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Micron Swings to a Loss

The company falls short of analysts' earnings estimates.

Updated from 4:31 p.m. EDT


(MU) - Get Micron Technology, Inc. Report

swung to a loss in its fiscal second quarter, as the company endured plummeting prices of memory chips and weak demand from cell phone makers.

The Boise, Idaho chipmaker said Wednesday it lost $52 million, or 7 cents a share, for the three months ended March 1. A year earlier, the company earned $115 million, or 15 cents a share.

The loss was greater than analyst expectations, which had called for Micron to lose one penny a share in the quarter.

Sales totaled $1.43 billion, up 16.5% from the same time a year ago. Analysts were expecting sales of $1.46 billion a year earlier.

"Notwithstanding current, challenging market conditions, the size of the markets for our semiconductor products continues to grow at an impressive rate," said CEO Steve Appleton in a statement.

Shares of Micron were up 45 cents, or 3.7%, to $12.52 in after-hours trading; the stock fell 1.3% in very heavy trading during the regular session.

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The company blamed crashing prices of NAND flash memory chips for much of the red ink. According to Micron, prices for flash memory chips fell 30% in the second quarter.

While prices of DRAM memory chips also fell during the second quarter, Micron said it lowered its DRAM production costs by a similar amount, resulting in "relatively stable gross margins" for DRAM products.

Overall gross margins dipped to 25% vs. 31% in the fiscal first quarter.

Megabit sales of all memory products increased roughly 35% sequentially.

Micron's business providing image sensors for camera phones -- the company's most profitable product line -- is also under pressure.

Micron said image sensor sales declined on both a unit and revenue basis in the second quarter due to a "reduced appetite" for the chips from cell phone handset makers, increased competition and the popularity of less expensive low-resolution camera phones.

Micron executives said they probably lost market share in the second quarter, and noted that the image sensor business would have trouble replicating the growth rates it has notched up in past years.

Image sensors accounted for a large chunk of Micron's inventory, which increased 16% sequentially to roughly $1.3 billion. And executives acknowledged that it might take the rest of the fiscal year before inventory levels for image sensors come back down to desirable levels.

While the company did not provide financial guidance for the current quarter -- in keeping with its standard practice -- Micron executives noted that prices for NAND flash and DRAM memory have begun to stabilize in recent days.

Analysts polled by Thomson Financial expect Micron to lose 4 cents a share in the current quarter on sales of $1.43 billion.