Thursday afternoon, memory and gadget maker Micron Technology (NYSE:MU) reports third-quarter 2007 earnings. A micron is a very, very small measurement, so let's break out a high-powered microscope for this preview.

What analysts say:

  • Buy, sell, or waffle? Twenty-one analysts follow the memory maven today. Seven of them have a buy rating on the stock, thirteen recommend that we hold, and there's one analyst finger on the sell button. In our Motley Fool CAPS investor community, it's a three-star stock, based on over 320 user ratings.
  • Revenues. The average estimate calls for $1.26 billion, down 4% from last year's $1.31 billion.
  • Earnings. A net loss of $0.24 per share is in the cards, according to the Wall Street consensus. That's down from a $0.12 per-share profit a year ago.

What management says:
In the last earnings report, we were told that market conditions in the quarter led to average selling prices on NAND flash memory products that were 30% below that of the preceding period. Sales of CMOS image sensors dropped too, because of a weak mobile handset market and consumer preference for lower-margin, low-resolution camera phones.

But in the next breath, CEO Steve Appleton said that "notwithstanding current, challenging market conditions, the size of the markets for our semiconductor products continues to grow at an impressive rate. Our broad product portfolio, coupled with our expanded capacity, leaves us well positioned to leverage our investments in technology."

What management does:
Rising gross margins look good, and the operating trend is fine too. Rolling net income was inflated by $230 million in proceeds from a sale of intellectual property assets to Intel (NASDAQ:INTC) in the second quarter of fiscal 2007. When that item dropped off the four-quarter total in the last report, it made the current net margin look weak. Excluding that one-time gain, the rolling net margin for the November quarter would be 4.2%, and the August number would be 3.4%.

Margins

12/2005

3/2006

6/2006

8/2006

11/2006

3/2007

Gross

20.8%

18.8%

22.6%

22.9%

24.6%

25.9%

Operating

1.3%

(1.4%)

2.8%

7.1%

8.3%

7.7%

Net

1.9%

3.5%

7.5%

7.7%

8.5%

3.8%

FCF/Revenue

7.9%

22.3%

20.6%

12.4%

(3.2%)

(29.4%)
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
In other news, the company took on $1.27 billion of new debt in May, courtesy of Morgan Stanley (NYSE:MS) and Wells Fargo (NYSE:WFC).

Presumably, the loans will be used to continue investing in company infrastructure. Micron's capital expenditures have been on the heavy side lately, and the company seems to have developed a taste for acquisitions, too. Most of that has gone into upgraded flash manufacturing lines in a facility in Singapore.

Micron has missed analyst targets by at least $35 million -- $0.05 per share -- in each of the last three quarters. This time, nobody expects much from this company, but the earnings estimates range from breakeven to a $0.43 loss per share. That very large spread tells me that nobody is quite sure what to make of Micron right now.

Appleton's brazen optimism appears to jibe poorly with reality. Growing markets with selling prices in free-fall don't equal a good position. The CEO also publicly called the bottom of the DRAM pricing situation based on a week's worth of stable pricing -- hardly solid footing, and the price erosion then recommenced.

If you're buying this stock today, it would probably be because of the recent rumors of a leveraged buyout. Prospective acquirers supposedly include Blackstone (NYSE:BX), Intel, and Morgan Stanley. The memory market is a shifty place, with mergers and spinoffs doing the foxtrot around each other on a regular basis, and each of the three rumored buyers have decent reasons to haul out their wallets for Micron. Still, a rumor is a rumor, and you'd essentially be gambling. As a real investment, Micron isn't making much of a case for itself right now.

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Fool contributor Anders Bylund holds no position in any of the companies discussed here. You can check out Anders' holdings if you like, and Foolish disclosure will help you find the road ahead.