美光科技 (MU) 2002 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen and welcome to Micron Technology first quarter earnings release. At this time, all parties are placed on a listen-only mode and the floor will be open for your questions and comments following the presentation. If at any point, during the teleconference, you would like to register for a question, please dial the numbers 1 followed by 4 on your touchtone telephone. I would like to turn the floor over to one of your host, Mr. Kipp A. Bedard. The floor is yours, sir.

Thank you very much. Now welcome to Micron Technologies first quarter fiscal year 2002 conference call. On the call today are Steven R. Appleton, Chairman, CEO and President, [Bill] Stover, Jr., Vice President, Finance and Chief Financial Officer and Michael W. Sadler Vice President of sales. This conference call, including audio and slide is also available on Micron's home page on the Internet at www.micron.com. If you have not had an opportunity to review the earnings press release, it is available on Micron's website, again at www.micron.com. Our call will be approximately 60 minutes in duration. There will be a taped replay of this call available at 5:30 pm, Eastern Time. You can reach that by dialing 973-341 3080 with a conformation code of \u009c3020959. This replay will run until Wednesday, December 19, 2001 at 8 pm Eastern Time. Webcast replay is available through December 26, 2001. We encourage you to monitor our website at www.micron.com throughout the quarter for the most current information on the company including information on the various financial conferences that we will be attending. During the course of this call, we may make projections or other forward-looking statements regarding future events or the future financial performance of the company and the industry. We wish to caution you that such statements are predictions and that actual events or results may differ materially. We refer you to the documents that the company filed on a consolidated basis from time-to-time with the Securities and Exchange Commission, specifically the company's recent form-10K and form-10Q. These documents contain and identify important factors that could cause the actual results for the company on a consolidated basis to differ materially from those contained in our projections or forward-looking statements. These certain factors can be found on the company's website. Although, we believe that the expectations refected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. We are under no duty to update any of the forward-looking statements after the date of the presentation, to confirm these statements to actual results. With that, I would like to turn the call over to Mr. Bill Stover.

Thanks Keith. I will briefly touch on numbers for the quarter, which ended in November 29, 2001. Net sales totalled $424 million and the company had a loss of $266 million or $0.44 per share. With the immediately preceding quarter, sales totalled $480 million and the company reported a loss of $576 million or $0.96 per share. The first quarter includes the charge in cost of goods sold for the expected loss to be realized on future sales of finished goods and work in process inventories amounting to $173 million. The net realizable value inventory adjustment required by Generally Accepted Accounting Principles for the first quarter equates to approximately $0.18 per share. Selling prices were down on an average of 24% from the prior quarter. For the 128 make synchronous DRAM, our first quarter average was approximately $1.40. You will note that Selling, General And Administrative Expenses of $80 million for this quarter was down noticeably from prior quarter. In part, the reduction is due to no longer consolidating Micron Electronics, which had been running $10-15 million per quarter. It is also due to a lower level of legal expenses. Note that the fourth quarter of last year also included $94 million pre-tax for the donation of Micron Electronics, the Inter-land stock through the Micron Foundation. Our investment in the future, represented by research and development expenses, continued at a high level. Period-to-period, our expense fluctuates with a volume of wafers processed and resources devoted to development products. In the first quarter, the higher level of activity related to 256-meg make products and to DDR devices. Micron is very well positioned with cash and liquid investment balances exceeding $1.7 billion and with that summary, I will hand it off to Mike.

Thanks [Bill]. Our fiscal Q1 can best be split into two fairly distinct periods with respect to assessment of memory demand. First half of the three-month period was characterized by sluggish demand and as expected, this resulted in continued pricing pressure that we have become accustomed to over the previous three or four quarters. In the latter half of October, we observed a significant uptake in demand and by the first quarter of November, this demand strength resulted in rather sharp stock market price increases. The robust demand environment has continued beyond the reporting period and today, market prices are trending up in both the stock market and with our OEM customers. The strengthening of the business in this particular timeframe was not unexpected as we are in the midst of the typical high point with respect to demand seasonality. What is beyond the strong seasonal period, we would not be surprised to see demand taper off somewhat from today's levels. In the quarter, we rode the seasonal demand strength by increasing megabit shipments by about 20% sequentially and by some 120% on a year-over-year basis. We also sold substantially more megabits in fiscal Q1 than we produced bringing finished goods inventory on-hand down to a level that is resulting in us quoting delivery lead times on a variety of mainstream devices. In the face of a best case, flat PC units sales environment, it is clear that memory content for a computer system is greatly accelerating and memory demand in platforms outside of traditional PC are gaining momentum with respect to becoming significant drivers of memory demand. For several quarters, I have been speaking about the main memory technology transition that will be occurring in the computing environment. We are now in the cusp of this major shift from SDRAM to DDRSDRAM and Micron is generally recognized among industry leaders as both a key technology enabler and high-volume provider of DDR to support the steep ramp of this transition.

