for the memory chip industry, helping boost shares of South Korean chipmakers,” said analyst Seo Sang-young at Kiwoom Securities.
Analysts have been wary about prospects of the memory chip market due to lower demand for smartphones and slumping investment from data center companies.
“With its plan to cut production, it seems that Micron is determined to better control oversupply problems in the chip market,” said analyst Park Sung-soon at BNK Securities.
Tech research firm TrendForce in a report on Wednesday said it expects a only a slight decline in NAND flash chip sales in the second quarter as demand recovers from smartphones, computers and servers.
“Although it won’t cause an immediate reversal of the oversupply situation, it will have a positive effect on the market environment,” analyst Ben Yeh at DRAMeXchange, a Trendforce division, said in the report.
Both Samsung Electronics and SK Hynix said in their earnings conference calls in January that they expected sales of memory products to revive in the second half of the year.
Rising chip shares helped lift the broader KOSPI stock price index by 0.3 percent.
Reporting by Heekyong Yang; Editing by Christopher Cushing
(Reuters) – U.S. chipmaker Micron Technology Inc on Wednesday said it sees a recovery in the memory chip market coming and reported a quarterly profit that beat estimates as cost controls helped offset falling demand and prices, sending its shares up nearly 5 percent.
The logo of U.S. memory chip maker MicronTechnology is pictured at their booth at an industrial fair in Frankfurt, Germany, July 14, 2015. REUTERS/Kai Pfaffenbach
Micron makes NAND storage chips that are used in phones and internet servers as well as DRAM chips that help computer processors communicate with those storage chips.
The company beat revenue expectations for the fiscal second quarter ended Feb. 28. Although it gave a forecast for its fiscal third quarter that was below Wall Street’s expectations, Micron said demand is likely to begin growing again by its fourth quarter.
The results come against the backdrop of a glut in the global semiconductor industry triggered by waning demand for smartphones and spotty purchasing patterns by cloud-computing vendors, which hurt chipmakers such as Intel Corp earlier this year.
Meantime, Micron trimmed its spending plans and said it had idled some factory lines to bring its chip output in line with lower demand, helping keep profits flowing and a share buyback plan on track.
For its fiscal second quarter, Micron generated nearly $ 1 billion in free cash flow and a profit of $ 1.71 per share, excluding items. That was down from $ 2.82 a year earlier but above Wall Street expectations of $ 1.67, according to IBES data from Refinitiv.
“Certainly Micron has not been in a situation before where it’s been able to deliver such healthy profitability and cash flow in an adverse industry environment,” Chief Executive Sanjay Mehrotra said in an interview with Reuters.
Kinngai Chan, an analyst with Summit Insights Group, said investors were focusing on the outlook for a recovery in the second half of the calendar year, with the fiscal third quarter forecast representing “the bottom for Micron’s near-term sales and gross margin.”
The Boise, Idaho-based company said on Wednesday it expects revenue between $ 4.6 billion and $ 5 billion for its fiscal third quarter, falling short of analyst expectations of $ 5.3 billion according to IBES data from Refinitiv. The company cut planned capital expenditures for the 2019 fiscal year to $ 9 billion, Micron executives said, down from a previous forecast of between $ 9 billion and $ 9.5 billion.
Revenue fell to $ 5.84 billion from $ 7.35 billion, beating expectations of $ 5.3 billion.
The company said it bought back 21 million shares of its common stock for $ 702 million during the quarter as part of its $ 10 billion share buyback program, leaving a net cash position of $ 2.99 billion.
Reporting by Sayanti Chakraborty in Bengaluru and Stephen Nellis in San Francisco; editing by Sriraj Kalluvila and Leslie Adler
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