Micron Technology Inc. reports a 73 percent drop in its third fiscal quarter profit in the wake of the sharpest drop in computer memory chip prices in a decade.
Micron earned $58.2 million, or 27 cents a share, during the three months that ended May 30. It earned $220.2 million, or $1.02 a share, during the same period a year ago.Revenue was $771 million, up from $761 million a year ago.
However, its produced twice as many memory chips as it did a year ago.
"The principal cause of the lower net sales and net income was the decline in average selling prices for semiconductor memory products as a result of worldwide memory supply outpacing growth in demand," the company said in a statement.
The performance was below analysts' forecasts of a profit of 31 to 35 cents per share. Micron reported its results after the stock market closed. Its shares finished up 371/2 cents to $30.25 on the New York Stock Exchange.
Average pricing for Micron's primary product, the 4-megabit memory chip, has declined about 75 percent since late 1995. The drop is the fastest since 1985 and ended three years of price stability in memory chips.
Micron's gross margin on memory chips in the latest quarter was 38 percent, down from 62 percent in the second quarter and 70 percent in the first three months of the fiscal year.
The company said production in the fourth quarter would likely remain at the third-quarter level. It said lower prices have forced it to cut capital expenditures, which could limit capacity.
In addition, the company is moving forward with the conversion of some of its production lines to a more powerful chip and may experience some economic inefficiencies during that transition.
Micron and Texas Instruments Inc. are the only U.S. companies that produce memory chips. Most of Texas Instruments' production is overseas.
Because of the lower prices, Micron has stopped construction of a new plant in Utah, capped production and stopped hiring people at its existing facilities in Boise and cut executive salaries.
Micron earlier this month asked the Commerce Department to investigate whether two South Korean manufacturers are dumping chips at below production-cost prices in the United States.
The decline in third quarter profit erased gains from a record first quarter and strong second quarter for Micron.
Nine-month profit was $574.9 million, or $2.66 per share, compared to $563 million, $2.62 per share, during the first nine months of fiscal 1995.
Nine-month sales totaled $2.95 billion, compared to $1.92 billion a year earlier.