We are following through with about 25-30% of our outlook in the current quarter being DDR and projections calling for DDR to represent over a half of our total output within a year's time. Outside the computing environment, we have started to see demand re-accelerate in the wireless handset market. Accordingly, we have again commenced shipments of our flash memory products into this market. After a couple of quarters of virtually no activity, it is certainly refreshing to re-activate customer shipments in this area. In our networking and wired communications infrastructure business, we have not seen a return to 2000 shipment rates, but business has stabilized across the entire customer base. Collaborative design activity with customers continues at a fever pace and we are securing multiple design wins for our advanced networking communications memory products such as QDR SRAM, RLDRAM, and that recently introduced line of low cost even-structured flash devices. In addition, you may have noticed that Micron recently announced that Atmel as a second source for our innovative line of SyncFlash products, assuring a comfort level for our customers as they design SyncFlash into an embedded applications such as set top boxes and a variety of communications equipment. Earlier today, we announced the signing of a MoU with Toshiba that will result in Micron taking ownership of the Dominion fabrication facility in Menace, Virginia in coordination with Toshiba's exit from the commodity DRAM business. This transaction will enhance Micron's value proposition for our customers by providing both an avenue for capacity expansion and effective broadening of our product offering in both the short and intermediate term. We believe that the industry is headed for even further consolidation and Micron is in excellent position to be a beneficiary of this consolidation trend. With that I will turn it over to Steve.

Great. Thanks Mike. Just [everyone] understands that in case the connection is not as good as you would all like it, I am actually joining the conference call from Japan for obvious reasons. We just finished the MoU with Toshiba on their facilities. So, I think, may be I will just comment on that before I turn back over to Kipp. Although, the terms are confidential, there are a few comments that I do want to make about the MoU. First, we do expect it to close by the end of our quarter, although the exact timing, as you can imagine, is difficult to predict. Initially, I think, it will result in contraction in any bit output increases and later [all of this] would depend on what we do at the facility. The NAND operation that is currently there, or I should say the NAND equipment will be moved, as Toshiba has stated. The cost to Micron of this acquisition is a fraction of what it would be to build and equip this type of facility and which, I would add, that the facility is [300 mm] capable should we choose to convert it. There is a supply agreement associated with the transaction and finally, it does include significant resources in Japan to assist Micron with further penetration in that market. So, with that, I will turn it back over to Kipp.

Thanks Steve. What we would like to do now is, take questions from callers. In the interest of time, please limit yourselves to one question and just a reminder, if you are using a speakerphone; please pick up the handset when asking any questions so that we can hear you clearly.

Ladies and gentlemen, the floor is now open for questions. If you do have a question or comment, please dial the numbers 1 followed by 4 on your touchtone telephone at this time. If at any point your question has been answered, you may remove yourself from the queue by pressing the pound key. Questions will be taken in the order they are received. Thank you. Our first question is coming from Dan Niles of Lehman Brothers. Your line is live, sir.

Okay. Steve, first of all, congratulations on another great acquisition. If you can comment a little bit on Toshiba's facilities, about the TI facilities, you are able to triple output from there. Obviously, Toshiba is much further along. Can you maybe, give some idea of, you know, the efficiencies you think you will gain as you move their manufacturing processes over to yours and in terms of the yield improvements etc...and anything around that you can talk about?

Yeah, okay, well, essentially, let me first start with the facility itself for those who are not familiar. The facility is there in Dominion includes a wafer fabrication plant. It is about a 150,000 square feet of [cleaning room] and that, keep in mind that the actual building itself is essentially three layers of 200,000 square feet. So, it is a very high quality 150,000 square feet cleaning room. When I say that, we get to use [south] floor and of course, the floor above to do things that may be in some older fabs you would have to burn a cleaner space to do this, so it is really a pretty well built facility. In addition to that, and in addition to what you would normally expect to see with the fab, which is recouped in all of the support infrastructure, there is also a 600,000 square foot building that was IBM's before they did the joint venture on that site that is also sitting there. So, you are talking about a fully developed site. The entire fab is facility, both what they call Mode I and Mode II and we will not know the exact capability that fab until we obviously we start implementing our technology. But to give you a comparison, for the size of that cleaning room, that cleaning room was actually larger than the cleaning room that we have in Lehi. So it is a pretty sizable fab and we would expect obviously to be able to achieve the same efficiency as we would in any of our other facilities.

