SECURITIES AND EXCHANGE COMMISSION
                          Washington, D. C. 20549


                                 FORM 10-Q



     (Mark One)
     [X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
              EXCHANGE ACT OF 1934

     For the quarterly period ended        February 26, 1998
                                   ------------------------------------------
                                      OR

     [ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
              EXCHANGE ACT OF 1934

     For the transition period from                    to
                                   --------------------  --------------------

     Commission File Number:        0-17932
                            -------------------------------------------------





                          Micron Electronics, Inc.
          ------------------------------------------------------
          (Exact name of registrant as specified in its charter)





               Minnesota                                       41-1404301
     -------------------------------                      -------------------
     (State or other jurisdiction of                       (I.R.S. Employer
     incorporation or organization)                       Identification No.)


     900 E. Karcher Road,  Nampa, Idaho                                 83687
     ------------------------------------------------------------------------
     (Address of principal executive offices)                      (Zip Code)


     Registrant's telephone number, including area code        (208) 898-3434
                                                       ----------------------

  Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes  X   No
    ---     ---

  The number of outstanding shares of the registrant's common stock as of
March 16, 1998 was 95,663,180.

<PAGE>
                      PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

Micron Electronics, Inc.
Statements of Operations
(Amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>

                         For the quarter ended      For the six months ended
                       February 26,  February 27,  February 26,  February 27,
                               1998          1997          1998          1997
-----------------------------------------------------------------------------
<S>                      <C>           <C>          <C>            <C>
Net sales                $  494,760    $  510,274   $ 1,053,650    $  931,292
Cost of goods sold          490,302       418,659       971,978       759,227
                         ----------    ----------   -----------    ----------
Gross margin                  4,458        91,615        81,672       172,065
Selling, general and
 administrative              91,938        48,420       164,196        89,899
Research and development      3,759         1,034         7,341         1,917
Other expense (income),
  net                        19,196          (903)       21,003        (2,556)
                         ----------    ----------   -----------    ----------
Operating income (loss)    (110,435)       43,064      (110,868)       82,805
Gain on sale of MCMS
  common stock              156,222             -       156,222             -
Interest income, net          1,989         1,536         4,183         2,806
                         ----------    ----------   -----------    ----------
Income before taxes          47,776        44,600        49,537        85,611
Income tax provision         23,011        16,761        23,707        32,960
                         ----------    ----------   -----------    ----------
Net income               $   24,765    $   27,839   $    25,830    $   52,651
                         ==========    ==========   ===========    ==========
Earnings per share:
  Basic                  $     0.26    $     0.30   $      0.27    $     0.57
  Diluted                      0.26          0.30          0.27          0.56

Number of shares used in
 per share calculation:
  Basic                      95,622        92,988        95,587        92,726
  Diluted                    95,735        93,630        95,798        93,274

</TABLE>


















The accompanying notes are an integral part of the financial statements.

                                     1
<PAGE>

Micron Electronics, Inc.
Balance Sheets
(Dollars in thousands, except par value amounts)
<TABLE>
<CAPTION>
As of                                   February 26, 1998     August 28, 1997
-----------------------------------------------------------------------------
<S>                                            <C>                 <C>
ASSETS
Cash and cash equivalents                      $  341,075          $  183,935
Liquid investments                                 10,034              10,068
Receivables                                       151,107             223,476
Inventories                                        54,986             115,501
Deferred income taxes                              38,859              26,240
Other current assets                                3,380               3,928
                                               ----------          ----------
  Total current assets                            599,441             563,148

Property, plant and equipment, net                144,478             191,536
Other assets                                          992               3,662
                                               ----------          ----------
  Total assets                                 $  744,911          $  758,346
                                               ==========          ==========

LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued expenses          $  266,264           $ 304,608
Accrued licenses and royalties                     36,547              36,034
Current debt                                       17,048              18,622
                                               ----------          ----------
  Total current liabilities                       319,859             359,264

Long-term debt                                     15,238              20,019
Deferred income taxes                               3,277                  86
Other liabilities                                  13,499              13,406
                                               ----------          ----------
  Total liabilities                               351,873             392,775
                                               ----------          ----------

Commitments and contingencies

Common stock, $.01 par value,
  authorized 150.0 million shares;issued
  and outstanding 95.7 million and 95.6
  million shares as of February 26, 1998
  and August 28, 1997, respectively                   957                 956
Additional capital                                121,032             120,108
Retained earnings                                 270,950             245,139
Cumulative foreign currency translation
 adjustment                                            99                (632)
                                               ----------          ----------
  Total shareholders' equity                      393,038             365,571
                                               ----------          ----------
  Total liabilities and shareholders' equity   $  744,911          $  758,346
                                               ==========          ==========
</TABLE>






The accompanying notes are an integral part of the financial statements.
                                     2
<PAGE>

Micron Electronics, Inc.
Statements of Cash Flows
(Amounts in thousands)
<TABLE>
<capiton>

Six months ended                        February 26, 1998   February 27, 1997
-----------------------------------------------------------------------------
<S>                                            <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                     $   25,830          $   52,651
Adjustments to reconcile net income to net
 cash provided by (used for) operating
 activities:
     Depreciation and amortization                 21,771              15,449
     Gain on sale of MCMS common stock           (156,222)                  -
     Changes in assets and liabilities, net
      of the effect of the sale of MCMS:
       Receivables                                 29,133              19,064
       Inventories                                 37,253             (37,698)
       Accounts payable and accrued expenses        7,577              (2,882)
       Accrued licenses and royalties                 513               8,329
       Deferred income taxes                       (7,303)             11,599
       Other                                        7,988                 257
                                               ----------          ----------
Net cash provided by (used for) operating
 activities                                       (33,460)             66,769
                                               ----------          ----------

CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment    (44,502)            (34,297)
Proceeds from sales of property, plant and
 equipment                                          5,802                 193
Proceeds from sale of MCMS common stock, net
 of cash                                          235,884                   -
Other                                              (1,231)                  -
                                               ----------          ----------
Net cash provided by (used for) investing
 activities                                       195,953             (34,104)
                                               ----------          ----------

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings                              173               4,568
Repayments of debt                                 (6,291)             (1,754)
Proceeds from issuance of common stock                935              49,119
Purchase and retirement of stock                      (29)               (112)
                                               ----------          ----------
Net cash provided by (used for) financing
 activities                                        (5,212)             51,821
                                               ----------          ----------
Net increase in cash and cash equivalents         157,281              84,486
Effect of exchange rate changes on cash and
 cash equivalents                                    (141)                  -
Cash and cash equivalents at beginning of
 period                                           183,935             115,839
                                               ----------          ----------
Cash and cash equivalents at end of period     $  341,075          $  200,325
                                               ==========          ==========
</TABLE>












The accompanying notes are an integral part of the financial statements.

                                     3
<PAGE>

Micron Electronics, Inc.
Notes to Financial Statements
(Tabular amounts in thousands)


1.   Unaudited Interim Financial Statements

  In the opinion of management, the accompanying unaudited financial
statements contain all adjustments (consisting solely of normal recurring
adjustments) necessary to present fairly the financial position of Micron
Electronics, Inc. and its subsidiaries (collectively, the "Company") and
their results of operations and cash flows.  Certain reclassifications have
been made, none of which affect results of operations, to present the
financial statements on a consistent basis.

