Micron Tops Targets - TheStreet

Updated from 5:38 p.m. EST

Micron Technology

(MU) - Get Report

beat Wall Street's financial targets for its fiscal second quarter Tuesday, as it shipped more memory chips than expected.

Shares of the company recently rose 1.3% to $10.26 in after-hours trade on the news.

Micron said that its regained market share was attributable to increased shipments. Mike Sadler, vice president of worldwide sales, said that current demand from the computer market is seasonal but that price declines are enabling more memory to be included in every computer.

Micron slipped in calendar 2004 to become the third-largest Dynamic Random Access Memory manufacturer worldwide, behind

Samsung Electronics

and

Hynix Semiconductor

. Micron has been working to diversify its product portfolio away from DRAM, or strictly commodity chips, to other products.

The Boise, Idaho-based company reported net income of $118 million, or 17 cents a share, on sales of $1.3 billion. For the same quarter last year, Micron lost $28 million, or 4 cents a share, on sales of $991 million.

Analysts had predicted earnings of 15 cents a share and sales of $1.22 billion, on average, according to Thomson First Call.

Micron's sales volume rose 23% from the first quarter, based on megabits, and average selling prices declined 15%. Production rose 28% because of manufacturing efficiencies.

At the quarter's start, Micron predicted that selling prices would decline between 10% and 15% with megabit production and shipment growth of 15% to 20%, sequentially.

For the third quarter, Micron predicted midsingle-digit percent production growth. Micron also stated that it expects demand growth from its PC customers of roughly 10%, with about half of that coming from increased memory content and the other half from increased unit shipments. The company declined to offer a prediction on pricing, but contract prices have already dropped 10% this quarter.

In the second quarter, the weak selling prices hurt Micron's gross margins, however, dragging them down to 27% from 33.6% in the first quarter, against 25% in the same quarter last year. The production increase further inflated Micron's inventory, pushing it up 6.7% to $752.7 million. From the first to the fourth quarter, Micron's inventory rose 22%.

Costs were less than expected, with selling, general and administrative expenses coming in at $84.9 million, down from $86.8 million in the first quarter.

Micron executives said its diversification plans were proceeding as projected and reaping benefits. The company now derives 60% to 70% of its sales from flash memory and DRAM chips sold into the computing end market, 10% to 15% of its sales from the mobile market, 5% to 10% from networking infrastructure, 5% to 10% from consumers and another 5% to 10% from industrial and automotive customers.