Micron posts loss on memory chip price declines

SAN FRANCISCO (Reuters) - Memory chipmaker Micron Technology Inc posted a quarterly loss on Tuesday, hit by lower prices for chips used in digital cameras, music players and other devices, sending the stock down 3.1 percent.

Micron, whose stock had risen 3.9 percent in regular trade, said average selling prices for both DRAM and NAND memory chips fell about 15 percent from the preceding quarter.

DRAM chips are the most widely used in personal computers and NAND microchips are used in digital music players, cameras and other gizmos.

Micron is the largest U.S. maker of memory chips, but has also been working to reduce its reliance on the memory market. It is now one of the biggest makers chip image sensors used in digital cameras.

The company also said that for its current quarter ending in November it expects industrywide prices for DRAM and NAND chips to decline 10 percent and 25 percent, respectively.

Micron's costs are dropping, but not enough to drive significant gross profit margin improvements in the tough price environment, one analyst said. The memory chip market is highly volatile, often whipsawed by rapid changes in supply and demand, and, consequently, in pricing as well.

"Their cost reductions are going to be pretty closely in line with where their pricing is going to be," said American Technology Research analyst Doug Freedman. "So there's not much improvement available on the gross (profit) margin line."

Micron had a net loss for its fourth fiscal quarter of $158 million, or 21 cents per share, compared with a year-earlier net profit of $64 million, or 8 cents per share.

Revenue rose to $1.44 billion from $1.37 billion.

Micron also took a restructuring charge of $19 million, most of it for employee severance and related costs arising from job cuts of about 1,000, or 10 percent of its global work force.

Both the net loss and revenue were slightly better than analysts' average forecasts of 22 cents per share on $1.41 billion, according to Reuters Estimates.

At the same time, Micron said its costs of goods sold per megabit fell in the fourth quarter from the third quarter by about 10 percent for DRAM chips and 40 percent for NAND flash memory microchips.

Micron attributed the decline to improvements in its manufacturing process and the production of "significantly more" NAND flash wafers. Microchips are made from circular silicon wafers.

The company last year established a joint venture with Intel Corp to make flash-memory chips and challenge Samsung Electronics Co and Toshiba in that market.

Investors may have also been surprised by the number of contracts with customers Micron had during the quarter to supply chips at agreed-upon prices, Freedman said. Prices in the memory chip spot market can be higher than contract prices, depending on the level of supply.

"It's a tough market environment with industrywide oversupply," Freedman said.

Micron also estimated capital spending in fiscal 2008 of about $2.5 billion, roughly in line with previous expectations, Freedman added.

Sales of its image sensors rose about 5 percent in the fourth quarter from the third quarter, due primarily to higher average prices.

So far this year, shares of Boise, Idaho-based Micron have declined about 20 percent, compared with a 7 percent gain in the Philadelphia Semiconductor Index, of which Micron is a constituent.

Shares fell 3.1 percent in after-hours trade to $11.42, after closing up 44 cents at $11.79 on the New York Stock Exchange.

(Reporting by Duncan Martell)