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Micron's quarterly net misses Street, investors eye tight DRAM supply

By Noel Randewich

SAN FRANCISCO (Reuters) - Micron Technology posted a smaller-than-expected fiscal fourth-quarter net profit on Thursday but the chipmaker's shares held steady on expectations memory chip supplies will be constrained following a recent fire at a competitor's factory.

After a deep memory chip price slump last year that led some chipmakers to throttle back production, prices for DRAM and NAND chips made by Micron, Samsung Electronics <005930.KS> and SK Hynix <000660.KS> have increased this year, although NAND lost some ground in the Micron's August quarter.

Spot prices for DRAM chips have jumped more than 35 percent since a fire in September damaged a memory chip plant in China owned by SK Hynix, according to Pacific Crest analyst Monika Garg.

The fire came after the end of Micron's fourth quarter in August. It remains unclear when the plant will resume normal production levels.

Reflecting the rise in chip prices and recent expectations of a shortage of DRAM chips due to the fire, shares of Micron have surged by more than 180 percent so far in 2013.

"Overall the DRAM market remains tight. Given growing demand in the specialty markets and undersupply in the PC DRAM business, and the impact on supplies in the (Hynix) accident, inventories appear extremely low," Micron President Mark Adams said on a conference call with analysts.

Micron expects DRAM memory chip average selling prices to rise by 5 to 7 percent in its fiscal first quarter compared with its fourth quarter, Adams told Reuters.

The company expects NAND average selling prices to decline by about 8 or 9 percent in its first quarter as Micron moves to higher-density products on cutting-edge manufacturing nodes.

Micron's quarterly results for the first time included Elpida Memory following the close of its acquisition of the Japanese company in July. It said $1.31 of its quarterly EPS came from purchase-accounting gains related to Elpida and results from Elpida's operations.

Micron says the acquisition of the last of Japan's DRAM chipmaker will create economies of scale and the combined company will rank second only to Samsung in the memory chip market.

Without Elpida, Micron's EPS was 20 cents, lower than the 25 cents expected by analysts, according to Thomson Reuters I/B/E/S.

With demand from PC makers declining, chipmakers have been converting some of their DRAM production capacity to focus on smartphones and tablets.

NAND chips are used in mobile devices to store music and video. They have also been making inroads into high-end laptops, where they can replace traditional hard disk drives and enable "instant on" performance similar to tablets.

The company reported a net profit of $1.71 billion, or $1.51 a share, compared to a net loss of $243 million, or 24 cents, in the year-ago quarter.

The Boise, Idaho chipmaker had fourth-quarter revenue of $2.843 billion, up from $1.963 billion in the year-ago quarter. Analysts had expected revenue of $2.714 billion for the quarter ended in August.

Shares of Micron were 2 cents higher in extended trade after closing up 1.5 percent at $18.43.

(Reporting by Noel Randewich; Editing by Carol Bishopric, Phil Berlowitz and Bob Burgdorfer)

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