MICRON TECHNOLOGY, INC.

(MU)
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Delayed Nasdaq  -  04:00 2022-07-01 pm EDT
53.65 USD   -2.95%
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Memory chip maker Micron launches new pricing experiment for stability

05/12/2022 | 03:23pm EDT
The logo of U.S. memory chip maker MicronTechnology is pictured at their booth at an industrial fair in Frankfurt

SAN FRANCISCO (Reuters) - Chipmaker Micron Technology Inc on Thursday announced it was experimenting with a new pricing model for its chips called forward pricing agreements that would aim to stabilize the steep price fluctuations that plague the industry.

"I'm super excited to announce that a top 10 customer has already signed up on this model with us, a more than $500 million a year of revenue for a three year agreement," said Sumit Sadana, Micron's chief business officer at the company's investor day event.

He declined to project how much of the long-term agreements with customers would migrate to this new model of pricing, and emphasized that this was an "experiment". He said the current long-term agreements are based on volume and not on prices. The forward pricing agreements have both volume and pricing.

When asked about whether the contracts would be enforceable Sadana acknowledged that one party or the other would always be on the wrong side of the price.

Sadana also said that Micron does not plan to lower its gross margins to push the forward pricing agreements ahead.

"There'll be ups and downs, but the benefits ultimately outweigh the risks of actually doing an agreement like this," said Sadana.

(Reporting By Jane Lanhee Lee in San Francisco, and Chavi Mehta in Bangalore; Editing by Nick Zieminski)

By Jane Lanhee Lee and Chavi Mehta


© Reuters 2022
Stocks mentioned in the article
ChangeLast1st jan.
MICRON TECHNOLOGY, INC. -2.95% 53.65 Delayed Quote.-40.65%
UNITED PARCEL SERVICE INC 1.34% 184.99 Delayed Quote.-13.69%
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Financials (USD)
Sales 2022 31 381 M - -
Net income 2022 8 900 M - -
Net cash 2022 4 138 M - -
P/E ratio 2022 6,80x
Yield 2022 0,78%
Capitalization 59 184 M 59 184 M -
EV / Sales 2022 1,75x
EV / Sales 2023 1,70x
Nbr of Employees 43 000
Free-Float 99,7%
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Mean consensus BUY
Number of Analysts 35
Last Close Price 53,65 $
Average target price 82,42 $
Spread / Average Target 53,6%
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Managers and Directors
Sanjay Mehrotra President, Chief Executive Officer & Director
Mark Joseph Murphy Chief Financial Officer & Executive Vice President
Robert E. Switz Director
Scott J. DeBoer Executive Vice President-Technology Development
Manish Bhatia Executive Vice President-Global Operations
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