March 23, 2017 / 8:15 PM / in 5 months

Micron's upbeat forecast rides on rising chip prices

The logo of U.S. memory chip maker MicronTechnology is pictured at their booth at an industrial fair in Frankfurt, Germany, July 14, 2015.Kai Pfaffenbach

(Reuters) - Micron Technology Inc forecast current-quarter revenue and profit far ahead of analysts' estimates as prices for memory chips climb amid tight supplies and demand surges for storage chips used in smartphones. Shares of the company, which also beat second-quarter profit estimate, were up 9.4 percent in extended trading on Thursday.

Global memory chip makers are on the cusp of what analysts call an ultra-super-cycle as supply bottlenecks created by efforts to make smaller yet more efficient chips weigh, while demand soars for data storage from smartphones and artificial intelligence to autonomous driving and the Internet of Things.

Micron said on Thursday average selling prices of dynamic random access memory (DRAM) chips jumped 21 percent in the second quarter. They had risen 5 percent in the preceding quarter.

DRAM chips accounted for about 64 percent of Micron's revenue in the latest quarter.

Meanwhile, demand for the company's NAND chips is also thriving, tracking the explosive growth in storage capacity within smartphones.

NAND sales volumes rose 18 percent in the second-quarter ended March 2, Micron said.

"We saw continued gains in client DRAM pricing, but also benefited from increases in mobile, cloud, and enterprise pricing as well," Chief Executive Officer Mark Durcan said during a call with analysts.

Durcan, who has announced he would retire once a successor is found, had said in December that PC DRAM average selling prices are up 50-60 percent since hitting a trough.

Micron forecast adjusted profit of $1.43-$1.57 per share for the current quarter, well above the average analysts' estimate of 90 cents, according to Thomson Reuters I/B/E/S.

The Boise, Idaho-based company also said it expected revenue of $5.2 billion-$5.6 billion, handily beating estimates of $4.72 billion.

Micron, which closed its $3.2 billion acquisition of Taiwanese chip company Inotera in December, is said to be a potential bidder for the Japanese company Toshiba Corp's chip unit.

The strong pricing environment is helping gross margins, Summit Redstone Partners analyst Jagadish Iyer said.

The company forecast adjusted gross margin of 44 percent-48 percent for the current quarter, compared with the 38.5 percent in the preceding quarter.

Excluding certain items, the company earned 90 cents per share, beating the average analysts' estimate of 86 cents, according to Thomson Reuters I/B/E/S.

Net sales surged 58.4 percent to $4.65 billion, but in line with analysts' estimate. (bit.ly/2nhTnff)

Up to Thursday's close of $26.47, the chipmaker's shares had risen 21 percent year-to-date, compared with the 10 percent gain in the broader Philadelphia SE Semiconductor Index.

Reporting by Aishwarya Venugopal in Bengaluru; Editing by Sriraj Kalluvila

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