Micron Technology Inc. took a battering in after-hours trading today as it posted guidance for its fiscal first quarter that came in some way below analysts’ forecasts because of an expected decline in the price of memory chips.

That warning came after the chipmaker posted strong fourth-quarter and full-year results.

The company reported a profit before certain costs such as stock compensation of $2.39 per share on revenue of $8.27 billion, up from $6.06 billion a year ago. That was better than expected, with Wall Street looking for earnings of just $2.33 per share on revenue of $8.23 billion.

Micron said its gross profit margin for the quarter hit 47.9%, up 13 percentage points from the same period one year ago.

Micron Chief Executive Sanjay Mehrotra (pictured) said the company’s “outstanding execution” in the quarter came on the back of a year that saw it achieve several key milestones.

“In 2021, we established DRAM and NAND technology leadership, drove record revenues across multiple markets, and initiated a quarterly dividend,” he said in prepared remarks. “The demand outlook for 2022 is strong, and Micron is delivering innovative solutions to our customers, fueling our long-term growth.”

That may be so, but analysts were more concerned with Micron’s short-term prospects, and the company’s guidance for the first quarter did not make for pleasant reading. Micron said it’s expecting a first-quarter adjusted profit of $2 to $2.20 per share on revenue of $7.45 billion to $7.85 billion. That’s way below Wall Street’s consensus of $2.53 per share in profit and $8.54 billion in revenue.

The company’s shares fell more than 4% in after-hours trading.

Micron had seen its stock rise throughout the COVID-19 pandemic. The company is one of the world’s leading producers of dynamic random-access memory chips, which are used in personal computers and servers. It also sells NAND flash memory chips for smaller devices such as smartphones and USB drives.

Those products have all been in big demand throughout the pandemic, sending prices of components such as memory chips much high. Micron has benefited from that spike, as its full-year results demonstrate: For fiscal 2021, Micron’s total revenue came to $27.71 billion, up from $21.44 billion the year before.

However, most analysts believe the party is coming to an end, especially in the case of DRAM. The pandemic-inspired boom in PC sales is slowing down, so demand for DRAM is on the decline, sending prices lower.

Mehrotra admitted that much on a call with analysts after the company presented its results, saying demand for DRAM and NAND will “decline modestly” from very high levels during the next quarter. He revealed that “some PC customers are adjusting their memory and storage purchases due to shortages of non-memory components needed to complete PC builds.”

Holger Mueller of Constellation Research Inc. said despite today’s stock drop, Micron deserves credit for its performance, delivering a “spectacular year” with almost 30% revenue growth, and closer to 40% revenue growth in the final quarter.

“This was due in part to its remarkable cost discipline, which saw it double its operating income,” Muller said. “We know the chip industry is a roller coaster and it reached incredible highs during the pandemic, now we’ll have to see how PC sales hold up in 2022. The good news is that Micron has improved its financial health ahead of the coming dip.”

Pund-IT Inc. analyst Charles King told SiliconANGLE that Micron is a good example of the ups and downs that occur in extraordinary times. He said it was ideally positioned to benefit from the COVID challenges witnessed over the past year and that its leadership deserves credit for the way they stepped up.

“However, extraordinary times don’t last forever, especially in markets where pricing and demand are often volatile,” King said. “Overall Micron had an excellent quarter that capped off an exceptional year. While memory chip supply and demand makes views murky for the next couple of quarters, the solid performance of Micron’s leadership during the past 18 months suggests that whatever happens, the company is in good hands.”

Indeed, although the next couple of quarters might be difficult, Mehrotra said he’s rather optimistic of a rebound later in the year.

“Bit shipment growth will resume in the second half of the fiscal year and we are planning to deliver record revenue with solid profitability in fiscal 2022,” Mehrotra said. “The demand outlook for 2022 is strong and Micron is delivering innovative solutions to our customers, fueling our long-term growth.”

Photo: SiliconANGLE