  This report on Form 10-Q for the second quarter ended February 26, 1998
should be read in conjunction with the Company's Report on Form 10-K for
the fiscal year ended August 28, 1997.  Portions of the accompanying
financial statements are derived from the audited year-end financial
statements of the Company dated August 28, 1997.  The Company's fiscal year
is a 52 or 53 week period ending on the Thursday closest to August 31.

  In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statements of Financial Accounting Standard ("SFAS") No. 130, "Reporting
Comprehensive Income."  SFAS No. 130 establishes standards for the
reporting and display of comprehensive income and its components in a full
set of general purpose financial statements.  Comprehensive income is
defined as the change in equity of a business enterprise during a period
from transactions and other events and circumstances from nonowner sources.
The adoption of SFAS No. 130 is effective for the Company in fiscal 1999.

  In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information."  SFAS No. 131 requires publicly-
held companies to report financial and other information about key revenue-
producing segments of the entity for which such information is available
and is utilized by the chief operation decision maker.  Specific
information to be reported for individual segments includes profit or loss,
certain revenue and expense items and total assets.  A reconciliation of
segment financial information to amounts reported in the financial
statements is also to be provided.  SFAS No. 131 is effective for the
Company in fiscal 1999 and the form of the presentation of the Company's
financial statements has not yet been determined.


2.   Gain on Sale of MCMS Common Stock

  On February 26, 1998, the Company completed the sale of 90% of its
interest in MCMS, Inc. ("MCMS"), formerly Micron Custom Manufacturing
Services, Inc. and a wholly-owned subsidiary of the Company.  The sale was
structured as a recapitalization of MCMS (the "Recapitalization"), whereby
Cornerstone Equity Investors IV, L.P. ("Cornerstone"), other investors and
certain members of MCMS' management, including Robert F. Subia, then a
director of the Company, acquired the 90% interest in MCMS.  In exchange
for the 90% interest in MCMS, the Company received $249.2 million in cash.
Subsequent to the Recapitalization of MCMS, the Company owned a 10% interest
in MCMS which is accounted for by the Company on the cost basis.
Accordingly, results of operations of MCMS subsequent to February 26,
1998 will be excluded from the Company's results of operations.

<TABLE>
<CAPTION>
3.   Receivables
                                        February 26, 1998     August 28, 1997
-----------------------------------------------------------------------------
<S>                                            <C>                 <C>
Trade receivables                              $  149,500          $  228,220
Receivables from affiliates, net                      425               4,227
Income taxes recoverable from parent
 corporation                                          516               1,377
Other                                               8,406               4,341
Allowance for doubtful accounts                    (5,993)             (7,556)
Allowance for returns and discounts                (1,747)             (7,133)
                                               ----------          ----------
                                               $  151,107          $  223,476
                                               ==========          ==========

</TABLE>
                                     4
<PAGE>
Micron Electronics, Inc.
Notes to Financial Statements-Continued
(Tabular amounts in thousands)

<TABLE>
<CAPTION>
4.   Inventories
                                        February 26, 1998     August 28, 1997
-----------------------------------------------------------------------------
<S>                                            <C>                 <C>
Raw materials and supplies                     $   29,107          $   81,505
Work in progress                                    9,837              11,601
Finished goods                                     16,042              22,395
                                               ----------          ----------
                                               $   54,986          $  115,501
                                               ==========          ==========
</TABLE>
<TABLE>
<CAPTION>
5.   Property, Plant and Equipment
                                        February 26, 1998     August 28, 1997
-----------------------------------------------------------------------------
<S>                                            <C>                 <C>
Land                                           $    1,384          $    1,639
Buildings                                          31,500              44,403
Equipment and software                            143,241             167,413
Assets in progress                                 23,992              42,586
                                                  200,117             256,041
                                               ----------          ----------
Less accumulated depreciation and amortization    (55,639)            (64,505)
                                               ----------          ----------
                                               $  144,478          $  191,536
                                               ==========          ==========
</TABLE>
<TABLE>
<CAPTION>
6.   Accounts Payable and Accrued Expenses
                                        February 26, 1998     August 28, 1997
-----------------------------------------------------------------------------
<S>                                            <C>                 <C>
Trade accounts payable                         $  178,794          $  237,066
Payable to affiliates                              10,360              10,971
Salaries, wages and benefits                       23,909              26,006
Income taxes payable                               29,424               2,193
Equipment contracts payable                         1,203               2,139
Accrued warranty                                   14,825              12,988
Other                                               7,749              13,245
                                               ----------          ----------
                                               $  266,264          $  304,608
                                               ==========          ==========
</TABLE>
                                     5
<PAGE>
Micron Electronics, Inc.
Notes to Financial Statements-Continued
(Tabular amounts in thousands)

<TABLE>
<CAPTION>
7.   Debt
                                        February 26, 1998     August 28, 1997
-----------------------------------------------------------------------------
<S>                                            <C>                 <C>
Notes payable in periodic installments
 through September 2001, weighted average
 interest rate of 7.54% and 7.52%,
 respectively                                  $   18,341          $   22,644
Capitalized lease obligations payable in
 monthly installments through June 2000,
 interest rate of 7.28% and 7.28%,
 respectively                                       5,362               5,881
Amounts outstanding under revolving loan
 agreement, due June 1998,variable interest
 of 1.31% and 0.90%, respectively                   8,583               9,283
Amounts outstanding under revolving loan
 agreement, due May 1998, variable interest
 of 7.63% at August 28, 1997                            -                 833
                                               ----------          ----------
                                                   32,286              38,641
Less current portion                              (17,048)            (18,622)
                                               ----------          ----------
                                               $   15,238          $   20,019
                                               ==========          ==========

  The Company has an unsecured revolving credit facility, expiring June
2000, with a group of financial institutions which provides for borrowings
of up to $130.0 million.  Under the agreement, the Company is subject to
certain financial and other covenants including certain financial ratios
and limitations on the amount of dividends declared or paid by the Company.
For the quarter ended February 26, 1998, the Company was in violation of
its ratio of debt to earnings before interest, taxes, depreciation and
amortization ("EBITDA") covenant, as calculated under the terms of the
agreement, which excludes the effect of the gain from the sale of MCMS.
The Company obtained a waiver for the violation of such covenant.
As a result, as of February 26, 1998, the Company was eligible to borrow
approximately $30 million under the agreement, but had no borrowings
outstanding.

  The Company's wholly-owned subsidiary, Micron Electronics Japan K.K., has
an unsecured revolving credit facility with a financial institution,
expiring June 1998, providing for borrowings of up to 1.5 billion Japanese
yen (US$11.7 million at February 26, 1998).  As of February 26, 1998, the
Company was eligible to borrow the full amount under the agreement and had
US$8.6 million outstanding.

  Certain of the Company's notes payable are collateralized by equipment
with a total cost of $22.0 million and accumulated depreciation of $7.4
million as of February 26, 1998.


8.   Other Expense (Income), Net

  Other expense in the second quarter of fiscal 1998 included $13.0
million of costs associated with the Company's actions to realign its
PC operations to concentrate on its core markets and customers.  Such
actions include the consolidation of the Company's domestic and
international PC operations and the reduction of 10% of its workforce, or
approximately 450 employees, from generally all areas of the Company.
Costs associated with the realignment include employee termination benefits
of $6.7 million, the write-down of equipment and leasehold improvements and
the write-off of current technologies and other intangible assets as a
result of the consolidation of the Company's NetFRAME enterprise server
operations.

