Micron Posts Third Straight Loss on Weak Memory-Chip Prices

Micron Technology Inc. (MU), the largest U.S. maker of computer memory, reported a third consecutive quarterly loss after sluggish demand for personal computers dragged down chip prices.

The second-quarter net loss was $224 million, or 23 cents a share, compared with a profit of $72 million, or 7 cents, a year earlier, the Boise, Idaho-based company said today. Sales were $2.07 billion in the period, which ended March 1. Analysts had predicted a loss of 19 cents and revenue of $2.01 billion on average, according to data compiled by Bloomberg.

A glut of memory-chip production has sent prices tumbling, making it harder for Micron and its competitors to stay profitable. The picture may improve if the bankruptcy of Japan’s Elpida Memory Inc. (6665) reduces industry output, saidAlex Gauna, an analyst at JMP Securities LLC in San Francisco.

“The industry is poised to get healthier, but it’s not healthy yet,” Gauna said. He recommends buying Micron shares, which he doesn’t own himself. “We’ve seen improvements, but most of the product drivers and better seasonality come in the second half of the year.”

Micron shares fell 1.6 percent in late trading following the report. The stock, up 38 percent this year, had closed at $8.71 earlier in the day.

Elpida Bankruptcy

Elpida, the last Japanese maker of computer-memory chips, sought bankruptcy protection last month after losses left it unable to pay debts. The Japanese press has speculated that Micron may be among bidders for some of its assets.

Micron will look continue to look at developments in the industry to see if there are investment opportunities “that make sense for shareholders,” President Mark Adams said in a telephone interview. He declined to comment on whether the company is considering an investment in Elpida.

Today’s earnings report is the first for Micron since the February death of Chief Executive Officer Steve Appleton in a plane crash. Former Chief Operating Officer Mark Durcan replaced Appleton as CEO, reversing a decision to retire.

Micron also makes memory chips used in smartphones and tablet computers in a joint venture with Intel Corp. (INTC) On Feb. 28, Micron announced plans to buy two of the joint venture’s factories for about $600 million, gaining greater control over the partnership.

Micron said today that it while it sold 20 percent more chips by volume in the second quarter, compared with the preceding three months, a decline in prices resulted in only “slightly higher” revenue.

Prices of Nand chips that are used in mobile devices have fallen about 20 percent this month, Micron said. That’s been caused by lower orders from makers of solid state drives -- main storage in computers made using memory chips -- as they work through inventory, Adams said.

Prices for dynamic random access memory, or DRAM, used as memory in personal computers, have remained unchanged this quarter as PC makers stock up on concern that Elpida’s bankruptcy will hurt supply.

To contact the reporter on this story: Ian King in San Francisco at ianking@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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