Micron Rallies Ahead of Earnings: Should Benefit from Windows 7

Jun.24.09 | About: Micron Technology (MU)

Micron Technology (NASDAQ:MU) shares are sharply higher ahead of the company’s earnings report for the fiscal third quarter ended May, which is due after the close Thursday.

Giving the stock a boost Wednesday is Credit Suisse chip analyst John Pitzer, who lifted his projections for the quarter to $1.24 billion in revenue and a loss of 38 cents a share, from $1.13 billion and a loss of 52 cents. The Street has been expecting $1.18 billion and a loss of 43 cents. Pitzer said the higher forecast reflects stronger pricing: he says DRAM contract pricing was up 13% sequentially, while NAND was up 63%.

Pitzer thinks gross margin will improve to -3.4% in the May quarter, from -31.2% in the February quarter.

For the August quarter, he now sees $1.4 billion in revenue and a loss of 23 cents a share, up from $1.34 billion and a loss of 36 cents; the Street sees $1.33 billion and a loss of 29 cents. For the August 2009 fiscal year, he sees $5.03 billion in revenue and a loss of $2.04 a share, up from $4.87 billion and a loss of $2.32.

Pitzer contends Micron will benefit from the roll out of Microsoft Windows 7, which is due to roll out in October. He notes that about 2/3 of corporate PCs are still running Windows XP and close to the end of useful life. Pitzer also sees opportunities for the company in servers, which he notes account for about 20% of revenues, providing about a 20% ASP premium with just 5% extra costs.

MU Wednesday is up 36 cents, or 6.2%, to $5.15.

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