                                     6
<PAGE>
Micron Electronics, Inc.
Notes to Financial Statements-Continued
(Tabular amounts in thousands)


</TABLE>
<TABLE>
<CAPTION>
9.   Transactions with Affiliates
                         For the quarter ended      For the six months ended
                       February 26,  February 27,  February 26,  February 27,
                               1998          1997          1998          1997
-----------------------------------------------------------------------------
<S>                       <C>           <C>           <C>           <C>
Net sales                 $  10,373     $   8,736     $  17,838     $  13,497
Inventory purchases           6,305        18,375        23,619        36,757
Component recovery
 agreement expenses           6,589         9,677        14,941        15,461
Administrative services
 and other expenses             643           233           911           475
Property, plant and
 equipment purchases            314           383           577           529
Property, plant and
 equipment sales                159           121         5,307           121
Construction management
 services                         9            79           110           624
</TABLE>

  The above transactions with affiliates include those of MCMS up to
February 26, 1998.


10.   Income Taxes

  The provision for income taxes for the second quarter and first six
months of fiscal 1998 reflects the Company's effective tax rate of 39.5%,
principally the federal statutory rate and the net effect of state taxes,
plus $4.1 million for the write-off of a deferred tax asset relating to the
Company's consolidation of its NetFRAME enterprise server operation.  The
effective tax rate of 38.5% in the first six months of fiscal 1997
principally reflected the federal statutory rate and the net effect of
state taxes.


11.  Earnings Per Share

  For the second quarter of fiscal 1998, the Company adopted SFAS No. 128,
"Earnings Per Share," which changed the standard for computing and
presenting earnings per share.  Earnings per share for periods prior to the
second quarter of fiscal 1998 have been restated as required by SFAS 128.
Diluted earnings per share exludes the effect of antidilutive stock options.


A reconciliation of the income available to common shareholders and number of
common shares outranding follows:

<TABLE>
<CAPTION>
                         For the quarter ended      For the six months ended
                       February 26,  February 27,  February 26,  February 27,
                               1998          1997          1998          1997
-----------------------------------------------------------------------------
<S>                       <C>           <C>           <C>           <C>
Income available to
 common shareholders:
 Net income used for both
  basic and dilutive
  earnings per share      $  24,765     $  27,839     $  25,830     $  52,651
                          =========     =========     =========     =========
Common shares
 outstanding:
 Denominator for basic
  earnings per share -
  weighted average shares    95,622        92,988        95,587        92,726
 Effect of dilutive
  employee stock options        113           642           211           548
                          ---------     ---------     ---------     ---------
 Denominator for diluted
  earnings per share -
  adjusted weighted
  average shares and
  assumed conversions        95,735        93,630        95,798        93,274
                          =========     =========     =========     =========

</TABLE>
                                     7
<PAGE>

Micron Electronics, Inc.
Notes to Financial Statements-Continued
(Tabular amounts in thousands)


12.  Commitments

  As of February 26, 1998, the Company had commitments of $13.6 million
for equipment purchases and $0.8 million for construction of buildings.  In
addition, the Company is required to make minimum royalty payments under
certain agreements and periodically enters into purchase commitments with
certain suppliers.


13.  Contingencies

  Periodically, the Company is made aware that technology used by the
Company may infringe on intellectual property rights held by others.  The
Company has accrued a liability and charged operations for the estimated
costs of settlement or adjudication of asserted and unasserted claims for
alleged infringement prior to the balance sheet date.  Resolution of these
claims could have a material adverse effect on future results of operations
and could require changes in the Company's products or processes.

  During fiscal 1997, the Company began to collect and remit applicable
sales or use taxes in nearly all states.  In association therewith, the
Company is party to agreements with nearly all states which generally limit
the liability of the Company, if any, for non-remittance of sales and use
taxes prior to such agreements' effective dates.  Management believes the
resolution of any matters relating to the non-remittance of sales or use
taxes prior to the balance sheet date will not have a material adverse
effect on the Company's business and results of operations.

                                    8
<PAGE>

Item 2.  Management's Discussion and Analysis of Financial Condition and
Results of Operations

  The following discussion contains trend information and other forward-
looking statements that involve a number of risks and uncertainties.  The
Company's actual results could differ materially from the Company's
historical results of operations and those discussed in the forward-looking
statements.  Factors that could cause actual results to differ materially
include, but are not limited to, those identified in "Certain Factors" and
in other Company filings with the Securities and Exchange Commission.  All
quarterly references are to the Company's fiscal periods ended February 26,
1998, August 28, 1997 or February 27, 1997, unless otherwise indicated.
All tabular dollar amounts are stated in thousands.


Overview

  Micron Electronics, Inc. and its subsidiaries (collectively, the
"Company") manufacture electronic products and provide services for a wide
range of computer and digital applications.  The Company is a leading
provider of PC systems and network servers through the direct sales channel
in the United States and develops, markets, manufactures and supports PC
systems for consumer, business, education and government use.  The
Company's SpecTek semiconductor memory products operation processes and
markets various grades of memory products under the SpecTek brand name.
The Company is majority owned by Micron Technology, Inc ("MTI").


Results of Operations

  Net income for the second quarter of fiscal 1998 was $24.8 million, or
$0.26 per diluted share, on net sales of $494.8 million compared to net
income of $27.8 million, or $0.30 per diluted share, on net sales of $510.3
million for the second quarter of fiscal 1997.  Net income for the first
six months of fiscal 1998 was $25.8 million, or $0.27 per diluted share, on
net sales of $1,053.7 million compared to net income of $52.7 million, or
$0.56 per diluted share, on net sales of $931.3 million for the first six
months of fiscal 1997.

  On February 26, 1998, the Company completed the sale of 90% of its
interest in MCMS, Inc. ("MCMS"), formerly Micron Custom Manufacturing
Services, Inc. and a wholly-owned subsidiary of the Company.  The sale was
structured as a recapitalization of MCMS (the "Recapitalization"), whereby
Cornerstone Equity Investors IV, L.P. ("Cornerstone"), other investors and
certain members of MCMS' management, including Robert F. Subia, then a
director of the Company, acquired the 90% interest in MCMS.  In exchange
for the 90% interest in MCMS, the Company received $249.2 million in cash.
Results of operations in the second quarter of fiscal 1998 include a pre-
tax gain of $156.2 million ($94.5 million or $0.99 per diluted share, after
taxes) realized from the sale.  The Company's financial statements for the
second quarter of fiscal 1998 include the results of MCMS' operation for
that period.  Subsequent to the Recapitalization of MCMS, the Company owned
a 10% interest in MCMS which is accounted for by the Company on the cost
basis.  Accordingly, results of operations of MCMS subsequent to February
26, 1998 will be excluded from the Company's results of operations.

  Results of the Company's operations for the second quarter of fiscal 1998
also include significant operating losses from the Company's PC operation.
Selling prices for the Company's notebook products in the second quarter of
fiscal 1998 decreased to a level below the Company's cost.  In addition,
the Company wrote down the value of notebook PC inventories which the
Company purchased as a result of an overly aggressive forecast.  In
February 1998, the Company announced it had taken several actions to
realign the Company to concentrate on its core markets and customers,
including the consolidation of its domestic and international operations
and the reduction of approximately 10% of its workforce.  As a result, the
operating loss in the second quarter of fiscal 1998 includes a charge of
$13.0 million for employee severance costs and other costs to consolidate
the Company's PC operations.

