Micron Loses on Falling Memory Prices

December 22, 2011, 2:41 AM EST By Ian King

(Updates with CEO’s comment in sixth paragraph.)

Dec. 21 (Bloomberg) -- Micron Technology Inc., the largest U.S. maker of computer-memory chips, reported its second consecutive quarterly loss as prices declined amid lackluster demand for personal computers.

The net loss was $187 million, or 19 cents a share, compared with net income of $155 million, or 15 cents, a year earlier, the Boise, Idaho-based company said in a statement today. Revenue in the first quarter ended Dec. 1 fell 7.2 percent to $2.09 billion. Analysts on average estimated a loss of 8 cents on sales of $2.12 billion, according to data compiled by Bloomberg.

The average price of Micron’s dynamic random access memory, or DRAM, which provides the main memory in PCs, fell 12 percent in the quarter and has slid another 20 percent so far in the current period, the company said. Floods in Thailand have left PC makers short of hard-disk drives, leading them to trim purchases of other components. That has resulted in a 10 percent to 15 percent drop in DRAM orders, Micron said.

“Business is not going gangbusters,” said Daniel Berenbaum, an analyst at MKM Partners LLC in New York, who recommends buying Micron shares. Berenbaum anticipates that the slowdown will force rival chipmakers to exit the industry or join forces. “Micron will be a survivor in the latest round of consolidation,” he said.

Micron shares were little changed in extended trading. Before the report, they fell 4.3 percent to $5.54 at the close in New York. The stock has dropped 31 percent this year.

‘Catalyst and Consolidator’

Micron, which has previously acquired the operations of other companies exiting the memory business, will consider further deals, Chief Executive Officer Steve Appleton said on a conference call with analysts.

“If there’s something there that makes sense, then we’re going to take a look,” he said. “I think we really have been the only catalyst and consolidator in the main DRAM field that’s been successful.”

While Micron’s DRAM selling price fell from the previous period, the company said it shipped 14 percent more chips. Inventory was little changed from the fiscal fourth quarter at $2.1 billion, and cash and short-term investment fell 11 percent to $1.92 billion after Micron spent $750 million on new plants and equipment.

Micron’s PC-maker customers will be able to ship 20 million more machines in the calendar first quarter compared with the fourth after an increase in hard-disk supply, Micron estimated.

Alone in U.S.

The company is the only remaining U.S.-based maker of DRAM after Asian manufacturers forced out the pioneers of the industry, including Intel Corp. and Texas Instruments Inc. Producers’ inability to match supply to demand in DRAM has hurt earnings as prices for the chips, which are traded on commodity exchanges in Asia, often fell below the cost of production.

Micron has reported an annual profit in only four of the past 10 calendar years. The company goes head-to-head with South Korea’s Samsung Electronics Co., the world’s second-largest chipmaker behind Intel.

Micron has lessened its dependence on DRAM by following Samsung and Toshiba Corp. into the market for Nand flash memory, chips that provide the storage in portable electronics such as Apple Inc.’s iPhone and iPad.

--Editors: Jillian Ward, Niamh Ring

To contact the reporter on this story: Ian King in San Francisco at ianking@bloomberg.net.

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net.

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