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Micron blows away 3Q estimates

Micron Technology lived up to the hype it's received in the past week, shattering analysts' estimates by 13 cents a share in its third quarter.

In the quarter, Micron (NYSE: MU) posted a profit of $275 million, or 47 cents a share, on sales of $1.8 billion.

Analysts surveyed by First Call Corp. predicted it would earn 34 cents a share in the quarter.

Its shares closed off 5 9/16 to 85 3/16 ahead of the earnings report.

The $1.8 billion in sales marks a stunning 108 percent improvement from the year-ago quarter when it lost $27.7 million, or 5 cents a share, on sales of $864 million.

In the quarter, chip sales surged to $1.5 billion, up 30 percent from the second quarter as PC manufacturers snapped up higher speed chips at a frantic pace.

However, average selling prices were down 20 percent from last quarter.

Excluding a one-time $49 million gain related to the adjustment of costs of products purchased under a joint venture supply arrangement, Micron posted gross profit margins of 40 percent in the quarter compared to 41 percent in the second quarter.

Unit shipments of its PC system chipsets jumped 19 percent sequentially, mainly as a result of 21 percent jump in desktop sales. Gross margins for the PC systems units remained flat with the prior quarter at 13 percent.

Last week Lehman Brothers analyst Dan Niles said Micron would benefit from surging PC demand and improving prices and margins on high-speed microprocessors.

“People are buying more powerful machines,” Niles said. “And corporate demand, since late February, has been picking up every week, every month-- and especially in the early part of June, it really started to pick up.”

Niles added that Micron’s stock should double from its current price in the next 12-18 months.

Merrill Lynch's Joseph Osha predicted Micron would earn 46 cents a share in the quarter while Prudential Securities' Hans Mosesmann called it a "screaming buy" and upped his 12-month price target to $126 a share.

Last quarter, Micron missed analysts' estimates mainly due to slumping DRAM prices. It still managed to earn $161 million, or 58 cents a share, on sales of $1.4 billion.

Micron shares rallied up to a 52-week high of 94 1/2 earlier this month after falling to a low of 18 11/16 last June.

Eighteen of the 21 analysts following the stock rate it either a "buy" or "strong buy."

Analysts are expecting a profit of 62 cents a share in the fourth quarter and $1.83 a share in the fiscal year.