                                    9
<PAGE>
Net Sales

  The following table summarizes the Company's net sales by product line:
<TABLE>
<CAPTION>
                                    Second Quarter                            Six Months
                         ------------------------------------    -------------------------------------
                                 1998               1997                1998               1997
                         -----------------  -----------------    ------------------  -----------------
<S>                      <C>        <C>     <C>        <C>       <C>         <C>     <C>        <C>
PC systems               $ 403,044   81.4%  $ 409,578   80.3%    $  862,084   81.8%  $ 755,485   81.1%
Contract manufacturing      71,522   14.5%     71,377   14.0%       141,723   13.5%    123,134   13.2%
SpecTek memory products     20,194    4.1%     29,319    5.7%        49,843    4.7%     52,673    5.7%
                         ---------  ------  ---------  ------    ----------  ------  ---------  ------
Total net sales          $ 494,760  100.0%  $ 510,274  100.0%    $1,053,650  100.0%  $ 931,292  100.0%
                         =========  ======  =========  ======    ==========  ======  =========  ======
</TABLE>

  Personal Computer Systems   Net sales of PC systems were lower in the
second quarter of fiscal 1998 compared to the second quarter of fiscal 1997
primarily as a result of an 11% decrease in average selling prices for the
Company's PC systems, partially offset by a 7% increase in unit sales of PC
systems.  Net sales of PC systems were higher in the first six months of
fiscal 1998 compared to the first six months of fiscal 1997 primarily as a
result of a 20% increase in unit sales of PC systems and an increase in non-
system revenue, partially offset by a 10% decrease in average selling
prices for the Company's PC systems.  Net sales of PC systems were 12%
lower in the second quarter of fiscal 1998 compared to the first quarter of
fiscal 1998 primarily as a result of a 10% decrease in unit sales of PC
systems and a lower level of decline in non-system revenue.

  Sales to governmental entities, including prime contractors under certain
federal government procurement programs, were 15%, 28% and 16% of total net
sales of PC systems in the second quarter and first quarter of fiscal 1998
and second quarter of fiscal 1997, respectively.  The level of the
Company's governmental sales is dependent on the buying practices of
governmental entities and the Company's participation in government
contracts in the future, of which there can be no assurance.  As a result,
the level of such sales may vary from quarter to quarter and a significant
decline could have a material adverse effect on the Company's business and
results of operations.  In particular, the Company is a supplier to a prime
contractor to the U.S. Air Force under the Desktop V contract.  The
Company's sales under this contract represented 1.5% and 5.1% of total
revenues from sales of PC systems in the second quarter and first six
months of fiscal 1998, respectively.  The Desktop V contract expires in
April 1999.

  Unit sales of notebook systems were 15% and 14% of total unit sales of PC
systems during the second quarter and first six months of fiscal 1998,
respectively, compared to 10% and 9% in the corresponding periods in 1997.
Average selling prices for the Company's notebook products were 19% and 23%
lower in the second quarter and first six months of fiscal 1998,
respectively, compared to the corresponding periods in fiscal 1997
primarily as a result of extremely intense price competition in the PC
industry for notebook products.

  Contract Manufacturing   Revenues from the Company's MCMS operation were
relatively flat in the second quarter of fiscal 1998 compared to both the
first quarter of fiscal 1998 and the second quarter of fiscal 1997, but
were 15% higher in the first six months of fiscal 1998 compared to the
first six months of fiscal 1997.  Higher production volumes in the second
quarter of fiscal 1998 compared to the second quarter of fiscal 1997 were
essentially offset by the effect on net sales of a shift toward and the
decline in pricing for memory intensive products.  For the first six months
of fiscal 1998 compared to the first six months of fiscal 1997, the effect
of higher production volumes exceeded the effect of declines in pricing for
memory intensive products.  Higher production volumes were achieved through
the acquisition and utilization of additional manufacturing equipment and
the upgrade of existing equipment at MCMS' contract manufacturing
facilities.  The Company completed the sale of 90% of its interest in MCMS
on February 26, 1998.

                                    10
<PAGE>

  SpecTek Semiconductor Memory Products   Net sales of semiconductor memory
products were 31% and 5% lower in the second quarter and first six months
of fiscal 1998, respectively, compared to the corresponding periods in
fiscal 1997, primarily due to a significant decline in average selling
prices partially offset by an increase in megabits of memory shipped.
Average selling prices in the second quarter and first six months of fiscal
1998 were 61% and 48% lower, respectively, compared to the second quarter
and first six months of fiscal 1997, while megabits of memory shipped in
the second quarter and first six months of fiscal 1998 were 78% and 83%
higher compared to the corresponding periods in fiscal 1997.  The increase
in megabits of memory shipped was primarily due to reduced component test
times which resulted in increased throughput for substantially all memory
products.  During the first quarter of fiscal 1998, the Company began to
transition production to Synchronous DRAM ("SDRAM") products, but net sales
of SDRAM memory products in the second quarter of fiscal 1998 represented
only 6% of total SpecTek sales of semiconductor memory products.  The
Company anticipates significant downward pressure on prices for future
sales of semiconductor memory products.  The Company's SpecTek
semiconductor memory products results of operations are influenced by a
number of factors including pricing for, and availability of, nonstandard
semiconductor memory components.  See "Certain Factors-SpecTek
Semiconductor Memory Products Operation."

  Historically, a substantial majority of the semiconductor components used
in the Company's SpecTek semiconductor memory products operation has been
obtained from MTI.  In the second quarter and first six months of fiscal
1998, the Company obtained 74% and 67%, respectively, of its components
from MTI, compared to 81% and 77%, respectively, in the corresponding
periods in fiscal 1997.  In the first six months of fiscal 1998, the
SpecTek semiconductor memory products operation obtained nearly 100% of its
components from three sources, including MTI.  Purchases from sources other
than MTI are generally negotiated on a purchase order basis.  There can be
no assurance the Company will be able to negotiate future purchases from
sources other than MTI on terms acceptable to the Company.  Unless the
Company is able to continue obtaining significant quantities of nonstandard
semiconductor memory components from alternative sources, the Company's
SpecTek semiconductor memory products operation could be limited by the
volume of components supplied by MTI.  Any reduction in the availability or
functionality of nonstandard semiconductor memory components from the
Company's suppliers could have a material adverse effect on the Company's
business and results of operations.  See "Certain Factors-SpecTek
Semiconductor Memory Products Operation-Dependence on Component Recovery
Agreement with MTI and -Memory Product Transition."

Gross Margin
<TABLE>
<CAPTION>
                                     Second Quarter                           Six Months
                         ------------------------------------    ------------------------------------
                                1998                1997                1998                1997
                         ----------------    ----------------    ----------------   -----------------
                                     % of                % of                % of                % of
                           Amount   Sales      Amount   Sales      Amount   Sales      Amount   Sales
                         --------   -----    --------   -----    --------   -----   ---------   -----
<S>                      <C>        <C>      <C>        <C>      <C>        <C>     <C>         <C>
PC systems               $ (6,262)  (1.6%)   $ 72,072   17.6%    $ 52,616    6.1%   $ 140,102   18.5%
Contract manufacturing      7,507   10.5%       9,401   13.2%      17,598   12.4%      15,981   13.0%
SpecTek memory products     3,213   15.9%      10,142   34.6%      11,458   23.0%      15,982   30.3%
                         --------            --------            --------           ---------
Total gross margin       $  4,458    0.9%    $ 91,615   18.0%    $ 81,672    7.8%   $ 172,065   18.5%
                         ========            ========            ========           =========
</TABLE>

  Personal Computer Systems   The significant reduction in gross margins
from sales of PC systems in the second quarter of fiscal 1998 was
principally attributable to a decline in average selling prices of the
Company's notebook products.  The Company's purchases of notebook products
from third party suppliers have required volume and price commitments with
long lead times.  During the first and second quarters of fiscal 1998, the
Company entered into arrangements to purchase notebook products at
committed prices.  As a result of the precipitous decline in industry-wide
pricing for notebook products, the Company's selling prices for notebook
products in the second quarter of fiscal 1998 declined to a level
significantly below the Company's cost.  As a result, the Company realized
significant losses on notebook products sold during the second quarter of
fiscal 1998 and wrote down the value of inventories to their current market
value.

