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Micron Reports $262 Million Loss on Falling Prices
Micron Technology Inc., the largest U.S. maker of computer-memory chips, reported its fourth straight quarter of losses because of slumping prices. The shares fell 4 percent in late trading.

The first-quarter net loss was $262 million, or 34 cents a share, compared with profit of $115 million, or 15 cents, a year earlier, the Boise, Idaho-based company said today in a statement. Sales rose less than 1 percent to $1.54 billion in the three months ended Nov. 29.

A collapse in prices caused by overproduction undermined Chief Executive Officer Steve Appleton's attempts to expand beyond personal-computer memory chips. Micron's push into the market for so-called Nand flash memory, used in cameras and music players, faces the same challenge of falling prices.

``It seems the pricing environment is still pretty tough,'' said Robert Burleson, a San Francisco-based analyst for ThinkEquity Partners, who recommends buying the shares and doesn't own any. ``They did better on the top line and worse on the bottom than expectations.''

Prices for dynamic random access memory chips, which are used in PCs, fell about 20 percent in the quarter from the previous period, Micron said. Nand-chip prices fell 30 percent.

Micron declined 32 cents to $7.60 in extended trading, after rising 8 cents to $7.92 at 4 p.m. in New York Stock Exchange composite trading. The stock has fallen 43 percent this year, making it the second-worst performer on the 18-member Philadelphia Semiconductor Index.

Production Peaking

On average, analysts had predicted a loss of 15 cents a share on sales of $1.49 billion, according to a Bloomberg survey. A $62 million expense for chip inventory that had declined in value and a cost of $13 million for job cuts contributed to the loss, Micron said.

Appleton said memory-chip makers boosted capacity in 2007, causing a surge in production. He said he expects spending on new plants to decline in 2008.

``We're feeling the effects of what was a pretty big expansion year in 2007,'' Appleton said on a conference call with analysts. ``Output is probably peaking.''

The fall in prices was a result of too many chips in the market, sales chief Mike Sadler said on the call. Demand remains ``quite strong,'' he said.

Nand flash-memory prices have already fallen 40 percent in the first three weeks of the second quarter, Sadler said. Computer-memory chip prices have dropped 10 to 15 percent, he said.

Loss-Making

``They are likely to go down further from here,'' said Kevin Vassily, an analyst at Portland, Oregon-based Pacific Crest Securities, who has a hold rating on the stock. ``That's just not going to get these guys out of loss-making mode any time soon.''

Memory-chip plants run 24 hours a day and chips take about three months to manufacture from start to finish. That means it's more expensive to start and stop production than to keep plants running at full capacity and sell products at a loss, said Daniel Amir, a San Francisco-based analyst for Lazard Capital Markets.

Micron competes with South Korea's Samsung Electronics Co. and Hynix Semiconductor Inc. in the market for computer-memory chips. The company also has a joint venture with Intel Corp., the world's largest semiconductor maker, in the market for Nand chips.
http://www.bloomberg.com/apps/news?pid=20601103&sid=aMlgt8b704Vc&refer=us