I may have revise my price target down to close my short:
Micron Electronics, Inc. Reports Second Quarter Results
NAMPA, Idaho--(BUSINESS WIRE)--March 16, 1998--Micron Electronics, Inc.
(Nasdaq: MUEI), a leading direct vendor of personal computers, today reported its
financial results for the second quarter of fiscal 1998 ended February 26, 1998. Net
sales for the second quarter of fiscal 1998 were $494.8 million, 3% below net sales of
$510.3 million for the second quarter of fiscal 1997. Net income for the second
quarter of fiscal 1998 was $24.8 million, or $0.26 per diluted share. Net income for
the second quarter of fiscal 1998 includes a pre-tax loss of $108.4 million which is
more than offset by a $156.2 million pre-tax gain from the sale on February 26, 1998
of 90% of the Company's wholly-owned contract manufacturing services subsidiary
("MCMS"). Net income in the second quarter of fiscal 1997 was $27.8 million, or
$0.30 per diluted share.
For the first six months of fiscal 1998, net sales were $1,053.7 million, 13% higher
than net sales for the first six months of the prior year of $931.3 million. Net income for
the first six months of fiscal 1998 was $25.8 million, or $0.27 per diluted share,
compared to net income of $52.7 million, or $0.56 per diluted share, for the
corresponding period in fiscal 1997.
In accordance with its expectation as announced in February 1998, the Company
incurred significant losses in its PC operation in the second quarter of fiscal 1998.
Selling prices for the Company's notebook products in the second quarter of fiscal
1998 decreased to a level below the Company's cost. In addition, the Company wrote
down the value of notebook PC inventories which the Company purchased as a result
of an overly aggressive forecast. In the same announcement, the Company also
disclosed that it had taken several actions to realign its operations to more efficiently
and better serve its core markets. These actions included a consolidation of domestic
and international operations and a reassignment of approximately 10% of its workforce
to the Company's parent.
During the quarter, Micron successfully recruited five new executives from leading PC
companies, including new president and chief operating officer Joel Kocher, a former
top executive with Dell Computer.
"We have taken decisive actions this quarter to better position Micron Electronics as a
formidable competitor in the PC industry," said Joel Kocher. "While our products have
long been recognized for their excellent price-performance characteristics, our
organization needs a clearer focus and an infrastructure that will allow us to serve our
core customers in a more efficient, cost-effective way. While we made progress this
quarter, the team still has a lot of work ahead as we continue to improve the execution
of our business model."
Net sales of PC systems declined in the second quarter of fiscal 1998 compared with
the second quarter of the prior fiscal year primarily as a result of an 11% decrease in
average selling prices, partially offset by a 7% increase in unit sales. MCMS' net sales
were relatively flat in the second quarter of fiscal 1998 compared with the second
quarter of fiscal 1997. Net sales of SpecTek semiconductor memory products for the
second quarter of fiscal 1998 were 31% lower than sales in the second quarter of
fiscal 1997 due primarily to the decline in selling prices.
The Company's overall gross margin was $4.5 million in the second quarter of fiscal
1998, compared with $91.6 million in the second quarter of fiscal 1997. This decline
reflects a negative gross margin from the Company's PC operations and lower gross
margins from both the MCMS and SpecTek operations.
Selling, general and administrative expenses for the second quarter of fiscal 1998 were
$111.1 million compared with $47.5 million in the second quarter of fiscal 1997. This
increase includes higher personnel, advertising and other costs associated with the
Company's PC operations. In addition, the operating loss in the second quarter of
fiscal 1998 includes a charge of $13.0 million for employee severance costs and other
costs to consolidate the Company's domestic and international PC operations. |
