Micron net soars; top 3 exit

Electronic News, Sept 26, 1994

BOISE, IDA.--In stark contrast to the disclosure that three of its top executives have abruptly resigned--and amid reports of internal disputes on capital spending strategies--Micron Technology reported net income for FY94 ended Sept. 1 skyrocketed to $400.5 million, or $3.80 per fully diluted share, from $104.1 million, or $1.03 per fully diluted share, in FY93. Sales came to $1.6 billion versus $828.3 million. For the fourth quarter, net more than doubled to $141.9 million, or $1.34 per fully diluted share, from $62.9 million in the same quarter the year before. Sales were $491.6 million compared with $306.0 million.

The impact of the strong financial results was muddled by last week's announcement from Micron that three top executives had resigned. Joe Parkinson, chairman and CEO; Jim Garrett, president and COO; and Reid Langrill, VP, finance, treasurer and CFO (and chairman of Micron Computer Inc., a subsidiary of Micron Technology Inc.) were said to be leaving the company "for personal reasons." The departures were said to be "effective sometime over the next month," and the executives will continue to consult with Micron six months after that time. Observers noted that sudden resignations are not new at the company, which is characterized by many as secretive.

The head of Micron's semiconductor subsidiary, Steven R. Appleton, is expected to take over as chairman and CEO. The division's chief technical officer, Tyler Lowrey, and chief financial officer, Bill Stover, will assume those titles for the entire company.

Analysts and observers for the most part have been unable to make any connection between what are perceived as diametrically opposed developments: a company on a roll and the sudden, unexplained departures of its top officers. Speculation has fueled the view by some that there was a rift between management and Micron's major shareholder, John R. Simplot, the Idaho potato magnate who controls 21.5 percent, or one-fifth, of Micron's stock. Such reports have been sidestepped if not directly denied by the principals involved.

With a booming memory market, capacity is the issue at the company, according to one analyst, Rajiv Chaudri of Goldman Sachs, who was reported as saying that management was pushing for Micron to expand more rapidly, a departure from past strategies that require equity financing. Mr. Simplot was said to have been opposed to any move that would dilute his shareholdings or risk building excess capacity that might depress the stock. The analyst was reported as saying that Mr. Simplot's inclination was to stay conservative on capital spending, and that management wanted to be more aggressive.

A report circulating on the West Coast speculated that the departures were part of an ongoing disagreement over whether to raise the 5-cents-per-share dividend. It was said that the action was resisted by upper management but supported by Mr. Simplot.

During fiscal year 1994, Micron said it incurred about $375 million in capital spending and, subject to market conditions, expects to spend "a significantly greater amount" in fiscal 1995. Current capital expenditure plans include equipping and qualifying a newly constructed central implant facility and a .25 micron 8-in. R&D facility, and construction of an additional test and assembly facility. MSI may convert some or all of its 6-in. wafer fab lines to 8-in. processing capabilities over the next several years.

"Many of Micron's competitors have completed new facilities designed to process 8-in. wafers, which have an 84 percent greater usable surface area than a 6-in. wafer," said the company. "A significant portion of earnings for the current and upcoming fiscal year will be devoted to expansion of production capacity and technology upgrades."

Micron said the overall success of the firm continues to be dependent on the memory operations of its whollyowned subsidiary, Micron Semiconductor Inc. (MSI). "Favorable market conditions in fiscal 1994 resulted in relatively stable pricing for memory products," it said. "In addition, production of semiconductor memory, as measured in megabits, nearly doubled in fiscal 1994 as compared to fiscal 1993 due to increased wafer capacity, improved manufacturing yields, and conversion to further product shrinks. Reduced unit costs resulting from increased manufacturing efficiencies combined with stable product pricing allowed the company to experience significantly higher net income."

In its financial report, Micron said demand for semiconductor memory products has grown, fueled primarily by the PC industry. It added that the 4-Meg DRAM remains MSI's primary product and as of fiscal year-end, MSI had converted the majority of its 4-Meg DRAMs to the third-generation shrink version.

Internal qualification was said to be under way on the 300-mil-package 16-Meg DRAM as the company continues to improve manufacturability and decrease production costs. A shift to the 300-mil-package 16-Meg DRAM as the industry's primary product without significant improvement in MSI's manufacturing yields would have a negative impact on results of operations, Micron said. The 64-Meg DRAM is beginning to transfer from the pilot line into the manufacturing area, and the 256-Meg DRAM is in the early stages of development, the company added.