Memory and image sensor manufacturer Micron Technology (NASDAQ:MU) reported third-quarter results Wednesday afternoon. Judging by the fact that the share price is down about 7% as I write, you might think Micron had a rough quarter, but that really wasn't the case -- at least in my opinion. I have one concern regarding Lexar, which Micron recently acquired ... but more on that later.

Revenue for the quarter totaled $1.31 billion, and $89 million dropped down to the bottom line, which works out to $0.12 per diluted share. Analysts expected $0.10 per share on slightly higher revenue of $1.37 billion. Gross margins improved during the quarter, reaching 25% -- up from 19% in the prior quarter. The improvement came about because of better DRAM pricing and a larger fraction of total sales coming from higher margin products.

The main story with Micron continues to be the shift from being just a PC DRAM manufacturer to being a more diversified manufacturer of DRAM, NAND flash memory, CMOS image sensors, and other specialty memory products. In the third quarter, less than half of revenues came from DRAM memory. Although CMOS image sensor gross margins declined a bit to 40%, total imaging sales grew by over 30% from the previous quarter, reaching 16% of total sales. Micron believes that it continues to steal market share in CMOS image sensors from competitors like OmnivisionTechnologies (NASDAQ:OVTI). NAND flash memory totaled just 5% of sales for the quarter, since Micron is still in the process of ramping up production of NAND flash in the IMFT joint venture with Intel (NASDAQ:INTC). Output should leap upward during the last part of this year.

So, back to Lexar. One cause for Lexar's struggles was its difficulty in obtaining flash memory on favorable terms when the market was supply constrained, like last year. Lexar didn't have a manufacturing partner, which prevented it from benefiting from reduced manufacturing costs in the same way that SanDisk (NASDAQ:SNDK) does through its Toshiba partnership. It was natural to assume that Micron would be the manufacturing partner for Lexar, but management stated on the conference call that with Micron's other supply agreements it will not be able to supply all of Lexar's flash needs a year or two down the road. My concern is that other NAND flash producers will choose to play hardball with Lexar if it has to chase after flash supply again. Time will tell how all this plays out.

Micron is involved in some litigation that adds risk for investors, but I continue to like the Micron story. The memory markets are becoming increasingly diverse, and memory for mobile phones, for example, can be packaged in many different ways. As a manufacturer of a wide range of memory products, Micron should be able to pull the levers to its advantage. After a decade of poor investor returns, perhaps the company is finally ready to reverse that trend.

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Fool contributor Dan Bloom owns shares in Micron and Intel. Feel free to email comments to him at .