The $1.4-billion in cash and short-term investments that Micron Technologies has on its balance sheet is not enough to prevent the shutdown of its flash-memory joint venture. Despite a healthy balance sheet, the company reported fiscal year-end losses of $1.6 billion.
As a result, the Idaho-based company will shutter its IM Flash Technologies venture, located at its Boise facility, which it operates with partner Intel Corp. Company officials cited declining customer demand and product oversupply in the marketplace — which has driven down the price of NAND flash memory products below manufacturing costs — as the reason for the shutdown and continuing restructuring efforts.
Over the next two years, Micron will reduce its global workforce by 15 percent, beginning with a voluntary program. In 2007, Micron reported having 23,500 employees worldwide. Most of the laid-off workers will be casulties of the flash operation shutdown. For the fiscal year, which ended August 28, Micron recorded $33 million in restructuring charges tied to employee severance, relocation and retention bonuses, and write downs of facilities to their fair value.
The company will also slash executives salaries by 20 percent, as part of it effort to increase cash flow from operations and bolster its balance sheet. “Micron is in a strong position relative to our competitors, as evidenced by our balance sheet and cash flow, but we are not immune to the difficult global market conditions that are affecting all of us,” noted Micron chairman and CEO Steve Appleton in a statement.
As a result, Micron will work on a cash restructuring and expense reduction program that will reduce outlays by $60 million, and push next year’s cash operating margin to more than $175 million, according to a company filing.
During the fourth quarter, Micron posted a $344 million net loss on net sales of $1.45 billion. The results included a non-cash charge to cost of goods sold of $205 million to write down the value of work in process and finished goods inventories of flash memory products to their fair value. In addition, there was a $70 million charge for price adjustments for the flash memory products that were purchased from other suppliers in prior periods.
The $1.6-billion year-end loss was on sales of $5.8 billion. The annual results included a non-cash charge of $463 million (from the second quarter) to write off the carrying value of goodwill previously recognized in the company’s memory segment. Without figuring in the inventory and goodwill write offs, and the memory price adjustments, the net loss for the year would have been about $1 billion for the year.