Micron chief predicts 'pretty strong' 2004
Last modified: April 9, 2004, 5:55 AM PDT
By Reuters
Micron Technology, the world's second-largest maker of computer memory chips, said Friday that it was upbeat about its 2004 prospects, thanks to stronger memory chip prices and a broad recovery in the industry.
Boise, Idaho-based Micron, which has been largely in the red for the last three years and which supplies about 20 percent of the world's dynamic random access memory (DRAM) chips, ranks behind South Korea's Samsung Electronics, which has 31 percent of the market.
"We think that the outlook for 2004 is pretty strong," Micron Chief Executive Steve Appleton told Reuters in an interview.
"We believe (that) from this point, moving forward, the company will be profitable under current market conditions. Of course, we can't predict what those will be late in the year or 2005, but we believe it will remain fairly stable and strong for us, given the dynamics of what is happening--the shortage of silicon (chips) around the world."
Having slashed spending, the global semiconductor industry is bouncing back from its worst downturn. Computer memory chip prices, which have been firming since late February, hit levels this week that were nearly double last year's prices.
Mainstream 256-megabit double data-rate (DDR) memory chips averaged about $6.42 on Friday, according to DRAMexchange, an online clearing house. This compares with about $3.33 a year ago, analysts said.
Surging demand from PC makers and a shift in production capacity to other types of semiconductors, such as flash memory chips that are used in photo-snapping mobile phones and digital cameras, are behind the high prices, analysts said.
"The computing market is also strong," said Appleton, a 22-year veteran of the semiconductor industry. "We're seeing the corporate world coming back to buy, as their last upgrade cycle was in 1999 for Y2K."
Appleton, 44, has said he would forgo his $800,000 salary until Micron returns to profit. His pay, which stopped in October 2001, resumed last month.
Robust outlook
The stronger chip market prompted Oppenheimer analyst Quinn Bolton to raise his revenue and earnings estimates for Micron.
"We believe Micron will benefit from a tight DRAM market--the result of strong demand and constrained supply--that will lead to a robust pricing environment over the next few quarters," he said in a client note. "This should drive revenue higher."
Micron posted a narrower-than-expected net loss of $28 million for the company's second quarter, which ended March 4. That's compared with a net loss of $619 million a year earlier. Sales rose 26 percent to $991 million. The company had returned to the black in the first quarter, which ended Dec. 4, with net income of $1 million.
JP Morgan analyst Christopher Danely said that Micron needed to lower unit costs and diversify its revenue base, of which 80 percent to 85 percent comes from the PC market.
Appleton said Micron was reducing its unit cost for production of DRAM chips by 25 percent to 30 percent annually. The company exceeded that target in the last fiscal year, which ended in August 2003, he said.
The company also expects non-DRAM products, such as complementary metal oxide semiconductors (CMOS), to account for 20 percent to 25 percent of production capacity by the end of the year, up from its current level, which is between 10 percent to 15 percent.
CMOS image sensors are widely used in digital cameras and camera-equipped mobile phones.
"We expect that, by 2007, non-computing revenues will account for 30 to 40 percent of total revenues,'' Appleton said.
Micron plans capital spending of about $1.5 billion in fiscal 2004 and is targeting $1.1 billion to $1.5 billion in the next fiscal year. This compares with Samsung's $5.98 billion capital expenditure budget and Intel's target of $3.5 billion to $3.9 billion.
Micron shares closed at $17.35 on Thursday. The stock has gained nearly 30 percent since the start of the year, in accordance with the strengthening of DRAM prices. |
