Micron, Hurt by Falling Prices, Reports Big Loss

Updated from 5:43 p.m. EDT

Hurting from industry overcapacity and weak memory prices, chipmaker Micron(MU - Cramer's Take - Stockpickr) posted a May-quarter loss of $215 million or 36 cents a share, far exceeding last year's $24 million loss. Meanwhile, while noting that DRAM prices have firmed in the past couple weeks, the company acknowledged it saw little evidence that companies will start shelling out for PCs in a big way this year.

Sales of $733 million were down from $771 million in the same quarter last year, and below the $785 million posted in the preceding February quarter of 2003.

The revenue number is about on target with Wall Street analysts' expectations for $731 million, while the per-share loss is significantly better than the consensus estimate for a 52 cent loss.

The company said an increase in megabits of memory sold over the prior quarter was more than offset by a 15% drop in average selling prices.

Micron is getting more product out the door, however: In the first nine months of fiscal 2003, sales were about 20% higher than in the first nine months of 2002.

On a sequential basis, Micron cranked out about 20% more megabits of memory as it migrated to a more sophisticated process technology while improving its manufacturing yields. The company said it sold slightly more than it produced in the quarter, thus reducing inventory levels. Still, Micron took a $15 million charge to write down inventories.

Micron never gives earnings or revenue guidance because of the volatile nature of DRAM prices, but today it predicted production will rise in the single digits from the prior quarter.

Meanwhile, the company issued somewhat conflicting commentary on trends in PCs, the core market for its memory products.

Mike Sadler, vice president of sales and marketing, said that for the past several weeks DRAM prices have stabilized and have been showing an upward trend. "We're starting to see signs of life in PC demand and encouraging DRAM price trends, [though] at this point it's best termed as a seasonal uptick. There's reason for near-term optimism," he said.