  The gross margin realized from sales of desktop products decreased
significantly in the second quarter of fiscal 1998 compared to the second
quarter of fiscal 1997 due primarily to the effect of relatively higher
levels of inventory.  As a result of these higher levels of inventory, the
Company was unable to realize the effect of component cost reductions.

  The Company expects to continue experiencing significant pressure on
gross margins on sales of its PC systems as a result of intense price
competition in the PC industry and consumer expectations of more powerful
PC systems at lower prices.  In addition, the Company's gross margin
percentage will depend in large part on its ability to effectively forecast
demand and manage its inventories of PC components.  See "Certain
Factors-Personal Computer Systems-Competition in the PC Industry" and
"Certain Factors-Personal Computer Systems-Inventory Management."

                                    11
<PAGE>

  Contract Manufacturing   The gross margin percentage realized from the
Company's MCMS operation was lower in the second quarter of fiscal 1998
compared to the second quarter of fiscal 1997 primarily as a result of a
decrease in the overall complexity of the printed circuit board assemblies
produced and an increase in revenues derived from turnkey assembly
services.

  SpecTek Semiconductor Memory Products   The gross margin percentage
realized by the Company's SpecTek semiconductor memory products operation
was lower in the second quarter and first six months of fiscal 1998
compared to the second quarter and first six months of fiscal 1997
primarily due to significantly lower average selling prices.  Average
selling prices for the Company's SpecTek semiconductor memory products were
61% lower in the second quarter of fiscal 1998 compared to the
corresponding period in 1997 and 38% lower compared to the first quarter of
fiscal 1998.  The Company expects average selling prices for its SpecTek
semiconductor memory products to continue to decline.  As a result, the
gross margin for the Company's SpecTek semiconductor memory products
operation could decline further and adversely affect the Company's business
and results of operations.  See "Certain Factors-SpecTek Semiconductor
Memory Products Operation-Pricing of Semiconductor Memory Products."

Selling, General and Administrative
<TABLE>
<CAPTION>
                              Second Quarter                Six Months
                       --------------------------   --------------------------
                           1998  Change      1997      1998   Change      1997
                       --------------------------   --------------------------
<S>                    <C>        <C>    <C>        <C>        <C>    <C>
Selling, general and
 administrative        $ 91,938   89.9%  $ 48,420   $164,196   82.6%  $ 89,899
as a % of net sales       18.6%              9.5%      15.6%              9.7%
</TABLE>

  Selling, general and administrative expenses ("SG&A") were higher in the
second quarter and first six months of fiscal 1998 compared to the
corresponding periods in 1997 primarily as a result of higher levels of
personnel, advertising and other costs associated with the Company's PC
operation.  SG&A expenses in the first six months of fiscal 1998 include
costs associated with the Company's Japan PC call center operation opened
in the second quarter of fiscal 1997 and the Company's NetFRAME enterprise
server operation acquired in the fourth quarter of fiscal 1997.

Other Expense (Income), net
<TABLE>
<CAPTION>
                              Second Quarter                Six Months
                       --------------------------   --------------------------
                           1998  Change      1997      1998   Change      1997
                       --------------------------   --------------------------
<S>                    <C>        <C>       <C>     <C>        <C>     <C>
Other expense
 (income), net         $ 19,196   n/a       ($903)  $ 21,003   n/a     ($2,556)
</TABLE>

  Other expense in the second quarter of fiscal 1998 included $13.0
million of costs associated with the Company's actions to realign its
PC operations to concentrate on its core markets and customers.  Such
actions include the consolidation of the Company's domestic and
international PC operations and the reduction of 10% of its workforce, or
approximately 450 employees, from generally all areas of the Company.
Costs associated with the realignment include employee termination benefits
of $6.7 million, the write-down of equipment and leasehold improvements and
the write-off of current technologies and other intangible assets as a
result of the consolidation of the Company's NetFRAME enterprise server
operations.  In addition, other operating expense for the first six months
of 1998 included $5.2 million for the write-off of abandoned in-development
software projects.

Research and Development
<TABLE>
<CAPTION>
                              Second Quarter                Six Months
                       --------------------------   --------------------------
                           1998  Change      1997      1998   Change      1997
                       --------------------------   --------------------------
<S>                    <C>       <C>     <C>        <C>       <C>     <C>
Research and
 development           $  3,759  263.5%  $  1,034   $  7,341  282.9%  $  1,917
as a % of net sales        0.8%              0.2%       0.7%              0.2%
</TABLE>

  Research and development expenses were higher in the second quarter of
fiscal 1998 compared to the second quarter of fiscal 1997 primarily as a
result of the development activities associated with the Company's NetFRAME
enterprise server operation.  The Company expects its future research and
development expenses to be substantially lower as a percentage of net sales
as a result of the reduction in force and the consolidation of its NetFRAME
enterprise server operations.

                                    12
<PAGE>

Income Tax Provision
<TABLE>
<CAPTION>
                              Second Quarter                Six Months
                       --------------------------   --------------------------
                           1998  Change      1997      1998   Change      1997
                       --------------------------   --------------------------
<S>                    <C>       <C>     <C>        <C>       <C>     <C>
Income tax provision   $ 23,011  37.3%   $ 16,761   $ 23,707  (28.1%) $ 32,960
</TABLE>

  The provision for income taxes for the second quarter and first six
months of fiscal 1998 reflects the Company's effective tax rate of 39.5%,
principally the federal statutory rate and the net effect of state taxes,
plus $4.1 million for the write-off of a deferred tax asset relating to the
Company's consolidation of its NetFRAME enterprise server operation.  The
effective tax rate of 38.5% in the first six months of fiscal 1997
principally reflected the federal statutory rate and the net effect of
state taxes.

Liquidity and Capital Resources

  As of February 26, 1998, the Company had cash and equivalents of $341.1
million, representing an increase of $157.1 million compared to August 28,
1997.  Principal sources of liquidity in the first six months of fiscal
1998 were $235.9 million of net proceeds realized from the sale of 90% of
the Company's interest in MCMS, formerly a wholly-owned subsidiary of the
Company, and $5.8 million from sales of property, plant and equipment.
Principal uses of cash in the first six months of fiscal 1998 were
property, plant and equipment expenditures of $44.5 million for expansion
and capacity improvements of the Company's manufacturing operations, $33.5
million for operating activities and $6.3 million for the repayment of
debt.

  The Company has an unsecured revolving credit facility, expiring June
2000, with a group of financial institutions which provides for borrowings
of up to $130.0 million.  Under the agreement, the Company is subject to
certain financial and other covenants including certain financial ratios
and limitations on the amount of dividends declared or paid by the Company.
For the quarter ended February 26, 1998, the Company was in violation of
its ratio of debt to earnings before interest, taxes, depreciation and
amortization ("EBITDA") covenant, as calculated under the terms of the
agreement, which excludes the effect of the gain from the sale of MCMS.
The Company obtained a waiver for the violation of such covenant.  As a
result, as of February 26, 1998, the Company was eligible to borrow
approximately $30 million under the agreement, but had no borrowings
outstanding.

