Micron Technology Sales Tumble

Micron Technology Inc. (MU) on Thursday reported a fiscal second-quarter loss as the No. 2 maker of computer-memory chips saw sales decline from a year earlier, hurt by a slump in prices for the devices.

For the quarter ended Feb. 28, Boise, Idaho-based Micron said its loss widened to $30 million, or 5 cents a share, from a year-earlier loss of $4 million, or 1 cent. 

Analysts had expected Micron to post a loss of 4 cents a share, within a range of a loss of 12 cents to a profit of 6 cents, according to Thomson/Financial First Call. Revenue was expected at $665.9 million. 

Sales fell to $645.9 million from $1.07 billion from a year earlier, but rose 52 percent from $423.9 million posted in the prior quarter, largely due to reduced supply of dynamic random-access memory, or DRAM, chips widely used in personal computers and servers. 

``The boom-bust cycle of the DRAM business really is not driven by demand; it's driven by supply,'' said Dan Scovel, an analyst at Needham & Co. ``Obviously, DRAM prices are way up and that's good news.'' 

Micron said the average price in the quarter for its 128-megabit synchronous dynamic random-access, or SDRAM, chips, was about $2.50 each. That's up considerably from levels in November of about $1, but still well below the approximate $5 per 128-megabit SDRAM chip Micron got a year ago. 

It was Micron's fifth consecutive quarterly loss, and the prior, first quarter, was its worst in eight years. 

Micron, which has been in protracted talks with troubled South Korean memory-chip maker Hynix Semiconductor Inc. 00660.KS to buy its memory-chipmaking assets, said that the higher sequential revenue was due to an increase of about 70 percent in the average selling prices for its memory chips. 


Executives said on a conference call to discuss the results that the hefty sequential sales growth was due to stronger-than-expected demand from sales of personal computers, which continued to be strong even after the typically busy holiday shopping in November and December. 

The company also said that it was beginning to see signs of life in the corporate market, particularly in computer servers, which typically have more memory chip-content than personal computers. 

These dynamics, coupled with a reduction in the supply of memory chips in the market place, helped power the sequential sales increase. Also during the quarter, Micron slashed its own production of DRAM and flash-memory chips, further helping to dry up supplies of the chips, analysts said. 

Micron said it's also seeing an increase in the amount of memory used in each PC, driven by Microsoft Corp.'s Windows XP operating system, which requires more memory than earlier operating systems it has produced. Computer programs that require ever increasing amounts of memory-per-PC also contributed marginally, the company said. 

Chief Executive Steve Appleton, when asked to comment on the progress of the Hynix talks, declined to give details, noting, ``It just takes quite a bit of time ... particularly when it's happening across the world.'' 

``We'll just keep moving forward with that,'' Appleton said, adding that discussions are ongoing. 

The deal, which covers 70 percent of Hynix's assets, would, if consummated, elevate Micron to first place in the computer-memory chip industry, with more than 40 percent of the world's market share. 

Hynix's creditors are hoping to get at least part of the $6 billion they are owed from the Micron deal, after having bailed out the company multiple times. 

So far, Micron and Hynix have agreed on a $4 billion price tag, a loan for Micron after the takeover and the level of Micron's investment in Hynix's remaining non-memory unit, which is reportedly about 20 percent. 

``The longer the negotiations drag out, the better terms would be for Micron,'' Scovel said. ``So, from that perspective, let them drag that out a bit more, because there are a lot of liabilities associated with Hynix.''