Micron Technology Inc, the world's second-largest maker of personal-computer memory chips, said it lost money for a fifth quarter and will keep talking with Hynix Semiconductor Inc about an alliance that would make it a market leader as the industry rebounds.
Micron had a loss of US$30.4 million, or US$0.05 a share, in the three months ended Feb. 28, compared with a year-ago second quarter loss from continuing operations of US$4.1 million, or US$0.01 a share. Though revenue fell 40 percent to US$645.9 million from the year ago, Micron beat the US$423.9 million in sales from the previous period, indicating a recovery may be underway.
Earnings may improve as memory-chip sales pick up after plunging by two-thirds last year to US$11 billion, analysts said.
The World Semiconductor Trade Statistics group expects revenue from memory chips to surge 65 percent by 2004 to US$18.7 billion.
"If they can do this well in the seasonally slow quarter, we think there is significant upside to earnings and the stock price," said Eric Rothdeutsch, an analyst at Robertson Stephens who rates the shares a "buy." "Demand picks up in the second half of the year due to back-to-school and Christmas selling seasons."
Analysts surveyed by Thomson Financial/First Call expected Micron to lose US$0.04 a share on sales of US$665.8 million.
Shares of the Boise, Idaho-based company, up 11 percent this year, surged 6 percent to US$34.51 before the earnings report. They fell to US$34.20 in after-hours trading.
Buying South Korea's Hynix would catapult Micron into the world's biggest maker of memory chips, and may boost chip prices by giving the company better control over supply. Hynix is in business today only after two multibillion dollar creditor bailouts last year.
"We are still in discussions and will keep moving forward until we see some other path," Chief Executive Officer Steven Appleton said on a conference call.
Micron had 19 percent of the market last year, compared with 14.5 percent for Hynix, according to market researcher Gartner Dataquest Inc. The two lag Samsung Electronics Co, which had 27 percent and are well ahead of Germany's Infineon AG, with 9.7 percent.
Spot prices for the benchmark 128-megabit memory chip, used by investors to gauge demand, were US$3.54 in mid-January. Though that's down from US$5.52 last year, it's well above the year's low of US$0.93 in early November. The chips provide the main memory for personal computers.
Micron's average selling prices for 128-megabit chips were US$2.50 in the quarter and are now in the low US$5 range, Michael Sadler, Micron's vice president of sales, said on the conference call. Last year, when the industry was breaking even, Micron's average selling price was US$5, he said.
The increased demand has allowed Micron to lower inventory to minimum levels needed to meet customer demand. Micron said the quarter coming out of the Christmas holidays is typically weak.
Chip prices rose above the cost of production in January, helping push Micron's average selling price up 70 percent from the prior quarter. Inventory fell and demand for PCs, servers and cell phones increased, the company said.
PC sales during the post-holiday season showed "considerably greater strength than anyone foresaw," Chief Financial Officer Wilbur Stover said on the call.
Microsoft Corp's Windows XP operating system, released last year, resulted in a bigger-than-expected rebound in PC sales, while a new generation of cellular phones is sparking demand for flash memory chips, he said.
Still, any rebound may be temporary. Dell Computer Corp, the world's largest PC maker, said it has been reducing the amount of memory chips it's installing in computers because prices of the semiconductors are beginning to hurt demand.
"Demand and prices are pretty closely linked," Michael Dell, the company's chief executive officer, told reporters in Hong Kong. "Prices of the chips have gone up, and demand has started to go down."
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