  The Company's wholly-owned subsidiary, Micron Electronics Japan K.K., has
an unsecured revolving credit facility with a financial institution,
expiring June 1998, providing for borrowings of up to 1.5 billion Japanese
yen (US$11.7 million at February 26, 1998).  As of February 26, 1998, the
Company was eligible to borrow the full amount under the agreement and had
US$8.6 million outstanding.

  On October 11, 1996, the Company filed a registration statement with the
Securities and Exchange Commission allowing for the issuance from time to
time by the Company of debt and/or equity securities with a value of up to
$75.0 million, of which $51.0 million has been issued.

  As of February 26, 1998, the Company had commitments of $14.4 million for
capital expenditures for expansion and upgrade of facilities and equipment.
The Company anticipates making capital expenditures in fiscal 1998 in
excess of $70 million.  The Company is constructing an approximately
325,000 square foot facility in Nampa, Idaho.  This new facility is
expected to provide space for the expansion of the Company's Nampa, Idaho
PC operation and will provide space for possible future expansion.

  The Company expects that its future working capital requirements will
continue to increase.  The Company believes that currently available cash
and cash equivalents, cash flows from operations, the Company's current
credit facilities and equipment financings will be sufficient to fund its
operations through fiscal 1998.  However, maintaining an adequate level of
working capital through the end of fiscal 1998 and thereafter will depend
in large part on the success of the Company's products in the marketplace
and the Company's ability to control inventory levels, component costs and
other operating expenses.  The Company may require additional financing for
growth opportunities, including any internal expansion that the Company may
undertake, expansion and capacity enhancements to additional sites, or
strategic acquisitions or partnerships.  There can be no assurance that any
financing will be available on terms acceptable to the Company, if at all.


                                    13
<PAGE>

Certain Factors

  In addition to factors discussed elsewhere in this Form 10-Q and in other
Company filings with the Securities and Exchange Commission, the following
are important factors which could cause actual results or events to differ
materially from the historical results of the Company's operations or those
results or events contained in any forward-looking statements made by or on
behalf of the Company.

General

 Fluctuations in Operating Results and Stock Price

  The Company's past operating results have been, and its future operating
results may be, subject to seasonality and other fluctuations, on a
quarterly and an annual basis, as a result of a wide variety of factors,
including, but not limited to, industry competition, the Company's ability
to accurately forecast demand for its PC products, fluctuating market
pricing for PCs and semiconductor memory products, the Company's ability to
effectively manage inventory levels, the lead time and inventory exposure
from shipments of products from OEM suppliers, fluctuating component costs,
changes in product mix, inventory obsolescence, the timing of new product
introductions by the Company and its competitors, availability and pricing
of the memory components used by the Company's SpecTek semiconductor memory
products operation, seasonal government purchasing cycles, manufacturing
and production constraints, the effects of product reviews and industry
awards, seasonal cycles common in the PC industry and critical component
availability.  As a result, the operating results for any particular period
are not necessarily indicative of the results that may occur in any future
period.  The trading price of the common stock of the Company is subject to
significant fluctuations due to general market conditions and financial
performance of the Company, MTI and other companies in the PC industry,
announcements of technological innovations, new commercial products or new
strategies by competitors, component availability and pricing or other
factors.

 Management

  Historically, the Company has experienced expansion in the number of its
employees, in the breadth and complexity of its management, in operating
and financial information systems and in its geographic scope of
operations.  These expansions have resulted in new and increased
responsibilities for the Company's management and has placed, and continues
to place, significant demands upon the Company's management, operating and
financial information systems and other resources and systems.  The Company
recently reduced its workforce by approximately 10%.  There can be no
assurance that such action will not place a strain on the Company's
operation, which could have a material adverse effect on the Company's
business and results of operations.  The Company continues to consider
various expansion alternatives, including expansion of facilities,
acquisition or establishment of facilities in new geographic regions and
certain strategic relationships.  While the Company recently recruited five
new executives, there can be no assurance that the Company's management
resources, operating and financial information systems and other resources
and systems will be adequate to support the Company's existing or future
operations, the failure of which could have a material adverse effect on
the Company's business and results of operations.

 Intellectual Property Matters

  It is common in the electronics industry for patent, trademark and other
intellectual property rights claims to be asserted against companies,
including component suppliers and PC manufacturers.  Periodically, the
Company is made aware that technology used by the Company may infringe on
intellectual property rights held by others.  The Company evaluates all
such claims and, if necessary and appropriate, seeks to obtain licenses for
the continued use of such technology.  The Company has accrued a liability
and charged operations for the estimated costs of settlement or
adjudication of asserted and unasserted claims for alleged infringement
prior to the balance sheet date.  The Company would be placed at a
competitive disadvantage if it were unable to obtain such licenses upon
terms at least as favorable as those experienced by the Company's
competitors.  The Company has entered into several intellectual property
license agreements, which generally require one-time or periodic royalty
payments and are subject to expiration at various times.  The Company is
unable to predict whether any of these license agreements can be obtained
or renewed on terms acceptable to the Company.  If the Company or its
suppliers are unable to obtain licenses necessary to use intellectual
property in their products or processes, the Company may be forced to
market products without certain technological features or software,
discontinue sales of certain of its products and/or defend legal actions
taken against it relating to allegedly protected technology.  The inability
of the Company to obtain licenses necessary to use certain technology, or
an inability to obtain such licenses on competitive terms, or any
litigation determining that the Company, in the manufacture or sale of its
products, has infringed on the intellectual property rights of third
parties could have a material adverse effect on the Company's business and
results of operations.

                                    14
<PAGE>

  The Company, as a majority-owned subsidiary of MTI, is licensed under
certain license agreements between MTI and third parties.  The Company
makes payments to MTI relating to certain of such agreements.  The
Company's rights under such agreements may be terminated by MTI in the
event that the Company is no longer a majority-owned subsidiary of MTI.  In
the event of any such termination, the inability of the Company
independently to obtain such rights on similar terms could have a material
adverse effect on the Company's business and results of operations.

 MTI Ownership of Common Stock of the Company

  As of February 26, 1998, MTI owned 64% of the Company's outstanding
common stock.  In addition, four of the seven directors of the Company are
also directors of MTI, including Steven R. Appleton, Chairman and Chief
Executive Officer of MTI.  So long as MTI continues to own a majority of
the outstanding common stock of the Company, MTI will have the ability to
control the outcome of matters requiring shareholder approval, including
the election of directors, and generally will have the ability to control
the management and certain financial and other affairs of the Company.
Termination or modification of certain of the Company's arrangements with MTI
resulting in terms less favorable to the Company could adversely affect the
Company's business and results of operations.  In the event that MTI's
ownership of the Company were to decrease below certain levels, certain
arrangements may be terminated by MTI, which could have a material adverse
effect on the Company's business and results of operations.  See
"Intellectual Property Matters" and "SpecTek Semiconductor Memory Products
Operation-Dependence on Component Recovery Agreement."

  The level of MTI's ownership of the common stock of the Company may limit
the Company's ability to complete future equity financings.  In addition,
the sale on the open market of substantial amounts of shares of common
stock of the Company currently held by MTI could adversely affect the
prevailing market price of common stock of the Company.  MTI's ability to
sell shares of common stock of the Company, unless registered under the
Securities Act of 1933, as amended (the "Securities Act"), is subject to
volume and other restrictions pursuant to Rule 145 promulgated under the
Securities Act.

