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Micron Tech tops estimates

The memory chip manufacturer says its continuing operations lost $4 million, or a penny per share, for the fiscal second quarter ended March 1.

    Micron Technology topped analyst estimates in its second quarter.

    Shares of Micron traded at $45 in after-hours activity on the Island ECN, following the release of quarterly results. Micron rose $1 to $45.25 in Thursday's regular trading ahead of the news.

    Micron had delayed results for one week pending financial information from Micron Electronics, which is majority owned by Micron Technology.

    After market close Thursday, the memory chip manufacturing giant said its continuing operations lost $4 million, or a penny per share, for the fiscal second quarter ended March 1. First Call's survey of 20 analysts produced a consensus forecast calling for a loss of 3 cents per share in its second quarter.

    Micron's continuing operations exclude the results of Micron Electronics' PC business, which is being sold to a private investment firm. Micron Electronics will focus exclusively on Web hosting after merging with Interland.

    Including the PC business, which is categorized as discontinued operations, Micron Technology lost $88 million, or 15 cents per share.

    Although the company beat the published consensus forecast, the results came as little surprise to most observers. The company last week said its semiconductor operations, which generate the vast majority of Micron Technology's revenue, would be slightly profitable. However, the Web hosting business of Micron Electronics lost about $4.1 million.

    "I don't think there's a whole lot of incremental information here, other than what was said last week," said Dan Scovel, analyst with Needham & Co.

    Second-quarter revenue for Micron fell 32 percent to $1.07 billion from $1.57 billion in the first quarter. Semiconductor sales declined 33 percent sequentially. The average selling price for memory chips dropped 50 percent during the quarter, as megabit shipments rose 33 percent.

    Megabit production of dynamic RAM chips (DRAMs) is falling across the industry, said Kipp Bedard, vice president of corporate affairs. During a conference call with analysts, Micron executives reported that the company's own megabit production during the second quarter increased in the high single digits, on a percentage basis.

    Micron said its inventories peaked five weeks ago and have been falling continuously ever since.

    "Inventories are relatively low at DRAM manufacturers and in the channel," said Eric Rothdeutsch, analyst with Robertson Stephens. "The environment out there continues to be tough. PC demand is not getting any worse, but it's not very strong."

    Company executives did not predict earnings or revenue for the third quarter. Micron rarely provides Wall Street specific financial forecasts, because the DRAM pricing market is often unpredictable.

    Analyst estimates reflect that uncertainty. First Call's estimates for Micron's current quarter range from a loss of 21 cents per share to a profit of 26 cents per share. Among 11 analysts polled by Zack's Research, five predict that Micron third-quarter losses will range from a penny to 15 cents, while the remainder call for bottom-line results ranging from break-even to a profit of 31 cents per share.

    Although Micron saw DRAM prices on the spot market rise in the last couple of weeks, that's not necessarily going to continue, analysts said. DRAM prices should maintain their current level, Scovel said, because as Micron shifts more production lines to newer types of RAM, the supply of synchronous DRAM--still the most commonly used type of memory in PCs--will decrease.

    But the current quarter is also a slow period for PC sales historically, Rothdeutsch said. "DRAM prices are now stabilized at these levels, but it's not going any higher," he said. "I don't think there's any real uptick in demand in this quarter."