Micron Technology Posts Unexpected Third-Quarter Loss
By REUTERS
Filed at 7:54 p.m. ET
SAN FRANCISCO (Reuters) - Micron Technology Inc. (MU.N), the No. 2 maker of computer-memory chips, on Tuesday reported an unexpected fiscal third-quarter loss, continuing a string of money-losing quarters, citing a sudden decline in memory-chip prices.
After the report, Micron shares fell 8 percent, or $1.58, to $18.17 on the Island system from a close on the New York Stock Exchange of 19.75. In regular trade, before the company announced its earnings, the stock rose 3 cents.
For the quarter ended May 30, the Boise, Idaho-based company said it had a net loss of $24 million, or 4 cents a share, compared with a second-quarter loss of $30 million, or 5 cents a share. In the year-ago quarter, Micron had a loss from continuing operations of $301 million, or 50 cents a share.
Revenue rose to $771.2 million from $645.9 million in the second quarter, but fell from the year-ago third-quarter revenue of $818.3 million. Megabits sold in the quarter by the company declined 17 percent from the second quarter, a larger decline than many analysts had forecast.
``I was surprised by the lower shipments as the quarter dragged on,'' said Dan Scovel, an analyst at Needham & Co. ''That's where most of it (the shortfall) is right there, there's no question about it.''
Analysts had forecast Micron Technology, which has become swept up in a U.S. Department of Justice probe investigating possible anti-competitive practices in the industry, to earn 6 cents a share, within a range of nil to 21 cents a share, according to Thomson First Call. Revenue was pegged at $908 million.
One type of memory chip that sold for $10 in early March had fallen 50 percent to $5 in early June, said Chief Financial Officer Bill Stover on a conference call.
Executives also said that they were ``somewhat surprised'' by the weakening prices, which were exacerbated by seasonal weakness in the personal computer industry and by a relative leveling of memory content per PC in the quarter.
MEMORY CHIP PRICES PEAKED IN MARCH
Micron said in a statement that while average selling prices rose 44 percent in the third quarter from the second quarter, prices started to tumble in early April.
Prices in the volatile memory chip industry had peaked in March, prompting PC makers to pull back on the amount of memory they installed in each PC, said Mike Sadler, head of sales for Micron on the conference call.
``There is no question that our customers became concerned about rising memory prices in the spring,'' Sadler said.
However, that trend is reversing itself now somewhat, at least in the short term. ``We are observing a re-acceleration of memory content growth ... due to falling prices.''
Some analysts such as Merrill Lynch's chip analyst Joe Osha had forecast Micron to earn 21 cents in the third quarter, while his worst-case scenario was for net income of 8 cents a share, he wrote in a note earlier on Tuesday to clients.
Based on the recent declines in selling prices, Micron recorded a write-down of $26 million in the third quarter to record inventories of chip products at their estimated market values.
Excluding that write-down and the effect of previous write-down on products sold in the third quarter, the company's gross margin ``for the third quarter of fiscal 2002 would have been lower by an estimated $55 million.''
Last week the U.S. Department of Justice said it was investigating the $11.3 billion global memory chip industry, appearing to focus on whether chipmakers may have colluded either to prop up prices, or to move them lower in a bid to push out smaller, weaker players.
Micron, Samsung Electronics Co., Infineon Technologies and others confirmed they were contacted by U.S. antitrust regulators for information related to the probe.
Chief Executive Steve Appleton also said on the call, in response to a question, that Micron was not in contact with troubled South Korean memory-chip maker Hynix Semiconductor Inc. (00660.KZ) or in discussions with the company to resume talks that had broken down earlier this year to buy the chip-making assets of Hynix for $3.4 billion.
``We don't have any ongoing discussions with them now,'' Appleton said. ``They have their own set of challenges to go through. We are somewhat just in a neutral position now with no engagement''.
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