  On October 11, 1996, the Company filed a registration statement with the
Securities and Exchange Commission allowing for the issuance from time to
time by the Company of debt and/or equity securities with a value of up to
$75.0 million, of which $51.0 million has been issued.  The registration
statement also allows for an additional $250.0 million of outstanding
common stock of the Company to be sold by certain existing shareholders,
consisting of MTI and certain management employees, of which $212.9 million
has been sold.

 Dependence on Key Personnel

  The future success of the Company will depend, in part, on its ability to
attract and retain key management, technical and sales and marketing
personnel.  The Company attempts to enhance its management and technical
expertise by recruiting qualified individuals who possess desired skill
sets and experience in certain targeted areas.  There is competition for
such personnel in the electronics industries, and the Company's inability
to retain employees and attract and retain sufficient additional employees,
particularly in the areas of information technology, engineering and
technical support resources, could have a material adverse effect on the
Company's business and results of operations.  The Company does not
currently maintain "key man" life insurance with respect to any of its
employees.  There can be no assurance that the Company will not lose key
personnel or that the loss of any key personnel will not have a material
adverse effect on the Company's business and results of operations.

 Year 2000

  Some computer software and hardware systems will require modification in
order to remain fully operational after January 1, 2000.  The Company is in
the process of assessing the readiness of its internal computer systems and
the systems of its key subcontractors and suppliers relative to the year
2000, as well as the readiness of its computer systems sold to customers.
The Company expects to successfully implement modifications to its systems
necessary to address year 2000 issues relating to its internal computer
systems, and does not believe that the cost of such actions will have a
material adverse effect on the Company's results of operations or financial
condition.  However, there can be no assurance that interruption of the
Company's internal computer systems or systems of its subcontractors and
suppliers will not occur or that the Company will not incur substantial
costs to implement necessary changes to such systems.  Although the Company
does not anticipate incurring significant costs to modify computer systems
sold to customers,  there can be no assurance that significant costs will
not be incurred.  If the Company incurred substantial costs to implement
necessary changes to its internal computer systems or in connection with
any interruption of the Company's internal computer systems, there could
be a material adverse effect on the Company's business and results of
operations.

                                    15
<PAGE>

 Government Regulation

  The Company is subject to a variety of federal, state, local and foreign
laws and regulations, including, but not limited to, Federal Communications
Commission regulations, governmental procurement regulations, import and
export regulations, Federal Trade Commission regulations, securities
regulations, environmental regulations, antitrust regulations, and labor
regulations.  Any failure by the Company to comply with such regulations in
the past, present or future could subject the Company to liabilities and/or
the suspension of its operations, which could have a material adverse
effect on the Company's business and results of operations.

Personal Computer Systems

 Competition in the PC Industry

  The PC industry is highly competitive and has been characterized by
intense pricing pressure, generally low gross margin percentages, rapid
technological advances in hardware and software, frequent introduction of
new products, and rapidly declining component costs. Competition in the PC
industry is based primarily upon brand name recognition, performance,
price, reliability and service and support.  As a result of PC industry
standards, the Company and its competitors use many of the same components,
typically from the same set of suppliers, which limits the Company's
ability to technologically and functionally differentiate its products.
The Company's sales of PC systems has historically benefited from increased
name recognition and market acceptance of the Company's PC systems,
primarily resulting from the receipt by the Company of awards from trade
publications recognizing the price and performance characteristics of
Micron brand PC systems and the Company's service and support functions.
The Company competes with a number of PC manufacturers which sell their
products primarily through direct channels, including Dell Computer, Inc.
and Gateway 2000, Inc.  The Company also competes with PC manufacturers,
such as Apple Computer, Inc., Compaq Computer Corporation, Hewlett-Packard
Company, International Business Machines Corporation, NEC Corporation and
Toshiba Corporation among others, which have traditionally sold their
products through national and regional distributors, dealers and value
added resellers, retail stores and direct sales forces.  In addition, the
Company expects to face increased competition in the U.S. direct sales
market from foreign PC suppliers and from foreign and domestic suppliers of
PC products that decide to implement, or devote additional resources to, a
direct sales strategy.  In order to gain an increased share of the United
States PC direct sales market, these competitors may effect a pricing
strategy that is more aggressive than the current pricing in the direct
sales market.  Many of the Company's PC competitors have greater brand name
recognition, offer broader product lines, have substantially greater
financial, technical, marketing and other resources than the Company and
may benefit from component volume purchasing and product and process
technology license arrangements that are more favorable in terms of pricing
and availability than the Company's arrangements.  The failure of the
Company to compete effectively in the marketplace could have an adverse
effect on the Company's business and results of operations.

  The Company believes that the rate of growth in worldwide sales of PC
systems, particularly in the United States, where the Company sells a
substantial majority of its PC systems, has declined and may remain below
the growth rates experienced in recent years.  Any general decline in
demand or decline in the rate of increase in demand for PC systems could
increase price competition and could have a material adverse effect on the
Company's business and results of operations.

 Inventory Management

  The Company's ability to compete successfully in the PC market in the
future will depend in large part on its ability to accurately forecast
demand for its PC products and effectively manage its PC inventories.  The
Company's PC operations focus on the direct sale of assemble-to-order PC
systems that feature components incorporating the latest technological
developments in the PC industry.  The Company has experienced in the past,
and could experience in the future, excess PC inventories and inventory
obsolescence resulting from, among other things, the Company's accuracy in
forecasting demand for its PC products, the fast pace of technological
developments in the PC industry and the short product life cycles of PC
systems and components.  In particular, the Company wrote down the value of
its notebook inventories to then market values in the second quarter of
fiscal 1998 as a result of an overly aggressive forecast.  In addition,
because high volumes of quality components are required for the manufacture
of the Company's PC systems, the Company has experienced in the past, and
expects to experience in the future, shortages and other supply constraints
of key components.  Such shortages or supply constraints have in the past
adversely affected, and could in the future adversely affect, the Company's
ability to ship products on schedule or at expected gross margins.  To be
successful in the future, the Company must accurately forecast  demand for
its PC products and obtain adequate, but not excessive, supplies of
components to meet actual demand.  The failure of the Company to manage its
inventories effectively could result in excess PC inventories, inventory
obsolescence, component shortages and untimely shipment of products, any of
which could have a material adverse effect on the Company's business and
results of operations.

                                    16
<PAGE>

 Dependence on Key Sources of Supply

  The Company focuses on providing PC systems that feature components and
software incorporating the latest technological developments in the PC
industry, which components are periodically in short supply and are
available from sole or a limited number of suppliers.  As a result, the
Company has experienced in the past, and expects to experience in the
future, shortages in the components used in its PC systems.    The
microprocessors used in the Company's PC systems are manufactured
exclusively by Intel and, from time to time, the Company has been unable to
obtain sufficient quantities of certain Intel microprocessors.  In
addition, a significant portion of the RAM components used in the Company's
PC systems are supplied by MTI, and the Company generally relies on MTI to
supply the latest memory densities and configurations available.  The
Company relies, to a certain extent, upon its suppliers' abilities to
enhance existing products in a timely and cost-effective manner, to develop
new products to meet changing customer needs and to respond to emerging
standards and other technological developments in the PC industry.  The
Company's reliance on a limited number of suppliers and on a strategy of
incorporating the latest technological developments into its PC systems
involves several risks, including the possibility of shortages and/or
increases in costs of components and software, and risk of reduced control
over delivery schedules, which could have a material adverse effect on the
Company's business and results of operations.

