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Micron looking up but questions remain

The computer maker is expected to beat earnings estimates, but analysts wonder if it can break into the ranks of the biggest brands.

3 min read
Computer maker Micron Electronics is expected to show continued profit growth when it reports earnings for its first fiscal quarter today, although analysts say the book is still out on whether the company can break into the ranks of the major brands.

Analysts expect the company to post earnings later today of 11 cents per share for the company's first fiscal quarter, which closed at the end of November, according to First Call. Last year, the company reported earnings of 1 cent per share on sales of $559 million.

Last quarter, analysts got a positive surprise when the company beat estimates with earnings of $16.2 million, or 17 cents per share.

Investors appear to be expecting another uptick this quarter, with Micron's stock at 21.875 in afternoon trading, an increase of 5.11 percent from Friday's close.

Enthusiasm is heavily tempered, however. Although the company has been making progress on the turnaround strategy imposed when chief executive Joel Kocher took over the company last year, the PC market itself remains intensely competitive. Consumers and businesses appear to be flocking to the four to five largest brand names in the market. Micron is not one of them.

Questions remain about how Micron intends to close the gap with Gateway and Dell Computer, which are currently the largest direct vendors.

"They have to get people to care about Micron and spend money" on their machines, said Lou Mazzucchelli, an analyst at Gerard Klauer Mattison, who has a "hold" rating on the stock.

For the most part, Micron's answer is in the marketing. The company last year launched a dramatic personality change with its "New Rules New Tools" campaign to woo "power users" from small and medium-sized businesses. Many of Micron's executives, including Kocher, hail from the defunct Power Computing. And, like that company's past campaigns, Micron's new pitch is heavy on attitude and irony.

As part of its marketing blitz, Micron unveiled a new $1 million commercial campaign that will debut on the Internet first. The commercials feature Jeri Ryan, an actor from the cast of the TV show Star Trek Voyager. It is one of the most popular TV shows among PC buyers, according to research conducted by Micron.

The ad will debut on television during the "Micron PC Bowl" college football game on December 29 in Miami. Additionally, Micron executives have said they are speaking with the NCAA to see if some of the rules of college football can be changed as way to entertain viewers, Kocher told CNET News.com earlier. One suggestion: team captains will play "rock, paper, scissors" rather than flip a coin to determine which team kicks off.

In December, the company unveiled "Micron University," Web-based computer training on a variety of topics. The service is free for a year, then the company charges $59 per customer thereafter. Micron, like Gateway, also offers ISP services. The company isn't angling to make money on the services as much as use the programs to create customer loyalty to its products, executives said in previous interviews with CNET News.com.

Bloomberg contributed to this report.