Memory chip maker Micron Technology (NAS: MU) recently came out with fiscal third-quarter losses that were much wider than what analysts had expected. However, what's proved to be even more disappointing is the fact that Micron has made its biggest yet, fourth consecutive quarterly loss. So what seems to be the real problem with Micron? Before we delve into the details, let's take a closer look at the numbers.

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2. Memory chip maker Micron Technology (NAS: MU)
recently came out with fiscal third-quarter losses that were
much wider than what analysts had expected. However,
what's proved to be even more disappointing is the fact that
Micron has made its biggest yet, fourth consecutive
quarterly loss.
So what seems to be the real problem with Micron? Before
we delve into the details, let's take a closer look at the
numbers.
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3. Micron's revenue increased 8% on a sequential basis,
although it remained relatively flat from the prior-year
period. This was mainly because of a 20% sequential
increase in revenue in the DRAM segment -- the result of
a combination of higher sales volumes and average
selling prices.
Unfortunately, on the other hand, Micron incurred a loss
amounting to $320 million, as part of a series of quarterly
losses mainly caused by the prevailing softness in the
flash memory market. Revenue from the company's
NAND segment remained largely flat, despite a whopping
40% increase in sales volumes, mainly because of weak
market prices.
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4. However, one can take heart from the fact that these
problems are not specific to Micron, as its peers in the
NAND industry have also been having a hard time of
late. For instance, flash memory king SanDisk's (NAS:
SNDK) net income declined almost 50% as compared to
the prior-year period because of weak market prices.
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5. Demand in the DRAM space is beginning to show some
signs of bottoming out. Plus, a further boost in the DRAM
segment should occur when Microsoft releases its
newest Windows 8 operating system, which in turn,
should stimulate demand from Micron's OEM customers,
namely Intel and Hewlett-Packard.
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6. Micron is also in the process of taking over the bankrupt
Japanese DRAM manufacturer Elpida Memory. If the
company is successful, this would double Micron's
market share in the DRAM space and should somewhat
reduce competition as well. Nevertheless, the positive
effect of this development remains to be seen.
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7. But the company has its share of concerns, too. The
NOR flash space is witnessing tough times. According to
a TechNavio analyst forecast, the global NOR flash
market will decline at a CAGR of -5% from 2011 through
2014 mainly because of a decline in average selling
prices. However, the increasing demand for NOR chips
could be a long-term positive in this direction.
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8. The NAND flash space is also passing through a
turbulent phase, and Micron could see this segment of
its business take a hit in the coming months. This is
because NAND flash memory chips, used in mobile
devices and solid-state drives, or SSDs, have been
facing weak demand, coupled with oversupply issues of
late.
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9. Micron is currently trading at a price-to-book ratio of just
0.7, which at first makes it seem attractive. However, I'd
prefer to watch from the sidelines until Micron starts
putting some cash on the table. The company's
acquisition of Elpida could work in its favor in the long
run, provided there is a significant improvement in the
DRAM space.
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10. But, if you are not too enthused about Micron's possible
recovery, you can check out this special free report
called "The Motley Fool's Top Stock for 2012". The
report won't be there forever, so click here to get it while
it's still available.
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