Micron Electronics tops Q3 forecasts

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Micron Electronics Inc. (Nasdaq: MUEI) edged past analyst estimates in the third quarter.

In fiscal third quarter results released after market close Monday, the build-to-order maker of PCs posted net income of $7 million, or 7 cents a share. First Call's survey of 15 analysts predicted earnings of 6 cents a share for the quarter ended June 3.

Third quarter revenue of $327.7 million were down compared to $340.8 million a year earlier. Company executives have previously said they don't expect Micron to return to above market growth rates until the fourth quarter.

Micron said it was pleased with its progress in focusing on small business, commercial and government customers, with the latter two segments seeing year-over-year growth of 14 percent and 10 percent, respectively. The company picked up more than 400 new commercial accounts in the third quarter, said Joel Kocher, chairman and CEO.

But the company remains "challenged" by the consumer business, he said. "To meet these challenges we will be rolling out new products and services that we believe fit the new dynamics of the shifting consumer business and take advantage of the inherent benefits of the Internet," Kocher said.

Sales from PC systems fell 11 percent from a year earlier. PC sales also fell from the second quarter, with unit sales dropping 13 percent and prices staying flat.

Overall gross margins were 18.7 percent, up from 17 percent in the second quarter, although still lower than 19.2 percent in the third quarter of last year. The company credited improved line management and fewer product returns for the sequential improvement.

Of 19 analysts surveyed by Zack's Investment Research, 10 rate Micron Electronics the equivalent of a "hold", six maintain "moderate buy" ratings, and three recommend the stock as a "strong buy".>