Micron Technology Inc. reported lower than expected earnings Thursday - and so its stock soared.
Why? Bargain hunters, several analysts said.Micron stock jumped 31/2 points Friday, closing at $32.6211/2 per share. The company led a rally in semiconductor stocks.
According to the Dow Jones Index of eight semiconductor companies, the stocks closed up 4.59 percent on a market-capitalization weighted basis.
Micron sold more products but made less money during its second quarter, compared to a year ago. The Boise-based company reported net sales of $996.5 million and net income of $188.2 million. It reported earnings per share of 87 cents.
During the second quarter last year it had net income of $183.5 million on net sales of $628.5 million.
Freefalling memory chip prices are eating away at Micron's profits. Sales are down as well because of excessive inventories of memory chips and decreasing demand for Micron's primary product - 4 meg dynamic random access memory chips.
Micron said the volume of chips sold during the second quarter decreased 12 percent. It also said the gross margin on memory products was 62 percent, down 8 points.
Micron said it plans to move more rapidly to production of 16 meg DRAM chips, which are in higher demand.
The Semiconductor Industry Association also reported this week that the book-to-bill ratio - which tracks new orders compared to billings for previous shipments - stayed below the breakeven mark for the second month in a row.
Semiconductor companies sent out $100 in products for every $90 in new orders it received, the association said.
Len Hills, an analyst with Competitive Strategis in San Jose, said some analysts suggested recently that quick cash might be had if Micron's stock reached $28 a share.
They advised clients to buy at that price and sell it when the stock hit $34 a share.
"Without needing cash flow to build a new plant, earnings should be sufficient to increase the overall stock price," Hills said. "That's sad for Utah, but for stockholders the return will be there."
Overall analysts believe the memory chip market isn't likely to make a significant recovery until the second half of the year, he said.
"Without needing cash flow to build a new plant earnings should be sufficient to increase the overall stock price," Hills said. "That's sad for Utah, but for stockholders the return will be there."
The Semiconductor Industry As-sociation also believes a stronger market for chips will emerge in 1996.
"Overall, we continue to expect solid growth for the semiconductor industry throughout 1996 because the global consumer demand for chip-related products - such as personal computers - is going to increase for the foreseeable future," said Doug Andrey, director of information systems and finance.
Hills expects Micron will wait until fall to announce plans for restarting work on the plant.