Analysts See Micron Loss, but How Big?

There's little consensus on the chip maker's first-quarter earnings due out today.
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SAN FRANCISCO --

Micron Technology

(MU) - Get Report

posted a smaller-than-expected loss for its first quarter ended Dec. 3, reporting losses of $46 million, or 19 cents a diluted share. That compares with a

First Call

consensus estimate of a loss of 28 cents a share.

In the same quarter a year ago, Micron posted a profit of 3 cents a share, including the effect of its purchase of

Rendition

. Revenue for the quarter totaled $794 million, a 17% dropoff from the year before, but a 15% increase over fourth-quarter 1998 revenue. The company saw the average sales price for its 64-Meg SDRAM rise 8% in the first quarter compared with the previous quarter, and total memory unit production increased 10%.

The following story was posted today at 7:30 a.m. EST:

SAN FRANCISCO -- Just about the only thing analysts can agree on concerning today's earnings report from DRAM chip maker

Micron Technology

(MU) - Get Report

, coming after the close, is that the company is expected to post a loss. How big a loss is another question.

The

First Call

consensus of 17 analysts predicts a first-quarter loss of 28 cents per share, down from a profit of 4 cents a share for the same period last year. But within the consensus is a wide range, from a loss of 9 cents to a loss of 47 cents.

Those looking for the bullish view on Micron can turn to

BancBoston Robertson Stephens

analyst Dan Niles, who predicted last week that Micron could rise to $200 a share by 2001 based on a full recovery in the DRAM market and Micron holding onto its 20% share of that market.

Other analysts are leery, especially for the near term.

Needham & Co.

analyst Tad LaFountain is advising clients to flat-out sell. He believes the Street is overestimating Micron's health, and predicts the company will report a 40-cents-a-share loss. And he sees problems ahead: Demand for DRAMs will drop after the holidays, just about the time Korean memory producers are expected to re-enter the market. That could mean even lower prices for DRAMs, which are near $9 a chip, down from $43 a chip almost two years ago.

Fahnestock & Co.

analyst Dan Scovel predicts a loss of 28 cents a share for the quarter. He's also concerned about Micron's future. He expects DRAM prices will fall this quarter, slowing the company's return to profitability. That, he says, won't happen until the last quarter of this year.

Scovel will be watching for Micron's progress in its consolidation of manufacturing plants it acquired from

Texas Instruments

(TXN) - Get Report

this past summer, a consolidation that he says could cost Micron in money and focus if mismanaged. "It will take a pretty serious effort and they are in the middle of it now," Scovel says.

He is also concerned about threats from Micron's overseas competition, namely

Samsung

and

NEC

(NIPNY)

, as Asia recovers.

Compounding the dissent over earnings projections is Micron's stock, which has had a huge run-up despite three straight quarters of losses -- it has risen 96% since Oct. 8. In the past week it's vacillated wildly between 48 and 55. The stock closed down 4% yesterday at 52 1/2.

Some investors wonder how much higher Micron can go. Eric Feeder, an analyst with

Pitcairn Trust

, says his fund bought the stock a little over a year ago when it was trading at 22, and now he's looking for signs to sell. "The stock has doubled or more at this point," says Feeder, whose firm manages $2.2 billion in funds. "We are moderating our situation. It is approaching full valuation."