Micron Electronics, Inc. Reports First Fiscal Quarter Results
NAMPA, Idaho--(BUSINESS WIRE)--Dec. 15, 1997--Micron Electronics, Inc. (Nasdaq: MUEI)
today reports results of its consolidated operations for its first quarter of fiscal 1998 ended November
27, 1997. The Company's net income for the first quarter of fiscal 1998 was $1.1 million, or $0.01 per
share, on net sales of $558.9 million, compared to net income of $24.8 million, or $0.27 per share, on
net sales of $421.0 million for the first quarter of fiscal 1997.
The Company's overall gross margin of $77.2 million in the first quarter of fiscal 1998 was lower in
absolute dollars and significantly lower as a percentage of net sales compared to the corresponding
period in 1997 primarily as a result of the significant decline in the gross margin percentage realized
from the Company's PC operation, partially offset by higher gross margins from the Company's
contract manufacturing and SpecTek semiconductor memory products operations. The lower PC gross
margin in the first quarter of fiscal 1998 was largely attributable to the disposition of PC component
inventories and intense pressure on prices for the Company's PC systems.
Selling, general and administrative expenses were higher in the first quarter of fiscal 1998 compared to
the corresponding period in 1997 primarily due to higher levels of personnel, advertising and other
costs associated with the Company's PC operation. Results of operations in fiscal 1998 were adversely
affected by selling, general and administrative expenses associated with the Company's Japan PC call
center opened in the second quarter of fiscal 1997 and the Company's NetFRAME enterprise server
operation acquired in the fourth quarter of fiscal 1997.
Net sales of PC systems increased in the first quarter of fiscal 1998 compared to the corresponding
period in 1997 primarily as a result of a 36% increase in unit sales and an increase in non-system
revenue, partially offset by a decline in the average selling prices for the Company's PC systems. The
growth in unit sales of the Company's PC systems was largely attributable to a higher level of sales to
corporate customers and governmental entities. Average selling prices for the Company's desktop and
notebook PC systems declined 10% and 30%, respectively, in the first quarter of fiscal 1998 compared
to the first quarter of fiscal 1997 primarily as a result of intense price competition in the PC industry
and the introduction of several value-priced desktop and notebook products.
"Sales in the first quarter of fiscal 1998 did not meet our expectations," said Joseph M. Daltoso,
Chairman and CEO, "which resulted in higher levels of PC inventories during the quarter. By the end
of the quarter, we were able to return desktop raw materials to a level meeting our target, but we're
still long on notebook materials, which we plan to continue working through during the second fiscal
quarter. On the positive side, unit sales of notebook products were 45% higher in the first quarter of
fiscal 1998 compared to the fourth quarter of fiscal 1997 as a result of continued market acceptance of
the Micron brand."
Revenues from the Company's contract manufacturing operation were 36% higher in the first quarter
of fiscal 1998 compared to the first quarter of fiscal 1997 primarily attributable to a significant increase
in production volume for the Company's top five contract manufacturing customers. Net sales of the
Company's SpecTek semiconductor memory products were 27% higher in the first quarter of fiscal
1998 compared to the first quarter of fiscal 1997 primarily due to a 90% increase in megabits of
memory shipped, partially offset by a 33% decline in average selling prices. Net sales of semiconductor
memory products were 23% lower in the first quarter of fiscal 1998 compared to the fourth quarter of
fiscal 1997 primarily due to a 26% decline in average selling prices partially offset by a 5% increase in
megabits of memory shipped over the same period. The sequential decline in industry-wide pricing for
semiconductor memory products led to a lower gross margin percentage realized on the Company's
SpecTek semiconductor memory product sales in the first quarter of fiscal 1998 compared to the
fourth quarter of fiscal 1997.
Micron Electronics, Inc., and its subsidiaries manufacture electronic products and provide services for
a wide range of computing and digital applications. The Company develops, markets, manufactures
and supports PC systems for consumer, business, government and educational use. In addition, the
Company is a supplier of multi-processor network servers for enterprise, remote office and distributing
computing environments under the NetFRAME brand name. The Company's contract manufacturing
operation, Micron Custom Manufacturing Services, Inc., specializes in the assembly of custom
complex printed circuit boards, memory modules and system level products for original equipment
manufacturers. The Company's SpecTek semiconductor memory products operation processes and
markets various grades of memory products under the SpecTek brand name. Micron Electronics, Inc.
common stock trades on the Nasdaq Stock Market under the symbol MUEI. The Company is
majority owned by Micron Technology, Inc. Product information is available by calling
1-800-515-9197 or via the Micron Electronics home page on the Internet at www.micronpc.com .
MICRON ELECTRONICS, INC. FINANCIAL SUMMARY
(Tabular amounts in thousands, except per share amounts)
Quarter Ended
November 27, November 28,
1997 1996
----------------- ---------------
Net sales:
PC systems $ 459,040 $ 345,907
Contract manufacturing 70,201 51,757
SpecTek memory products 29,649 23,354
Total 558,890 421,018
Gross margin:
PC systems 58,878 68,030
Contract manufacturing 10,091 6,580
SpecTek memory products 8,245 5,840
Total 77,214 80,450
Gross margin percent:
PC systems 12.8% 19.7%
Contract manufacturing 14.4% 12.7%
SpecTek memory products 27.8% 25.0%
Total 13.8% 19.1%
Selling, general and administrative 74,065 39,826
Research and development 3,582 883
Interest income, net 2,194 1,270
Income tax provision 696 16,199
Net income 1,065 24,812
Earnings per share 0.01 0.27
Number of shares used in per
share calculation 95,971 93,002
As of November 27, As of August 28,
1997 1997
---------------- ---------------
Cash and cash equivalents $ 157,134 $ 183,935
Receivables 257,173 223,476
Inventories 130,654 115,501
Total current assets 586,246 563,148
Property, plant and equipment, net 201,051 191,536
Total assets 791,108 758,346
Accounts payable and accrued expenses 338,284 304,608
Current debt 18,815 18,622
Total current liabilities 389,610 359,264
Long-term debt 18,949 20,019
Shareholders' equity 365,408 365,571
A. Periodically, the Company is made aware that technology used by
the Company may infringe on intellectual property rights held by
others. The Company has accrued a liability and charged operations
for the estimated costs of settlement or adjudication of asserted and
unasserted claims for alleged infringement prior to the balance sheet
date. Resolution of these claims could have a material adverse
effect on future results of operations and could require changes in
the Company's products or processes.
During the third quarter of fiscal 1997, the Company began to collect and remit applicable sales or use
taxes in nearly all states. In association therewith, the Company is party to agreements with nearly all
states which generally limit the liability of the Company, if any, for non-remittance of sales and use
taxes prior to such agreements' effective dates. Management believes the resolution of any matters
relating to the non-remittance of sales and use taxes will not materially affect the Company's business
and results of operations. |
