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Shares of Micron Technology Inc. (NASDAQ:MU) rose 1.3% in Thursday's trading session. Before the market open, this manufacturer and marketer of semiconductor devices reported its fourth quarter results.

Fourth Quarter Results

Micron Technology reported fourth quarter revenues of $1.96 billion, down 8.3% on the year. Revenues fell by 9.6% compared to third quarter revenues of $2.17 billion. Revenues fell way short of analysts expectations of $2.11 billion.

The company reported a net loss of $243 million, or $0.24 per diluted share. In comparison, the company lost $0.14 per share in the fourth quarter of 2011, and $0.32 in the third quarter of 2012. Net losses came in line with analysts estimates for a quarter loss of $0.23 per share.

Full year revenues in 2012 fell by 6.2% to $8.2 billion. The company lost $1.03 billion, compared to a net income of $167 million for the full year of 2011.

Volume growth was not the problem for Micron's fiscal 2012. NAND revenues were up 12% for the full year. NAND Flash products volumes rose 106% on the year as a result of the ramp up of the IM Singapore wafer facility, largely offset by a 45% decrease in average selling prices. DRAM revenues fell 12%, as a 59% increase in selling volumes was offset by a 45% decrease in average selling prices.

CEO Mark Durcan commented on the results:

"In 2012, despite difficult market conditions and lower average selling prices, we continue to execute on our technology and manufacturing roadmaps and moved our products increasingly into premium segments. Our focus throughout 2013 is to drive additional cost reductions and advance our leading-edge memory technology to achieve increased manufacturing efficiencies."

Valuation

Micron Technology ended its fourth quarter with $2.9 billion in cash, equivalents and long-term marketable assets. The company operates with $3.3 billion in short- and long-term debt, for a small net debt position.

The company generated annual revenues of $8.2 billion in 2012. Micron reported a net loss of $1.03 billion, or $1.04 per diluted share. Currently, the market values the firm at $6.1 billion. This values Micron at roughly 0.8 times annual revenues.

Given the severe losses, Micron Technology does not pay a dividend.

Investment Thesis

Year to date, shares of Micron have fallen some 5%. Shares quickly rose some 50% to levels of around $9 in February and March. Shares fell back to levels around $5.50 during the summer months, as Micron won the $2.5 billion bidding war for bankrupt Japanese company Elpida.

Shares have fallen from $12 in the beginning of 2011 to $6 at the moment. Between 2008 and 2012, Micron grew its annual revenues from $5.8 billion to $8.2 billion. The company reported large losses in 2008/2009, but managed to report a modest profit for the full year of 2011.

The full year loss of $1.0 billion in 2012, comes as a nasty surprise for investors, who have seen their holdings erode by 50% over the past year. Long-term holders have been hit hard, also as the number of shares outstanding rose by some 30% over the past four years.

In March of this year, when Micron reported its second quarter results, I warned about the fairly high valuation, given the lackluster state of the business. Trading around $8.50 at the moment, shares have fallen some 40% over the past six months, yet I can not see compelling value yet.

While the company has a solid financial position, and the acquisition of Elpida will most likely be beneficial for pricing, the risk-reward position is not attractive enough for me at the moment.

Source: Micron Technology: Little Appeal, Given A Weak Fourth Quarter Report