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First Q for three years

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Micron has declared its first quarterly profit for three years. True, it's a titchy profit, just $1.1m on sales of $1.1 billion for Q1, the best-selling period of the year, ended December 4.

But the revenue line and the fact that Micron, is back in the black, shows that the DRAM market is picking up at long last. Compare and contrast with Q1 last year, when the company, America's last DRAM maker, produced a net loss of $315.9m on sales of $685.1m.

And the market will stay picked up in the medium term, according to IDC, which is forecasting industry revenue increases in 2004 and 2005. And then in 2006, as is the way of the memory market, over-production will see revenue falls once more.

Micron attributes its own turnaround to higher average selling prices and better manufacturing performance. In the late 90s, The Boise, Idaho firm had a good bull run, by coming to market with new DRAM technologies more quickly than its rivals. But worldwide oversupply in recent years, helped by state-subsidised rivals and slower than expected consolidation - mostly because basketcase Hynix is still around as an independent - resulted in a collapse of prices.

This hurt Micron badly. Without profits it was unable to innovate so quickly as before. Indeed, it was finding the pace difficult to keep up with market leader Samsung.

In January this year Micron raised $500m through a convertible bond issue, to fund "general working capital, R&D and managing the transition to new technologies and manufacturing processes". As we wrote at the time, the fact that Micron could go to market with an issue shows some strength; the fact that it needed to go to market shows the terrible weakness of the DRAM market.

In September this year, Intel pumped $450m into Micron, to help the company speed up production of DDR 2 server memory. ®

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