MU reports $301 million loss
By Mike Tarsala, CBS.MarketWatch.com
Last Update: 7:57 PM ET June 21, 2001
BOISE, Idaho (CBS.MW) - Leading computer-memory chipmaker Micron Technology reported a wider-than-expected fiscal third-quarter loss Thursday due to an inventory write-down and product price-erosion that lopped sales by 55 percent.
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The company reported a loss of $301 million, or 50 cents a share, compared with a profit of 47 cents, or $275 million in the year-ago quarter. The loss resulted from a pre-tax inventory write-down of approximately $260 million. The company reported a tax benefit of roughly $161 million from the write-off. Analysts expected a loss of 15 cents, according to First Call/Thomson Financial.
Revenue dropped to $818 million compared with $1.8 billion in the year-ago period. Analysts had expected revenue of $939.2 million, according to First Call. The company announced a 35 percent decline in its average selling price per megabit of memory, partially offset by an approximate 20 percent increase in megabit shipments.
"It's a tough business environment, but that's pretty well understood by investors," said Jonathan Joseph, analyst with Salomon Smith Barney. "Nobody was expecting the First Call number anyway."
Company executives said Micron accounted for its write-off based on quantities of semiconductors on hand and finished goods in stock The company valued the inventory based on when they expect to sell it, estimating lower future prices.
Also, Micron (MU: news, msgs, alerts) blamed its inventory problems partially on its purchase of Japan's KMT Semiconductor Limited. The company bought Kobe Steel's stake in KMT for $25 million in April.
While business results were lower than expected, it's of note that analysts had been slow to issue updated Micron estimates as the memory-chip business slid in May and June. Joseph last issued a Micron earnings estimate on March 30. Analysts from Wit Soundview and Gruntal & Co. last updated their estimates in March, while Sanford C. Bernstein analysts updated Micron's numbers in April. "We are continuing to work this difficult period, as end-customer demand for almost all electronic products are continuing to miss expectations," Steve Appleton, Micron's chief executive, said in a conference call.
The calendar second quarter often is the worst period for DRAM memory pricing, said Eric Ross, analyst with Thomas Weisel Partners. Usually, the memory-chip makers get somewhat higher DRAM prices in the third quarter, driven by back-to-school personal-computer purchases.
Micron executives, however, said they weren't able to tell how the memory-chip pricing would compare against year-ago results.
Sales of memory chips to the communications industry, typically between 10 to 20 percent of sales, were "negligible", said Bill Stover, Micron's chief financial officer. He said that customers are still trying to sell their product inventory, keeping memory-product purchases low.
Cash and liquid investments at the end of the quarter were more than $1.7 billion. Capital spending for Micron's fiscal-fourth quarter should be about $1.8 billion, the company announced.
Micron shares rose 87 cents, or 2.4 percent, to $37.71 in New York Stock Exchange trading ahead of the announcement.
Mike Tarsala is a San Francisco-based |
