Micron’s 4Q Results: Signs Of Life In The PC Sector?

Micron Technology Inc. (NYSE: MU), the sole U.S. manufacturer of memory chips, is scheduled to report a fourth-quarter loss after the close Thursday. But investors will be watching for indications of new orders for both new PCs and smartphones for shipment in the current quarter.

The reason is that the Boise, Ida.-based Micron is pivotal to the PC sector because its DRAM chips, including those using the more advanced NAND flash technology, are built into PCs and laptops from U.S. giants headed by Hewlett-Packard Co. (NYSE: HPQ), the No. 1 brand, Dell Inc. (Nasdaq: DELL), the No. 3 brand and many other Asian manufacturers.

As well, Micron has bid about $2.5 billion to acquire Japan’s bankrupt Elpida Memory Inc. (Tokyo: 6665) in a deal that would make it No. 2 globally behind Samsung Electronics (Seoul: 005930) as well as provide new manufacturing facilities in Japan.

Earlier this year, Micron and Intel (Nasdaq: INTC), the No. 1 chipmaker, also revised their joint-venture IM Flash Technologies with an eye toward designing more chips for smartphones and mobile products.

Overall, analysts surveyed by Thomson Reuters expected Micron will post a fourth-quarter loss that will widen to $215.7 million, or 22 cents a share, from the prior-year loss of $135 million, or 14 cents. Revenue is expected to fall about 1 percent to $2.1 billion. The full-year loss is expected to be about $1.01 a share on revenue of $8.4 billion.

The U.S. memory maker has been contending with two negative influences: tepid demand for PCs and laptops, where market researchers see little growth overall this year, as well as falling average sales prices. While Micron had been emphasizing the NAND sector more, once its Elpida acquisition closes, only about 30 percent of output will be non-DRAM-related.

The Elpida takeover has been approved by U.S. authorities but not yet by those in Japan.

There are bright prospects, though.

Analyst Shaw Wu of Sterne Agee believes Micron could sell more NAND chips into the iPhone 5, shipped last week by Apple (Nasdaq: AAPL), the world's most valuable technology company. The DRAM comes from Elpida, while analysts believe most of the NAND chips in the iPhone 5 come from South Korea’s SK Hynix (Seoul: 0660).

As well, prices for NAND chips, which use a more advanced technology than the previous generation of NOR memory chips, have been moving higher, says analyst Sandeep Bajikar of Jefferies, who also notes an increasing number of Micron’s DRAM chips are designed into more advanced servers and solid-state drives (SSDs) for enterprise clients.

Of the 29 analysts who cover Micron, 22 rate it either a “strong buy” or “buy,” with seven rating it hold. The shares have dipped 5 percent this year and about 8 percent over the past 52 weeks.

Micron shares rose 3 cents to $5.97 in midday Thursday trading.