Micron's Bottom Line

Oct. 4 -- Micron Technology reported fourth-quarter earnings of $1.20 a diluted share, trouncing Wall Street’s estimates of 96 cents a share, as sales from semiconductor operations skyrocketed.

While bearish investors anticipating another death knell for the PC industry were licking their chops ahead of today’s report, few close observers of the Boise, Idaho, company were worried about problems with Micron’s bottom line.

That may sound odd, given the recent performance of a market that iscrucial to the company’s success, the market for dynamic randomaccess memory, or DRAM.

Micron makes the overwhelming bulk of its money on DRAM, and DRAM prices have been tanking lately. Prices in the spot DRAM market, in which memory chips are sold for immediate delivery, were already languishing before Intel issued its memorable revenue warning two weeks ago.

Micron Escapes Sector’s ProblemsBy the middle of September, 64-megabit DRAM (the industry benchmark) was trading between $7.50 and $8, well off its spring highs. But things got considerably worse on news of extremely weak demand for Intel’s products in Europe. Because chipsets and motherboards mainly go into the same end market as memory — the PC market — Intel’s troubles quickly spilled over into the spot DRAM market.

Major PC manufacturers that had been hoarding DRAM in anticipation of ayear-end shortage suddenly had no good reason to continue holding thatinventory, and the price of 64-megabit memory tumbled to near $6 asthey unloaded their stock.

Luckily, Micron’s quarter ended in August, before Intel shook up theDRAM market.

“They’ve locked up the quarter a bit ago,” says Jack Geraghty, an analyst at Gerard Klauer Mattison who rates Micron a buy.

What Investors WantMicron investors wanted to hear Chairman and CEO Steven Appleton report that the company is seeing a strong order book going in the current quarter.