Micron Q3 earnings stronger than expected in light of Huawei ban

Micron's earnings beat analyst expectations but revenue fell 39% year-over-year. (Micron Technology)

Memory and storage chipmaker Micron’s Q3 2019 earnings beat analyst expectations, despite a 39% revenue decline year-over-year for the company and a key customer being blacklisted by the U.S. government.

 

Micron reported $4.79 billion in revenue for the quarter, beating analyst expectations of $4.69 billion, according to CNBC. Revenue in Q3 2018 was $7.80 billion for Micron, representing a 39% drop.

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Sanjay Mehrotra, president and CEO of Micron, said the company delivered solid fiscal results “despite headwinds from industry oversupply and steeper than expected price declines.”

 

“Clearly, fiscal 2019 has been challenging for both Micron and the industry,” Mehrotra said during an earnings call, according to a transcript provided by Motley Fool. “The confluence of events that impacted this year was unprecedented.”

 

Micron executives pointed to Huawei as the trouble spot for the quarter. Huawei, which has been blacklisted by the U.S. Commerce Department, accounted for 13% of Micron’s revenue in the first half of 2019, according to a filing with the SEC. U.S. firms are now barred from selling certain tech products to Huawei, and several chipmakers who count Huawei as a major customer, including Skyworks, Qorvo, Neophotonics and Lumentum, have lowered guidance and written down inventories as a result of the blacklisting, according to CNBC.

 

RELATED: Report: Quiet lobbying by U.S. chipmakers seeks to limit U.S. ban on sales to Huawei

 

Micron’s sales of DRAM and NAND products were hit hardest by the blacklisting, said David Zinsner, SVP and CFO. He speculated the company would have reached “the high end of our revenue guidance” had the restrictions not been put in place. DRAM sales, which account for 64% of the company’s total revenue, dropped 19% during the quarter, and fell 45% year-over-year. NAND sales dipped 18% during the quarter and dropped 25% year-over-year.

 

Revenue from Micron’s mobile business fell 33% year-over-year to reach $1.2 billion, due in part to lower shipments to Huawei, Zinsner said. Its embedded business unit revenues fell 22% year-over-year, while storage unit revenues dropped 29% year-over-year.

 

RELATED: U.S. tech firms find ways to bypass Huawei blacklisting

 

Mehrotra said the company has since begun shipping a subset of its products to Huawei.

 

“We determined that we could lawfully resume shipping a subset of current products because they are not subject to export administration regulations and entity list restrictions,” he said. “However, there is considerable ongoing uncertainty surrounding the Huawei situation and we are unable to predict the volumes or time periods over which we will be able to ship products to Huawei.”

 

The earnings report seemed to act as a boon for other semiconductors. Micron’s stock rose 10% after hours, and other chip stocks were up more than 3% the day after Micron released its Q3 earnings.

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