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Boise, Idaho-Based Micron Technology Posts $188 Million Profit

Posted on: Thursday, 29 September 2005, 21:00 CDT

By Melissa McGrath, The Idaho Statesman, Boise

Sep. 30--Micron Technology Inc.'s continued efforts to diversify its product line and rely less on the fluctuating DRAM market gave them a boost in profits in the fourth quarter and for the year, company officials said Thursday.

Micron, the state's largest private employer, posted $188 million in profit, or 29 cents a share, for the fiscal year that ended Sept. 1, up about $31 million from the end of the last fiscal year.

The year-end earnings beat analyst predictions that the company would gain only about 12 cents a share.

This is the first time the company has posted increased profits two years in a row since 1999 and 2000, said Mike Sadler, vice president for worldwide sales at Micron.

The Boise-based company also posted a $43 million profit, or 7 cents a share, for the fourth quarter, down about $50 million from the fourth quarter of last year.

A portion of the profits this quarter will go to Micron's employees, including the 10,000 workers in Boise, who will get bonus checks in October. Economists have predicted that the local economy benefits when Micron employees get bonus checks because most will spend the money in restaurants, at the movies or other retailers.

The earnings this quarter were up significantly from this year's third quarter when the company posted a net loss of $128 million.

The profits beat analyst expectations for the fourth quarter and for the fiscal year. On average, 21 analysts predicted a fourth-quarter loss of 9 cents per share and a gain of about 12 cents a share for the fiscal year, according to Thomson First Call.

Micron attributed the increase in profits this quarter and for the year to the diversification of its product line. In recent years, the company started making CMOS image sensors and NAND flash memory products to counter the ups and downs of the DRAM market. DRAM, or dynamic random access memory, is used in personal computers and is Micron's major product.

"We've spent the last several years trying to do a better job producing a stronger portfolio that reduces our dependence on the personal computer for driving our earnings quarter after quarter," Sadler said.

Five years ago, DRAM made up about 80 percent of Micron's net sales, but this quarter that product made up only about 50 percent, Sadler said. The CMOS image sensors and NAND flash memory made up about 15 percent of sales this quarter and specialty DRAM products used in cell phones and other electronics products make up the remaining 35 percent of sales, he said.

"I think this is just the beginning," said Bill Dezellum, president of investment firm Tieton Capital Management, which buys stock in Micron for other companies. "(Micron) is just beginning to see the benefit (of its diversified portfolio) this quarter. It's not a surprise that their strategy is beginning to bear fruit."

CMOS (complementary metal oxide semiconductor) image sensors, which Micron started marketing about two years ago, were the most profitable product this quarter, followed by specialty DRAM, NAND flash memory and the core DRAM products used in personal computers, Kipp Bedard, head of investor relations for Micron, told analysts on a conference call Thursday.

The CMOS chips are in high demand because they are used in camera phones, digital cameras and personal digital assistants (PDAs). The fast-growing camera phone market has driven most of Micron's sales of the CMOS image sensors, Sadler said.

"There is a one in three chance that if you buy a camera phone, it's got a Micron sensor in it," he said.

Micron reported total sales of $4.88 billion for the year, up from $4.4 billion the year before. For the quarter, the company posted about $1.26 billion in sales, slightly up from the $1.19 billion during the same quarter last year.

Micron said its revenue increased this quarter over the $1.05 billion posted in the third quarter ending June 2, 2005, because sales on all their product lines were up -- image sensors and flash memory sales grew 40 percent from the previous quarter and DRAM sales increased 15 percent.

Micron stock rose nearly 4 percent Thursday to close at $12.19 a share. The earnings were posted after the markets closed.

Dezellum said he would encourage investors to buy Micron stock now as the company is trying to expand the sales of its image sensors to the automotive industry and other markets. He also said NAND flash memory, a market that Micron entered just last year, will continue to grow in future quarters.

The company reported it spent $1.3 billion in capital expenditures this fiscal year, and predicts it will spend between $1 billion and $1.5 billion in expenditures in the next year. Most of that money will be invested in advancing process technologies at the Boise facility, not on new infrastructure, Sadler said.

Micron still has not decided if the Boise plant will be chosen for a $1 billion upgrade to produce the next generation of silicon wafers, he said.

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MU, TOC,

Source: The Idaho Statesman, Boise

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