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To: Jimbo Cobb who wrote (54419)	3/22/1999 5:08:00 PM
From: Mao II	Read Replies (1) \| Respond to of 97611

Jimbo: Why? M2

To: Jimbo Cobb who wrote (54419)	3/22/1999 5:13:00 PM
From: Captain Jack	Respond to of 97611

Jimbo--- What do you think this will do to CPQs price tomorrow? Looks like 28 is coming sooner than you think! NAMPA, Idaho--(BUSINESS WIRE)--March 22, 1999--Micron Electronics, Inc. (www.micronpc.com) (Nasdaq:MUEI), a leading direct vendor of personal computers, today reported its financial results for the second quarter of fiscal 1999 ended March 4, 1999. Revenues for the second fiscal quarter were $373.6 million compared to $403.5 million in the first fiscal quarter of 1999. Excluding estimated costs for the consolidation and closure of the Company's Japanese operations, net income for the second fiscal quarter was $6.5 million, or $0.07 per diluted share. These results compare to net income of $11.7 million, or $0.12 per diluted share, in the first quarter of fiscal 1999. Reported results for the second fiscal quarter of 1999, including the costs of consolidating and closing the Japanese operation, showed net income of $4.2 million, or $0.04 per diluted share. During the second quarter of 1998, the Company reported net income of $24.8 million, or $0.26 per diluted share, on net sales of $494.8 million. Net income for the second quarter of fiscal 1998 includes a pre-tax loss of $108.4 million which was 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"). In line with its earnings advisory statement issued March 1, 1999, the Company experienced a consolidated sequential revenue decline of 7% over the first quarter of fiscal 1999. As stated in that advisory, results of the second fiscal quarter of 1999 were unfavorably impacted by factors including: an anticipated seasonal slowdown in the Company's strategic government segment; continued industry pricing pressure in its consumer business; and purchase deferrals from the early promotion and late-quarter timing of Intel's Pentium III processor introduction. The second quarter 1999 sequential revenue decline of 7% compares to a second quarter 1998 sequential revenue decline of 13% excluding net sales of MCMS. As the Company continues to execute its strategic business transformation plan, other business operations showed continued progress during the quarter, including day's sales of PC inventory at seven days and maintaining an industry-leading position for its cash conversion cycle of negative 21 days. In addition, and in accordance with its plan, the Company experienced solid growth in its mid-market commercial PC business with second fiscal quarter sales increasing by more than 20% when compared to the first fiscal quarter of 1999. "It was a challenging quarter for Micron Electronics; however, we continued to make progress executing our direct model fundamentals and we began accelerating our business transformation," explained Micron Electronics Chairman and CEO Joel Kocher. "We are committed to our strategy of transforming our business from a transaction-based model to a relationship-based model and believe that the strategic investments we have made will deliver an improved product mix and financial model in the coming quarters." For the first six months of fiscal 1999, net sales were $777.1 million, compared to net sales for the first six months of the prior year of $911.9 million, which is adjusted to exclude net sales for MCMS of $141.7 million. Net income for the first six months of fiscal 1999 was $15.8 million, or $0.16 per diluted share, compared to net income of $25.8 million, or $0.27 per diluted share, for the corresponding period in fiscal 1998. Net sales of PC systems declined in the second quarter of fiscal 1999 compared with the first quarter of the fiscal year primarily as a result of a 14% decrease in unit sales which was partially offset by a 4% increase in average selling prices during the quarter. Net sales of SpecTek semiconductor memory products for the second quarter of fiscal 1999 were 27% higher than sales in the first quarter of fiscal 1999 due primarily to an increase in demand. The Company's consolidated gross margin in the second quarter of fiscal 1999 was 17.0%, compared to the 17.1% reported in the first quarter of fiscal 1999 and 0.9% in the second quarter of fiscal 1998. The Company's PC gross margins in the second quarter of fiscal 1999 were 13.8%, compared to 15.0% in the first quarter of fiscal 1999 and a negative 1.6% in the second quarter of fiscal 1998. The decline in PC gross margin from the first quarter of fiscal 1999 relates primarily to increasing pricing pressure and seasonally higher returns in the consumer segment and the business mix impact from relatively higher consumer and seasonally lower government sales. SpecTek's margin was 37.7%, compared to 36.4% in the first quarter of fiscal 1999 and 15.9% in the second quarter of fiscal 1998. Selling, general and administrative expenses for the second quarter of fiscal 1999 were $56.2 million versus $52.4 million for the first quarter of fiscal 1999 and $91.9 million in the second quarter of fiscal 1998. The increase over the first quarter includes higher personnel costs due to field sales force expansion, seasonally higher service and support costs in our consumer segment, and higher broadcast and print advertising expenses due to supplemental advertising to counteract the anticipated impact from the early promotion of the Pentium III processor. As a percentage of sales, SG&A expenses were 15.0% in the second quarter of fiscal 1999 versus 13.0% for the first quarter of fiscal 1999 and 18.6% in the second quarter of 1998. 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. Special Note A brief conference call for the investment community will be held at 3:00pm Mountain Standard Time today. Participants can access the call by dialing 312-470-7207 and the pass code is Micron U.