Micron Stumbles on Chip Pricing

Micron Technology (MU) reported a net loss well below analyst forecasts, as the chipmaker was forced to decrease already lowered prices on chips to deal with supply and demand issues in its industry. In the company's first fiscal quarter of 2008, it lost $262 million ($-0.34/share) compared to a loss of $158 million ($-0.21/share) last year. Revenue increased 7% to $1.5 billion. According to Bloomberg survey, analysts predicted a loss of $0.15/share on sales of $1.49 billion. Despite megabit sales volume increasing for DRAM and NAND flash memory products about 25% and 60% respectively, the company was still forced to decrease the average selling price of its DRAM chip approximately 20% and its NAND flash memory products 30%. The sector as a whole is dealing with a glut of supply after overestimating demand in 2007.

Analyst Daniel Berenbaum of Caris & Co. said in a research note before the release: "The memory segment faces significant near-term profitability hurdles as destructive market share battles rage in both NAND and DRAM… There are clear long-term demand drivers here, and the memory market does not appear to be structurally broken, but in the absence of any near term positive catalysts, we recommend that investors avoid Micron Technology stock."

Shares of Micron, which were up 1.0% in the day session, fell 1.5% to $7.80 in after hours trading.

Sources: Press release, Bloomberg

Seeking Alpha's news briefs are combined into a pre-market summary called Wall Street Breakfast. Get Wall Street Breakfast by email -- it's free and takes only seconds to sign up.