Micron's income is up

BOISE -- Even as prices for Micron Technology Inc.'s mainstay personal-computer memory chips decline, the semiconductor company's growing diversification into specialty markets has rescued its revenue picture, President and CEO Steve Appleton told shareholders at their annual meeting Tuesday.

The world's third-largest supplier of DRAM (dynamic random access memory) chips used in PCs is expanding into other digital memory applications such as imaging chips for cameras, specialty DRAM for mobile devices and flash memory for personal music players.

Sales of those non-PC memory products helped boost Micron's fiscal 2005 net income to $188 million on revenue of $4.8 billion compared to net income of $157.2 million on revenue of $4.4 billion in 2004, even as DRAM prices were dramatically lower this year compared to last.

Micron has about 500 workers involved in chip testing in Lehi.

"We had a very significant drop in the selling price of Micron's historical primary product, yet our gross margin stayed positive," said Appleton, chairman of Micron's board of directors. "That's because of the product diversification we have been working on."

Micron shares were down 31 cents, or 2.17 percent, to close at $13.99 Tuesday on the New York Stock Exchange after Lehman Brothers downgraded the stock on the belief that a recently announced joint venture with Intel has already been reflected in the share price. The stock has traded in a range between $9.32 and $14.82 over the past 52 weeks.

Speaking to about 300 shareholders in the cafeteria of the company's headquarters campus, Appleton said Micron is not exiting the DRAM market, but he predicted further consolidation of the handful of companies still producing the chips. Samsung is the world's largest DRAM supplier with 31 percent market share compared to about 16 percent each for Seoul-based Hynix Semiconductor and Micron.

Appleton said Micron would consider acquiring other companies, but declined to say if it was targeting any for takeover. "If the opportunity surfaces, we'll look at it," he said.

The boss of Idaho's largest employer -- 10,000 of Micron's 18,000 employees worldwide work in Boise -- said his goal is to allocate greater production resources to the form of memory known as NAND flash, used in a growing number of consumer applications such as the iPod Nano, digital cameras, and storage devices. Last month, Micron and Intel announced they'll spend up to $5.2 billion over the next three years on a joint venture to design and produce NAND flash for Apple Computer and other customers.

"The total size of the flash market is now approaching the DRAM market," said Appleton. "There are years of runway for more applications adopting this technology."

Micron still intends build a new fabrication plant to produce larger 300-millimeter silicon wafers that are used for making memory chips, but Appleton said the company will take more time to decide where to build it. Boise is considered a front-runner for the new $1 billion equipment upgrade, and the Idaho Legislature earlier this year granted Micron's request to put a cap on its property tax valuations as an incentive.

"It's not a question of if, but when," Appleton said of the new project. "We still have several hundred million dollars worth of investment we need to make on the (joint venture) NAND in Boise in addition to the other investments we would bring here."

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