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Micron Technology turns slight profit but delays results

    Micron Technology announced after the bell Wednesday that it topped analysts' estimates in its second quarter. However, investors will have to wait until next week to learn the particulars.

    The memory-chip manufacturer was expected to report its second-quarter results after the bell Wednesday, but instead told investors that it will report the numbers next week because it still needs to collect financial information from Micron Electronics (Nasdaq: MUEI), the PC maker that is majority owned by Micron Technology.

    Micron Technology (NYSE: MU) shares added $1.41 to $42.01 ahead of the earnings report before moving up to $43.80 in after-hours trading.

    In past quarters, Micron Electronics has reported its quarterly results before Micron Technology.

    Micron Technology executives did say that the company posted a slight profit in the quarter on sales of $1.05 billion, down from a profit of $352 million, or 58 cents a share, on sales of $1.8 billion in its first quarter.

    First Call consensus pegged Micron Technology for a loss of a penny a share in the quarter.

    During a conference call with analysts, Micron executives said average selling prices of its dynamic RAM (DRAM) chips fell 50 percent from the first quarter while gross profit margins tumbled to 19 percent from 49 percent in the prior quarter.

    Dan Scovel, an analyst at Needham & Co., said the delayed earnings report doesn't bode well for Micron Electronics investors.

    "I'm a little befuddled to tell you the truth," he said ahead of the conference call. "I'm disappointed to see a delay here, but it makes sense if they still need to get Micron Electronics' numbers. But it makes me wonder what's up with Micron Electronics. It's difficult to get too excited about it or any other PC companies at this point."

    Scovel said Micron Technology's slight profit in the quarter was in line with his estimates and the $1.05 billion in sales was a tad higher than he expected.

    Other analysts had varying estimates for the second quarter.

    Hans Mosesmann, an analyst at Prudential Securities, was expecting a loss of 10 cents a share on sales of $1.05 billion. Thomas Weisel Partner's analyst Eric Ross was looking for a profit of 10 cents a share on sales of $1.49 billion while Dresdner Kleinwort Wasserstein's Nimal Vallipuram pegged it for a profit of 10 cents a share on sales of $1.2 billion.

    "Inventories at DRAM companies is very high right now so it's still too early to call for recovery," Vallipuram said. "We've seen inventories in the spot market come down a lot lately, but there's still a lot of inventory out there."

    According to Prudential's Mosesmann, 128-megabit DRAM selling at roughly $7.50 each in early December were selling for $4.25 each in early March.

    Analysts said that once DRAM prices stabilize, Micron Technology is well positioned for a recovery in both total sales and profit margins.

    "We continue to believe DRAM market prices are at or near a bottom and will likely recover within the next few weeks as industry capacity is converted away from mainstream synchronous DRAMs to newer DDR (double data rate DRAM) and RDRAM (Rambus direct RAM) interface architectures," Scovel said in a research report.

    Micron Technology executives said the company will release its consolidated earnings report early next week, while Micron Electronics' results will hit the wire Friday.

    Analysts have offered conflicting outlooks for Micron Technology shares in recent weeks.

    Last week, Merrill Lynch analyst Joseph Osha and Morgan Stanley Dean Witter analyst John Cross both recommended investors buy the stock despite DRAM prices and inventory issues.

    "We believe that the worst of the DRAM news had already been factored into Micron's price several months ago," Osha said in a research note. "The grim earnings outlook for the February quarter notwithstanding, buying the stock now in anticipation of further price stabilization makes sense to us."

    Robertson Stephens analyst Eric Rothdeutsch and Bear Stearns analyst Charles Boucher both downgraded the stock primarily because of weak pricing in DRAM market.

    First Call consensus expects Micron Electronics to earn 2 cents a share in its second quarter, roughly flat from its first quarter when it pocketed $2 million, or 2 cents a share, on sales of $404 million.

    After peaking at $20.69 a share last March, Micron Electronics shares have slumped to below $4 a share this week.