Micron Beats Quarterly Revenue Estimates on Higher Memory Demand

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Micron Technology Inc said on Wednesday it expected a recovery in 2020 after a “cyclical bottom” in the second quarter, and that it had received all requested licenses to supply some products to its largest customer, Huawei Technologies Co Ltd.

Shares of Micron rose nearly 4% in extended trading, after its quarterly earnings beat Wall Street estimates on an uptick in demand for memory chips after a tepid year.

Struggling to grow sales in a slowing memory market, Micron faced more uncertainty when Washington placed Huawei on a so-called entity list in May that effectively banned U.S. firms from supplying to the Chinese company.

Wednesday’s announcement about Huawei licenses comes amid a tepid forecast for the second quarter, but Chief Executive Sanjay Mehrotra said he expected the business to recover in the third quarter of fiscal 2020.

“Recent trends in our business give us optimism that our fiscal second quarter will mark the bottom for our financial performance ... with continued recovery in the second half of calendar 2020,” Mehrotra told analysts on a post-earnings call.

In June, Micron said it had determined that some of its products could be legally shipped to Huawei, while others remained barred. It did not, however, disclose if it had received a license when U.S. officials began granting them in November.

The licenses are not expected to have a material impact on the company’s revenue in the next couple of quarters, Micron said. Sumit Sadana, Micron’s chief business officer, told Reuters in an interview it would take time for Micron to work with Huawei to make sure its chips work in Huawei’s newest phones.

“We believe that we’ll be able to get back to working with them and qualifying our products, and then within a few months we should be in a much better place - assuming of course that no changes occur in terms of the U.S. trade policy as it relates to Huawei,” Sadana said.

The Idaho-based company forecast second-quarter revenue between $4.5 billion and $4.8 billion, while analysts were expecting $4.78 billion.

Chipmakers have faced a harrowing 17 months as United States and China traded tariff blows that reduced access to the Chinese market—one of the largest for U.S. companies.

For the first quarter, Micron earned 48 cents per share on an adjusted basis, a cent above expectations.

Net income attributable to the company fell to $491 million in the quarter ended Nov. 28, from $3.29 billion a year earlier.

Revenue also fell to $5.14 billion from $7.91 billion, but beat estimates of $5.01 billion, according to IBES data from Refinitiv.