Intel pumps $450 mn in memory chipmaker

SAN FRANCISCO: Micron Technology Inc., a designer and maker of memory chips, has reported a narrower quarterly net loss and beat analyst expectations as a result of strengthened demand for its chips.

The company also said Intel Capital, the investment arm of Intel Corporation, made a $450 million cash injection in exchange for stock rights.

Micron's net loss for its fiscal fourth quarter ended August 28^th 2003, was $123 million, compared to a net loss of $586.5 million, a year earlier.

Sales for the fourth quarter were $888.5 million, up from $748 million a year ago, the company said.

Analysts, on average, were expecting Micron to post a net loss of 25 cents a share, according to Reuters Research, a unit of Reuters Group Plc.

EQUITY INVESTMENT

In exchange for the equity investment, Intel will get rights to common stock representing about 5.3 percent of Micron's outstanding common stock, Micron said.

According to the company, the money would be used to support its investment in 300-millimeter wafer manufacturing technology and increase production of its high-performance double data rate, or DDR2, dynamic random access memory chips.

The companies also said they would collaborate on the design of future memory technologies.

If Micron fails to meet certain production and processing capacity objectives by 2005 and Micron's stock price is below Intel's purchase price, Micron could be obligated to pay Intel up to $135 million, with some of it payable in stock, the company said.

Micron benefited during the fourth quarter from a strengthening in DRAM demand, attributed to "back-to-school PC seasonal demand and the early stages of a re-energized commercial environment," said Mike Sadler, vice president of worldwide sales.

The volatility of demand for computer memory makes the market highly competitive, and thus, financial results difficult to predict.

"It appears that supply-and-demand (ratio) is tightening," said Auguste Richard, an analyst at First Albany Corp. "Pricing was better than what people were expecting."

"However, the amount of memory per PC is growing more slowly than it has in the past," said Eric Rothdeutsch, an analyst at Friedman, Billings, Ramsey.

The average selling price of its primary product, the 256 megabyte DDR static dynamic random access memory chip, in the fourth quarter was down 30 percent from a year ago. But sales volume outpaced production in the fourth quarter, resulting in lower megabit finished goods inventories compared to the prior year-end, Micron said.

(C) Reuters