Micron Technology Inc., the largest U.S. maker of computer-memory chips, said second-quarter profit rose 64 percent, helped by a gain from the sale of semiconductor designs and technology to Intel Corp.
Net income increased to $193.2 million, or 27 cents a share, from $117.9 million, or 17 cents, a year earlier, the Boise-based company said Monday in a regulatory filing. Sales fell 6.3 percent to $1.23 billion, trailing an estimate for $1.36 billion by JPMorgan Chase & Co. analyst Shawn Webster.
The $230 million gain from a joint venture with Intel outweighed a decline in Micron's main business for dynamic random access memory chips. Prices fell about 12 percent from the first quarter, underscoring Micron's need to expand into less volatile products and partner with larger semiconductor companies.
"DRAM prices were cratering" in the first half of the quarter ended March 2, said Mike Sadler, Micron's head of sales, in an interview. "Unexpectedly they bounced pretty hard in January, and they are now up 50 percent from the lowest point."
Shares of Micron increased 9 cents to $15 as of 6:45 p.m. Monday in extended New York Stock Exchange trading from a close of $14.91. They have advanced 12 percent this year.
Intel, the world's largest chipmaker, and Micron in the second quarter ended March 2 started a venture to produce so-called Nand flash memory. Their venture, IM Flash Technologies LLC, announced last month that it will hire 1,850 people in Utah over the next two years and put its corporate headquarters at the former Micron facility in Lehi.
Micron had been slower to enter the rapidly expanding market for the chips that store songs on music file players and photos on digital cameras, which is dominated by South Korea's Samsung Electronics Co.
The company attributed a drop in second-quarter revenue and gross margin from the preceding three months mainly to the decline in average selling prices for memory chips. The company lowered costs to produce the chips by 8 percent, a slower pace than the drop in prices.
"The revenue number was lighter than expected," said Eric Ross, an analyst at ThinkEquity Partners in New York, who has an "accumulate" rating on the stock and said he doesn't own the shares. "Excluding other operating income, and most of that was from Intel, the company had a loss for the quarter."
Demand for memory chips is now exceeding supply, Sadler said on a conference call. If current trends continue, the price of the most commonly used memory chips will gain 20 percent this quarter from the previous three months, he forecast.
At the same time, the price of Nand chips is expected to drop about 20 percent because of weaker demand for music players that use the components, Sadler said. Micron is a supplier for Apple Computer Inc.'s best-selling iPod devices.
Most of Micron's revenue still comes from DRAM, the semiconductors that provide the main memory in personal computers. The majority of the chips are sold in long-term contracts with computer-makers such as Dell Inc. that are not made public. The rest are sold on spot markets in Asia where prices are used as the guide for contract negotiations.
Analysts had predicted a second-quarter profit of 6 cents, the average of 16 estimates in a Thomson Financial survey. The average sales estimate was $1.34 billion. Thomson doesn't disclose what may have been excluded from the estimates.
Micron expects to spend about $2.6 billion on new plants and equipment this fiscal year, Chief Financial Officer Wilbur Stover said on the call Monday. In fiscal 2007, the company is budgeting about $3.5 billion in spending, including $2 billion of investment by the joint venture with Intel, he said.