Micron Electronics jumps as Lehman ups estimates

Shares of Micron Electronics (Nasdaq: MUEI) surged Friday after Lehman Brothers upped its earnings estimates for the company.

Micron Electronics shares were up 2 9/16 to 12 near midday, almost hitting Lehman's new price target of $13.

Lehman Brothers analyst Dan Niles raised his earnings estimates for Micron to 33 cents a share from 28 cents for fiscal 2000, and to 70 cents a share from 63 cents for 2001.

Niles' earnings targets were well ahead of the consensus view. According to earnings tracking firm First Call Corp., Micron Electronics is expected to report 2000 earnings of 28 cents a share, and earnings of 49 cents a share for 2001.

"Despite weak U.S. retail demand for the industry, Micron has seen strong consumer PC demand due to their higher-performance consumer products," Niles wrote in a research report.

He also cited the company's push into Web hosting. "The company has devoted significant resources to this area to spur future growth, and this has limited EPS (earnings per share) upside in the current quarter," he said. "We expect that expense levels will drop significantly in the future."

Micron's Web hosting push is just part of the company's plan to differentiate itself from direct PC vendors such as Dell Computer (Nasdaq: DELL) and Gateway (NYSE: GTW), and competitors such as Compaq (NYSE: CPQ). The company beat estimates in its fiscal second quarter, but PC sales slipped.

Micron reports its fiscal third quarter financials Tuesday and Wall Street is expecting earnings of 3 cents a share. The company is also hosting an analyst briefing in New York City. CEO Joel Kocher is expected to talk about Micron's new initiatives and detail the company's application service provider and retail direct selling strategies.

Analysts are split on Micron stock with six rating it a "hold" and seven calling it at least a "buy."

Reuters contributed to this report.