Micron Technology (NASDAQ: MU) is a fabless semiconductor company that specializes in the design, development, and manufacture of semiconductor memory devices for mobile phones, digital cameras, MP3 players, and other electronic devices. Its products are used in a variety of applications such as mobile handsets, tablets, digital cameras, automotive systems and systems for communications, military, industrial and enterprise use.
If you’re not familiar with Micron Technology, you probably know its technology of choice, DRAM (Dynamic Random Access Memory). But if you’re not familiar with Micron’s recent AI experiments, you definitely know its recent cash to work experiments. The memory company completed a $150M stock buyback in March, its biggest since 2014. It’s also spent $275M in it’s first year in the IoT space, including an investment in a company focusing on AI-powered hardware. And its $100M in patent licensing income last quarter looks like it’ll be a reliable source of short-term cash too — that’s probably why Micron announced plans to use it for more than just tech development.
Micron Technology Inc.
Cash deposits provide the memory chip producer with millions of dollars in additional revenue using an artificial intelligence tool developed in-house.
The application of artificial intelligence allows Boise, Idaho-based Micron to invest its funds in a way that provides higher returns in the current climate of low interest rates, which worries many financial executives in various industries.
Technology, Micron provides recommendations for different asset classes and financial institutions that promise the best returns. This takes into account an entity’s limitations on the amounts it can invest in a particular institution or invest in a particular type of asset. Micron, which makes memory chips and storage devices for everything from cars to data centers, has relationships with more than 20 banks worldwide.
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With interest rates near zero in the United States and elsewhere, companies are struggling to find sources of income for the saved money they built up in response to the economic shock of the coronavirus pandemic. According to the latest comprehensive data from S&P Global Market Intelligence, cash and cash equivalents for S&P 500 companies totaled $3.79 trillion at the end of the first quarter, up from $3.03 trillion a year earlier and $2.07 trillion in 2019.
During the quarter ending 3. As of the end of June, Micron had $7.8 billion in cash and cash equivalents, down from $8.3 billion a year earlier, but still up from the same quarter of 2019. The Company’s interest income, which includes interest on cash deposits, was $8 million, down from $23 million in the prior year, due in part to lower interest rates.
In a low interest rate environment, given the amount of cash we hold, every basis point counts and is expressed in millions of dollars, he said.
Treasurer of Micron.
Finding the best way to allocate funds within a company’s internal boundaries can be a complex matrix, the CFO says.
Said. The AI tool is designed to do this thinking very quickly, he added.
Previously, the Corporation relied on Treasury Department staff to determine the maximum amount it could earn from distributing cash among deposits and investment accounts. The artificial intelligence tool now helps employees make cash management decisions.
It’s not about cutting jobs, it’s about doing a better job, Zinsner said. With artificial intelligence, our people have more time to invest in other areas of the treasury to bring long-term value to Micron.
Chief Financial Officer of Micron David Zinsner
Zinsner said the AI tool doesn’t move any money from the company, but that could change. Eventually, we want it to be able to perform all transactional tasks as well, but we’re not there yet, he says.
Rutin said the AI app, which has been in use since the second quarter, has generated several million more in revenue than the company would have earned without it. According to the management, the tool was developed by an internal team specializing in the automation of all services.
Businesses from all sectors have flooded banks with cash in recent quarters, leading some banks to take steps to discourage deposits, such as cutting interest rates on funds above a certain amount. A surplus of deposits can have a negative impact on the profitability of banks.
Rautin said Micron’s artificial intelligence tool influenced the company’s recent decision to direct more funds into high-yield bank accounts and away from low-yield money market funds. International banks with a smaller retail presence have paid higher yields than some U.S. banks in recent months, he said. According to Rutin, the AI tool takes into account investment options, including demand deposits, time deposits that impose a time limit on withdrawals, money market funds, a type of mutual funds, currencies and investment managers.
The company’s revenue increased due to demand for chip-based products, such as. B. cars and appliances, increased greatly during the pandemic, leading to a shortage of chips. Micron made a profit in the quarter ended March 3. June ended with $1.7 billion, up from $803 million a year earlier.
Artificial intelligence tools that help companies make cash management decisions are relatively rare, said Pete Gilchrist, executive vice president of retail deposits and commercial banking at consulting firm Novantas. These tools can make it harder for banks to predict customer behavior, e.g., how much money customers want to keep in their accounts, Gilchrist said.
Rautin, Micron’s treasurer, said the app has been very helpful to the company in managing multiple accounts in different jurisdictions and currencies. Given the number of banks we work with and the capabilities we have, this AI tool has really allowed us to take our optimization to the next level, he said.
Email Christine Broughton at Kristin.Broughton@wsj.com.
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