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.

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