Features - Enterprise Data Insights:

LESS PRODUCTION MEANS STRONGER MEMORY MARKET

The global computer memory market will begin to recover from a downturn this year, Gartner Dataquest predicted on Tuesday, but it warned this would be due to a lack of supply, not stronger demand.

The technology researcher, based in Stamford, Conn., said worldwide sales of dynamic random access memory, the kind used predominantly in personal computers, would soar 37.8 percent in the third quarter from a year earlier, to $5.1 billion.

For the year, memory sales will rise to $18.9 billion, up 21.8 percent from 2002, Gartner said in a press release.

Shares of U.S. computer memory maker Micron Technology Inc rose $1.14, or nearly 9 percent, to $13.90 in mid-day trade on the New York Stock Exchange.

While sales in megabytes, a basic unit of computer memory, have increased 50 percent a year in recent years, overcapacity of production equipment has pushed down the price of megabytes to levels that some analysts say equal the cost of production.

Gartner said that as supply tightens, pricing will fall at a slower rate, increasing revenue and profit.

Andrew Norwood, Gartner's United Kingdom-based memory analyst, said that the recovery was tenuous, because as prices rise, the memory makers will have an incentive to increase production, which would push pricing lower again.

"This recovery is really based on people not producing as many products, rather than there being a fundamentally stronger demand out there," he said.