RealTime IT News

Micron Exits the PC Business

Nampa, Idaho-based Micron Electronics Inc. is in essence paying to make its PC business go away -- in a "sale" to privately held Gores Technology Group.

Gores, an acquisition and turnaround management company, will assume the assets and the liabilities of Micron's PC business, and gets a $70 million cash contribution to working capital from Micron Electronics.

Micron is exiting the computer business and transitioning into a new role as a Web hosting company. The PC business has been draining its cash reserves and now the company will have no further obligation to fund the operations of the PC business.

Gores said the PC operations, which provide computer products and services for the small- and medium-size business, government, education and consumer markets, will continue to be called MicronPC, and will remain based in Idaho with its management team intact.

Micron shares were down 5 cents to $1.86 in mid-day trading.

Micron had already disclosed plans to sell or exit its PC division in order to focus on its Web hosting business, HostPro, and, through its pending acquisition of Interland, become a provider of business-class hosting solutions to the small and medium business market.

"Given the realities of the tough PC environment, and our desire to conserve cash to fund our hosting growth strategy, we believe this deal provides the best possible outcome for our shareholders and speeds our path to profitability," said Joel J. Kocher, chairman and chief executive officer of Micron Electronics.

He said that growth rates in the PC industry dropped more than six percent in the fourth quarter alone and price wars by major competitors reduced gross margins, making the PC business a major drain on the company's cash reserves.

" it became clear that it was in the best interest of our shareholders to complete our exit rapidly, cut our losses, and focus on our growing Web hosting business," Kocher said.

Following the sale of the PC division, Micron said, the company expects to have $230 million to $240 million in cash, and cash equivalents, positioning the company to launch the HostPro/Interland combined company with more than $200 million.

As for Gores, the company is sure it can make a success of the PC business.

"We are confident that the business has significant potential, and we look forward to providing the leadership and resources required to create and sustain a dynamic and market leading enterprise," said Alec Gores, founder and chairman of GTG.

Gores Technology said it has to date acquired approximately 35 companies providing high-tech services and products with total annual revenues of more than $2 billion.