Micron Technology Authorizes $1B Share Buyback Program
Semiconductor company Micron Technology Inc. (MU) is returning value to shareholders. Micron’s board of directors has authorized the repurchase of shares up to a value of roughly $1 billion. Following the news, Micron’s shares rose 3.9% on Monday, Oct 27.
The latest move came soon after Micron spent $389 million in the first-quarter of fiscal 2015 to repay debts and to reduce its outstanding share count, thereby increasing earnings per share and return on equity. The share repurchase program is a good way of encouraging investor confidence.
The enhanced capital deployment reflects Micron’s strong balance sheet as well as its confidence in long-term business prospects. Cash flow from operations in the fourth quarter of fiscal 2014 came in at $1.35 billion.
The company ended the quarter with $4.53 billion in cash and short-term investments versus $4.26 billion in the previous quarter. Based on this performance, Micron expects to spend more on research and development, capital expenditures and acquisitions and at the same time devote more cash for stock repurchases.
We remain encouraged by Micron’s strong cash position and its ability to service its long-term debts. Moreover, continuous share buybacks will inspire investor loyalty through higher returns.
Micron reported decent fourth quarter results, with both revenues and earnings per share increasing year over year. New products and growing demand for its products, particularly SSDs are positives for the company. Also, Micron provided an encouraging revenue guidance for the forthcoming quarter.
The company is also optimistic about supply/demand balance for DRAM and NAND memory chips in 2014, which should support prices.
Micron has been constantly innovating in memory technologies, spanning DRAM, NAND and NOR Flash memory solutions, which are being widely used in the latest mobile computing devices as well as in consumer, networking and embedded products.
Additionally, we believe that the acquisition of Elpida will help Micron’s share in the memory market. The acquisition also brought Apple Inc. (AAPL) on to its customer roster, which is a positive for future growth.
However, it may not be easy for Micron to capture share from SanDisk Corp (SNDK) a key player in the NAND space. Nevertheless, with support from Apple and Intel Corp. (INTC), its prime NAND customers, the situation could be in Micron’s favor going forward.
Currently, Micron has a Zacks Rank #2 (Buy).
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