Micron Electronics beats estimates but PC sales slip

Micron Electronics hurdled analysts' estimates in its second quarter Monday, earning $6 million, or 6 cents a share, on sales of $334 million.

First Call consensus expected the PC maker to pocket 4 cents a share in the quarter.

Micron Electronics (Nasdaq: MUEI) shares closed off 7/16 to 17 5/16 ahead of the earnings report.

The $334 million in sales marks an 11 percent decline from the year-ago quarter when it earned $4 million, or 4 cents a share, on sales of $374 million.

Gross profit margins for the quarter improved to 20 percent from 17 percent in the year-ago quarter but fell from the 24.6 percent it achieved in the first quarter.

In the quarter, Micron Electronics' Internet access and hosting services businesses reported sales of $7.2 million, up 73 percent from the first quarter. Its paid hosting accounts jumped 104 percent to 34,900 accounts.

"We feel very positive about the growth of our Internet services business," said CEO Joel Kocher in a prepared release. "In addition, we are considering several alternatives for unlocking the value in our Internet services subsidiary. To that end, we are in the process of engaging an investment banker to assist us in this evaluation."

It recorded $243 million in PC sales this quarter compared to $323 million in the year-ago quarter and $259 million in the first quarter.

Company officials said the decline in PC sales was a result of lower consumer PC sales and lower notebook sales in the company's commercial business caused in large part by a planned transition to a new notebook supplier

Unit shipments fell 17 percent sequentially from the first quarter primarily as a result of a 19 percent decline in desktop unit shipments caused by lower government sales.

Last quarter, Micron Electronics topped analysts' estimates, earning $14.6 million, or 15 cents a share, on sales of $353 million.

Its shares moved up to a 52-week high of 20 11/16 earlier this month after falling to a low of 9 in June.

Nine of the 14 analysts following the stock maintain a "hold" recommendation.

Analysts are looking for a profit of 29 cents a share in the fiscal year.