PC direct marketer Micron Electronics Inc said on Tuesday that its acquisition of NetFrame Systems Inc (CI No 3,179), which damaged financial results last quarter to the tune of $6.4m – including operating losses since the July takeover date – will continue to drag it down through its current first quarter. Micron projects a $5m operating loss for NetFrame in Q1. That loss will hamper a quarter that should already see weak notebook sales due to product transition and a lower average selling price for PCs, as large government shipments, due in the quarter, bring lower margins with them. But starting with the new calendar year, Micron expects NetFrame to contribute more than just operating costs and be accretive to revenue and earnings. All Micron’s server products will be marketed under the NetFrame brand, and the company expects gross margins from the NetFrame product line to be roughly double that of its PC margins. Micron also says it is aggressively hiring sales staff to better position itself for competition in the corporate sales market. As reported previously (CI No 3,243), Micron is launching its first television advertising campaign during the quarter in the hopes of broadening its brand recognition. Micron shares retreated $1.3125 on the sobering news to close at $19.25.
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