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Mood Dims at Micron

The company sees little hope of an upturn in flash chip prices.

Updated from 4:36 p.m. EDT

SAN FRANCISCO -- The roller-coaster memory market has left

Micron

(MU) - Get Report

with whiplash.

The chipmaker swung to a loss in its fiscal fourth quarter, as prices for memory chips tumbled 15%.

And while Micron is scrambling to cut costs, executives offered little hope of a near-term upturn in prices for its DRAM and NAND flash memory chips.

As it stands now, prices for NAND flash memory are on track to be down 25% sequentially in the current quarter, according to company executives. DRAM chips are on track to decline 10% sequentially.

"Without question, the market environment is challenging," Micron sales chief Mike Sadler said Tuesday in a post-earnings conference call. He added that the memory chip market's woes will ultimately be "self-correcting."

Shares of Micron fell 3.5%, or 41 cents, to $11.38 in extended trading Tuesday.

The Boise, Idaho, chipmaker said Tuesday that it lost $158 million, or 21 cents a share, in the three months ended Aug. 30, vs. the $64 million net income, or 8 cents a share, that it reported a year ago this time.

Revenue in the quarter was up 4.7% year over year to $1.44 billion.

Analysts polled by Thomson Financial were looking for a loss of 22 cents on sales of $1.46 billion.

Micron blamed the poor results on an oversupply of memory chips across the industry.

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What's more, Micron said the average quantity of DRAM memory in PCs experienced a "moderate flattening" in the quarter, as PC makers reacted to the slight, and ultimately short-lived, increase in memory prices this summer.

As more consumers and businesses buy PCs with the

Microsoft

(MSFT) - Get Report

Vista operating system, Micron said it expects the average amount of DRAM per PC to increase to the 2GB level, vs. current 1GB to 1.5GB levels.

Micron also became the

latest company to express an interest in using flash memory chips to go after the PC hard-drive market. Following a similar announcement by

Intel

(INTC) - Get Report

last month, Micron said Tuesday that it plans to begin selling so-called solid state drives later this year.

Micron and Intel have a joint-venture manufacturing NAND flash memory chips. While Micron would not disclose the profitability of its portion of the flash operation, it noted that the business was gross margin positive in the fourth quarter.

The company's overall gross margin was cut nearly in half to 12% during the quarter, vs. 23.6% at this time last year.

Micron wrote down $20 million worth of inventory to reflect fair market value of memory products. And the company took a $19 million charge stemming from restructuring actions in the fourth quarter that included workforce reductions.

Although Micron didn't provide earnings guidance for the current quarter, the company served up an operating expense model for its fiscal 2008 year, vowing to keep R&D and SG&A expenses below the current level.

The average analyst expectation calls for Micron to lose 4 cents on sales of $1.76 billion in the current quarter.