Micron Earnings Show A Turnaround That Can't Turn (MU)

Micron Technology, Inc., (NYSE:MU) showed a fourth quarter net loss of $344 million, or $0.45 EPS, on net sales of $1.45 billion. These results include a non-cash charge to cost of goods sold of $205 million and the effect of a recovery of $70 million for price adjustments for NAND products purchased from other suppliers.  On a non-GAAP basis its earnings were -$0.27 per share.  First Call had estimates at -$0.23 on $1.54 billion in revenue.

In the fourth quarter the chipmaker generated $243 million in cash flowsfrom operating activities and ended the quarter with $1.4 billion incash and investments.

Micron said the industry continues to face oversupply and fallingprices. The company said it is slashing senior executive salaries by 20% in addition to previously announced cost-cutting. DRAM overall sales dropped as gigabit sales fell. NAND Flash products saw a 20% average selling price drop on a 10%increase in total gigabits sold.  Sales of CMOS image sensors"increased slightly compared to the third quarter" and represented 12%of the company’s total sales in the fourth quarter, according to Micron.

The company did not offer any guidance.  But CEO & Chairman SteveAppleton said,  “The global memory market continues to experience severeoversupply and price degradation, and it remains a challenging periodfor all of us competing in the industry.”  Unfortunately, that doesn’toffer a hell of a lot of hope that things are getting better any timesoon.

Being a DRAM producer, and now a Flash producer, is really no different than being any raw commodity miner and producer.  The difference is that this memory sector’s commodity prices never seem to rise like they fall. This company has continued to be a turnaround that couldn’t turn.Nothing here is changing our opinion of that stance.  Shares closed up6% at $4.30 today (why?) and shares have given back half of those gainsin after-hours trading.  Its 52-week trading range is $3.61 to $11.92.

Jon C. Ogg
October 1, 2008