Okay. Go ahead. Thank you.

Thank you. Our next question comes from [David Wu] of [David Wu & Associates]. Your line is live, sir.

Steve, while you are in Japan, I was wondering whether this particular deal would preclude you from any other deals, discussion or transactions with Hynex to the extent that you can comment on the discussion that Hynex where is it and we hear something about it real soon?

Yeah, I cannot really comment too much with respect to the Hynex rather than saying that the discussions are continuing as we said before. That, you know, transaction is a significant higher quantity of resources and we are talking about Toshiba, so it is very difficult for us to predict the timing as we move forward on when things might get accomplished.

But at this point, we should not take the fact that there is a Toshiba deal would mean that the Hynex deal is gone?

That is correct.

Thank you.

Thank you. Our next question is coming from [Joe Auscher] of Merrill Lynch.

Yeah. Hello gentlemen. Can you hear me? Yeah. Listen, looking at the inventory commentary that [Bill] made, I am trying to reconcile that with what is on the balance sheet; you are showing $451 million in inventory which is down just a little bit and presumably that number just does not include the 173 write-offs. So if you add that back, it looks like you were still actually putting some inventory on the balance sheet. Am I misunderstanding something?

Our characterization in the press release is, I think, the most direct for you look to, in that there was approximately 20% reduction in megabit inventories when you aggregate work in process and finished goods. The dollar values that are reported, as you understand are influenced by the reporting of the [NRB] so the megabit is the best reference for you to look at.

Okay, and then just as a follow-on to that up to the current point. Are you continuing to ship more in megabit terms than your building falling on from Mike's comment?

Yeah, this is Mike speaking, Joe. In the first couple of weeks of the new quarter, we have finished more than we produced. So yeah, our inventory levels have come down in the last three weeks.

Okay. Thank you.

Thank you. Our next question is coming from [Lima Valeperm] of [_____]. Your line is live.

A question for Steve. Steve, historically you have done an excellent job as a company, you know, buying other manufacturing assets and upgrading them and gaining market share that way. This is the second time you seem to have done that with your execution of this or the MoU with Toshiba Fab. Is it safe to assume that is that what you are planning to do going forward without bringing the Hyanex negotiation into the picture, or can we not assume that in the [sense] that you might use some other acquisition strategy to gain market share as well?

First of all, the Toshiba transaction, as I said, is separate from Hynex transaction and I would not say that obviously one precludes the other because we do not think it does. Really what you are seeing continued to occur consolidation in the market place and I think, similar, with respect to, when we did the transaction with Texas Instruments, for those of you that do not remember, we did have actual contraction from those operations for some time until we made the change in technology and until we thought that the market was right to bring that capacity back online in much greater amount. So, I think, you will see something similar with Toshiba in that, as I have already said, we expect some contraction initially, and then over time it will depend how much we doll it up. But regardless, all of this is directed and providing us a more efficient cost, so to speak, in producing our DRAM bits on a comparable basis if we were to build it from scratch.

Thanks Steve.

Thank you. Our next question is coming from Scot Randall of [Sundew Technologies]. Your line is live.

Okay. Thank you. One more question, Steve, on Toshiba. What kind of costs are involved in bringing the facility up to what Micron needs to produce its you know current DRAMs, and also any help on sizing the percentage of business that Toshiba is doing in Dominion versus Japan currently for DRAMs?

Well, I do not want to speak for Toshiba, but they were producing more DRAM in this facility than they were anywhere else, I think, on a relative comparable basis. Now, of course, they are going to change their product mix as they go through time, so and if they try to consolidate a lot of their both flash and whatever is remaining in your case, so I cannot speak for them, but the facility itself, you have to keep in mind, it is already running. They are in the process of finishing the ramp on the Flash and then also running about 20,000 wafers a month on DRAM. So, the whole facility has been facilitized and being utilized to produce products in the neighborhood of 35,000-40,000 wafers per month. The technology they have there they have been on constant transition just like we have. So we do not expect to incur very large cost in order to be able to utilize that facility to produce DRAM. So, obviously, we have to go through time as just like we would with any other facility, and how we transition there the money we would spend on transition over the next few years. But essentially, I think the way to look at it is currently a lot of wafers today and that we are expect to utilize, if not all, a majority of that equipment.

Okay. Thank you.

Thank you. Our next question is coming from [Tim Mahon] of CSFB. Your line is live.

Yeah, thanks. Guys, in our previous quarters, you gave us an idea of the percentage of bit breakdown by density. I am wondering if you can give us a clue on how the quarter shaped up.

