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Hynix Has First Profit in Four Quarters on FX, Cost Cuts

Oct. 24 (Bloomberg) -- SK Hynix Inc. reported its first profitable quarter in four as the world’s second-largest maker of computer memory chips cut costs and a weakening dollar reduced its debt denominated in the U.S. currency.

Net income was 2 billion won ($1.8 million) in the third quarter, compared with a loss of 563 billion won a year earlier, SK Hynix said today in a statement. The average of 31 analysts’ estimates was for a loss of 33 billion won, according to data compiled by Bloomberg.

SK Hynix is cutting costs by shrinking the circuitry of its chips to pack more memory in each of them as demand and prices for dynamic random access memory used in PCs slumps. Icheon, South Korea-based SK Hynix, a supplier to Apple Inc., also stands to benefit from a recovery in prices for NAND flash memory for mobile devices as industry supplies decline.

“It’s much better than expected,” Song Myung Sup, a Seoul-based analyst at HI Investment & Securities Co., said by phone. “There must’ve been some cost cutting on the DRAM side. The NAND side seems to have done better than expected too.”

The operating loss, or sales excluding the cost of goods sold and administrative costs, was 15 billion won on sales of 2.42 trillion won, according to the statement.

SK Hynix rose 4.1 percent, the most since Sept. 14, to 24,000 won at the close of trading in Seoul, while the benchmark Kospi index fell 0.7 percent.

Lower Prices

South Korea’s won traded at an average 1,132.99 per dollar during the third quarter, 1.7 percent stronger than the 1,152.37 average during the previous three months.

The price of the benchmark DDR3 2-gigabit DRAM averaged 84 cents in the July-September period, compared with $1.08 a year earlier, according to data from Taipei-based DRAMeXchange, operator of Asia’s largest spot market for semiconductors.

Global PC shipments fell 8.3 percent from a year earlier to 87.5 million last quarter, according to researcher Gartner Inc. Framingham, Massachusetts-based data research firm IDC reported an 8.6 percent decline.

Samsung Electronics Co. is the world’s largest maker of computer memory chips.

Falling chip prices dragged Micron Technology Inc., which agreed to buy Japan’s Elpida Memory Inc. to double its market share in the computer-memory business, to a fourth-quarter loss wider than the one a year earlier.

DRAM prices may stabilize in the fourth quarter as PC makers are set to introduce new machines running on Microsoft Corp.’s latest version of Windows operating system, Shin Hyun Joon, a Seoul-based analyst at Dongbu Securities Co., said in a Sept. 28 report.

The September release of the iPhone 5 is also set to boost sales of SK Hynix’s mobile DRAM and NAND flash chips, Shin said.

The NAND industry supply is also set to decrease with Toshiba Corp. cutting output. The Japanese chipmaker said on July 24 it will reduce its NAND output by 30 percent.

To contact the reporter on this story: Jun Yang in Seoul at jyang180@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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