  The Company's notebook PC systems are currently assembled by third-party
manufacturers.  These outsourcing arrangements and any future outsourcing
arrangements that the Company may enter into may reduce the direct control
the Company has over certain components and the assembly of such products.
There can be no assurance that the Company's outsourcing arrangements will
not result in quality problems or affect the Company's ability to ship such
products on a timely basis or the flexibility of the Company to respond to
changing market conditions.  Moreover, although arrangements with such
manufacturers may contain provisions for warranty obligations on the part
of such manufacturers, the Company remains primarily responsible to the
consumer for warranty obligations.  Any unanticipated product defect or
warranty obligation, whether pursuant to arrangements with third-party
manufacturers or otherwise, could adversely affect the Company's business
and results of operations.

 State Taxation

  During fiscal 1997, the Company began to collect and remit applicable
sales or use taxes in nearly all states.  In association therewith, the
Company is party to agreements with nearly all states which generally limit
the liability of the Company, if any, for non-remittance of sales and use
taxes prior to such agreements' effective dates.  Management believes the
resolution of any matters relating to the non-remittance of sales or use
taxes prior to the balance sheet date will not have a material adverse
effect on the Company's business and results of operations.

SpecTek Semiconductor Memory Products Operation

 Dependence on Component Recovery Agreement with MTI

  Historically, a substantial majority of the components used in the
Company's SpecTek semiconductor memory products operation has been obtained
from MTI.  The Company and MTI are parties to a Component Recovery
Agreement, effective as of August 30, 1996 (the "Component Recovery
Agreement"), under which MTI is required to deliver to the Company all of
the nonstandard memory components produced at MTI's semiconductor
manufacturing operations.  The Company's cost of such components generally
is determined as one-half of the operating income generated from the
Company's SpecTek sales of semiconductor memory products supplied by MTI.
The Component Recovery Agreement, which expires on September 2, 1999, may
be terminated by MTI in the event that MTI's ownership of the Company falls
below 30%.  Expiration, termination or renegotiation of the Component
Recovery Agreement could have a material adverse effect on the Company's
business and results of operations.

  MTI is in the process of transitioning its semiconductor memory
operations toward SDRAM from EDO memory products and toward 64 Meg from 16
Meg densities.  The Company is unable to predict the impact these
transitions will have on the volume or grade of nonstandard memory
components supplied by MTI.  Other changes in MTI's semiconductor
manufacturing processes resulting in improvement of device yields and/or
changes in the product mix or specifications of its memory components, or
other changes or events at MTI adversely affecting its overall
manufacturing output, could adversely affect the volume of nonstandard
memory components supplied by MTI.  There can be no assurance that MTI will
continue to produce adequate volumes of nonstandard memory components to
maintain the Company's SpecTek semiconductor memory products operation at
existing or historic levels.

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<PAGE>

  Many semiconductor memory manufacturers are reluctant to sell nonstandard
memory components because such components could compete with their full
specification memory components for similar applications.  In addition,
some manufacturers are concerned that subsequent testing performed by a
recovery operation could reveal proprietary data regarding manufacturing
yields and processes.  As a result, there can be no assurance that the
Company will be able to obtain nonstandard memory components from
semiconductor manufacturers in quantities sufficient to meet demand for the
Company's SpecTek products.  Any reduction in the availability or
functionality of nonstandard memory components from the Company's suppliers
could have a material adverse effect on the Company's business and results
of operations.

 Pricing of Semiconductor Memory Products

  Pricing for the Company's SpecTek semiconductor memory products
fluctuates, to a large degree, based on industry-wide pricing for
semiconductor memory products.  The Company has experienced significant
declines in the average selling prices of its SpecTek semiconductor memory
products as industry-wide average selling prices for full specification
semiconductor memory products experienced sharp declines.  The Company
believes that such decline in average selling prices of semiconductor
memory products was due primarily to changes in the balance of supply and
demand for these commodity products, and the Company is unable to predict
the impact of semiconductor memory product market dynamics in future
periods.  Due to increased market risk associated with holding purchased
memory components in inventory, the Company has experienced in the past,
and may experience in the future, losses from write-downs of memory
component inventories in periods of declining prices.  Further declines in
pricing for semiconductor memory products would likely result in declines
in average selling prices of the Company's SpecTek semiconductor memory
products, which could have a material adverse effect on the Company's
business and results of operations.

 Memory Product Transition

  The semiconductor memory industry is characterized by, among other
things, rapid technological change, frequent product introductions and
enhancements, difficulties experienced in transitioning to new products,
relatively short product life cycles and volatile market conditions.
During the first quarter of fiscal 1998, SpecTek began to transition
production to Synchronous DRAM ("SDRAM") memory products.  In addition, the
Company anticipates beginning the initial phase of its transition to 64 Meg
memory products.  During periods of product transition, the Company's
SpecTek semiconductor memory products operation has experienced in the
past, and may experience in the future, significant increases in component
test times and corresponding decreases in throughput.  Future gross margins
could be adversely affected if the Company is unable to effectively
transition to new products in a timely fashion.

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                        PART II.  OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K

  (a)  The following are filed as a part of this report:

  Exhibit  Description
  -------  --------------------------------------------------------------
  10.47    Form of Employment and Noncompete Agreement, with 12-month
            termination provision, for certain officers of the Registrant
  10.48    Form of Employment and Noncompete Agreement, with 6-month
            termination provision, for certain officers of the Registrant
  10.49    Addendum to Severance Agreement, dated January 23, 1998, by and
            between the Company and T. Erik Oaas
  10.50    Addendum to Severance Agreement, dated January 12, 1998, by and
            between the Company and Gregory D. Stevenson
  10.51    Termination Agreement, dated December 21, 1997, between the
            Company and Robert F. Subia
  10.52    Employment Offer, dated January 10, 1998, to Joel J. Kocher (1)
  27       Financial Data Schedule

  (1)  Confidential treatment has been requested for certain portions of
this document.  Such portions have been redacted and marked with a double
XX.  The non-redacted version of this document has been sent to the
Securities and Exchange Commission pursuant to an application for
confidential treatment.

  (b)  Reports on Form 8-K:

  On January 9, 1998, the Company filed a report on Form 8-K announcing it
had entered into an agreement with Cornerstone Equity Investors IV, L.P.
("Cornerstone"), to sell a 90% interest in the Company's wholly-owned
contract manufacturing subsidiary, Micron Custom Manufacturing Services,
Inc.

  On January 22, 1998, the Company filed a report on Form 8-K announcing
the appointment of Joel J. Kocher as President of the Company.

  On February 19, 1998, the Company filed a report on Form 8-K with an
amendment to the agreement with Cornerstone.

  On March 13, 1998, the Company filed a report on Form 8-K announcing the
completion of the sale of 90% of its interest in MCMS, Inc., formerly
Micron Custom Manufacturing Services, Inc. and a wholly-owned subsidiary of
the Company, for $249.2 million in cash.



















  Micron and Micron Electronics are trademarks of the Company, and NetFRAME
and SpecTek are registered trademarks of the Company.  All other product
names appearing herein are for identification purposes only and may be
trademarks of their respective companies.

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                                SIGNATURES


  Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                              MICRON ELECTRONICS, INC.
                              -----------------------------------------------
                              (Registrant)


Dated:  March 20, 1998
                              /s/  T. Erik Oaas
                              -----------------------------------------------
                              T. Erik Oaas, Executive Vice President Finance,
                              and Chief Financial Officer (Principal
                              Financial and Accounting Officer)









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