this will be in tomorrow's nyt..not that it matters.
>>By GRETCHEN MORGENSON
NEW YORK -- This is a tale of two earnings reports from Micron Technology
Inc., one of the world's largest makers of semiconductor chips. Micron
also happens to be a very hot stock.
The reports detail the results for the company's first quarter, which
ended Dec. 3. One is a news release issued Dec. 23; the other is the
quarterly report, or 10-Q, filed with the Securities and Exchange
Commission on Jan. 5. The two reports differ in intriguing ways.
The most glaring discrepancy is in Micron's sales of semiconductor
memory products. The news release says these totaled $428.1 million in
the quarter. The 10-Q says they totaled $409.5 million.
Which number is correct? A Micron spokeswoman, Julie Nash, said: "There
was a $19 million reclassification of numbers that went from
semiconductor memory products sales into 'other.' These were sales that
were relative to providing semiconductor revenues, but they were
actually service fees."
She said Micron, of Boise, Idaho, found the error and fixed it in the
10-Q. But it did not publish a corrected news release. "It was not
material," she said.
So it's immaterial that 4.3 percent of the company's semiconductor sales
weren't semiconductor sales at all.
None of this would matter if investors relied on 10-Qs rather than news
releases for investment information. But that is not the case.
Dan Niles, an analyst at BancBoston Robertson Stephens, has a strong
"buy" rating on the stock. The revenue number he has used in
recommending the stock is the $428.1 million from the news release.
Niles did not know the number was incorrect until a reporter told him on
Friday. He said the new, lower number would not change his positive view
of the company.
There is another interesting difference in Micron's two reports. The
10-Q states that net sales of semiconductor memory products increased 10
percent over the previous quarter, a result of an 18 percent increase in
the chips' average selling price being partly offset by a 10 percent
decline in megabits shipped. The news release, however, is mum about the
decline in shipments.
It is a big deal to show a decline in megabits shipped. With chip makers
constantly improving the memory capacity of their products -- also known
as the yield -- a drop in megabits shipped is not good news.
Why did the news release not mention this? Ms. Nash again: "The press
release is a summary document used to discuss what we believe is of
interest to shareholders and reflect company trends."
Whether this passes the smell test is something Arthur Levitt, chairman
of the SEC, may want to ponder. Levitt is justifiably concerned that
companies make accurate disclosures to investors.
Who uncovered the Micron discrepancies? Sleuths on the Internet --
specifically, three people who post comments on the "Ask Michael Burke"
and "Micron Only" threads on Silicon Investor; and Larry Woods, editor
of the Tech Review newsletter in Stoney Creek, Ontario.
Two footnotes: Since Micron's news release came out, its shares have
risen 49 percent. Not bad for a company that lost $46.2 million in the
quarter. And on Wednesday, the company filed a registration of 2.75
million shares to be sold to the public. << |
