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Updated from 5:51 p.m. EDT

Memory vendor

Micron

(MU) - Get Micron Technology, Inc. Report

remained in the red in its fiscal fourth quarter, but has narrowed its losses amid improving prices in its core market, dynamic random access memory chips. As a bonus, it announced a hefty investment from

Intel

(INTC) - Get Intel Corporation Report

, which has signed on as a customer for an upcoming flavor of memory.

Shares rose 48 cents, or 3.4%, to $14.58 in after-hours trading.

Micron posted sales of $888.5 million, up 19% from last year's levels and above Wall Street expectations for $867.5 million. Selling prices rose 15% from the prior quarter, the company said.

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The company posted a net loss of $123.2 million, reducing its red ink from last year's loss of $586.5 million. On a per-share basis, that amounts to a loss of 20 cents in the most recent quarter, compared to consensus estimates for a 25-cent EPS loss.

Also today, Intel said it would be making a $450 million equity investment in Micron. The deal calls for Intel to receive rights representing about 5.3% of Micron's outstanding common stock, and grants Intel assurances for the availability of DDR2 memory.

Friedman, Billings, Ramsey analyst Eric Rothdeutsch calls the investment a "slight positive" for Micron, noting that Intel recently also made an investment in

Elpida

. "Intel wants to make sure there's an ample supply of DDR2

an advanced memory chip when they ramp up the Grantsdale chipset next year," he explains. "They want to add fuel to the fire to make sure DRAM pricing is nice and low. The faster DDR pricing comes down, the more people will use Grantsdale."

The cash infusion will help Micron ramp up its 300 mm fabs that much faster, he adds. "Micron really can't turn down that size of investment. It's very hard to say no given the balance sheet they have." Indeed, though Micron claims $921 million in cash and short-term investments, it revealed today that it had lost $1.27 billion on sales of $3.09 billion in the just-ended fiscal year 2003.

Despite the cash infusion, Rothdeutsch said he currently rates the stock only a market perform and remains cautious. His firm hasn't done any banking for Micron. "We see the amount of memory per box is plateauing, and that's a negative for growth. Units are doing better, but the biggest driver of demand for DRAM is the amount of memory per PC, and that's plateauing at 300 to 350 megabytes per box. You can run Windows 2000 fine with 256 or 300 megabytes of DRAM."

Today the company affirmed those trends, with vice president of sales Mike Sadler acknowledging, "With what I'd consider a price war in consumer PC, there's tremendous focus on costs right now. Our customers are kind of taking a breather on memory content until they get some sense where prices are headed."

Still, others on the Street are more enthusiastic about Micron. Auguste Richard, an analyst at First Albany, raised his rating on Micron to a strong buy two weeks ago. He calls Intel's investment a "pretty significant positive," noting it will ease Micron's transition to DDR2. First Albany has no banking relationship with Micron.

In other news from today's report, Micron said its megabit production rose 8% from the prior quarter, mostly because the company has shifted to more efficient manufacturing practices. In the first and second quarter of 2003, production rose 20% and 10%, respectively.