Yeah, we sure can. In terms of wafer operations, we ran about 75% on 128 megabit DRAM, we ran about mid-teens or 15% on 256 megabit DRAM. The question will probably will come up where we are in DDR and that was also around 15% for the quarter.

That is great. Kipp, he answered my last question for I asked. Thank you.

Thank you. Our next question is coming from [Manish Goyal] of New Burger Barman. Your line is live.

Yeah, hi. I have a couple of short questions. What was the reason for such a big spike in R&D?

The research and development spending was up noticeably in the period. It does fluctuate just depending upon how many wafers in our manufacturing lines are running on product that has not yet met our internal qualifications. This particular quarter, we had significant wafer processing on 256 megabit and DDR product and that really constitutes all of the increase that you are looking at there. On a go forward basis, we would expect R&D for the quarter to run may be, $120 million?

After this transaction with Toshiba is over, how will that change your capital spending requirements for the year and is Toshiba going to provide you funding to upgrade the facilities as TI did in the previous transaction?

Well, first of all, we do not have any funding coming back from Toshiba for us to move these facilities on to our technology. But as I mentioned, we [did] supply agreement for some time. So, you know, probably it counters that to some degree with what you are thinking about. In terms of ongoing capital expenditures, they want to approved facility bases. If you look at what we have done historically, it is never actually that much money on approved facility basis and we do not expect this to be more than any of our other facilities would be, but we also have to look at it is just the normal ongoing capital expenditure that you would spend on a fab to continue to move its technology forward. So we do not expect anything here to be unusual in comparison to our other facilities.

Just one word, Steve. If as in the previous transaction with TI where you needed capital to upgrade the facility, which was provided by TI, in this transaction Micron will end up the spending money to upgrade these fabs is that we have to think about?

I think overtime, but just to help you out on a comparison basis, remember that TI...if you think of the actual wafer fabs that we utilized, there were two in Singapore, two in Japan, two in Arizona and then, we ultimately sold the one that we did not upgrade, in Richardson, and one that was a part of TI Acer of course was carved out of the deal. Though, the technology that were in those fabs was...because they had various stages of investment prior to that and because of the partnerships they had as well. I think of those are being further behind than what we are talking about here in Dominion. So Toshiba has continued to make investment in the Dominion facility to bring this technology forward. So, do not confuse the differential that we had with some of the TI facilities that we have with this facility.

Final question is for Bill. Is the reported inventory number valued at the market value of DRAM today?

We look at the time period in which we expect to move the product. As Mike as indicated, inventory levels are coming down and sales levels have recently been quite strong. So current reference points on ASP is that substantially where our reference point was for the [NRB] calculations.

So could you be just a little bit more specific. Is it calculated based on the ASPs at the end of the quarter or is it based on some projected number out in the future?

The Generally Accepted Accounting Principles require us to look at the pricing in the period in which the product is expected to move. So it is a forward-looking estimate of pricing.

Thank you.

Thank you. Our next question is coming from [John Cross] of Morgan Stanley DeanWitter. Your line is live, sir.

Thank you. To follow-on to the Toshiba side ... I wonder if you could give some idea on the transition there in terms of ... is there equipment reuse and do you require any head counts from the Dominion facility and when would you expect that supply would come off line to kind of understand the supply agreement side to the extent we can? Thanks.

First of all, the facility currently employs approximately 1500 people, which is consistent with what you would expect of a facility of that size. A lot of those people are associated with the Flash operation. So Toshiba will obviously address that in whatever form that they need to. I think there are some details to be worked out which is why we are continuing to keep the terms confidential as to how that would transition. The DRAM operation itself, though, would be completely assumed by Micron and that includes all of the facilities by the way. So the only thing that really is somewhat formulated at the moment is how the transition the equipment itself being used for Flash. All the other equipment's Micron will assume as we close the transaction. That equipment is currently being utilized to produce DRAM and it will continue to be utilized to produce DRAM. We do not anticipate the inability to use any of that equipment. In other words, we will use it all to continue forward. I think the real question for Micron in terms of the transition of that facility would be how much additional capacity and what type of that additional capacity do we want to bring online as we make use of the rest of the facility whether they be Flash - being transferred out over probably the following...again, I do not know whether it is 3 months or 6 months or 1 month. We have to go through that still, but nonetheless, that will depend upon that schedule. So we think we will use all of the equipment in its current form and it is really a question of how much additional equipment do we install to make utilization of the rest of the facility freed up by the Flash transition.

Would that suggest that from a cost perspective, that we believe that it would be cost effective, and, I guess, the assumption was, kind of before that you kind of took out the equipment because it was not cost-effective and would apply to Micron process technology but in this case, could you give us some idea on the cost delta out there and if that would be dilutive?

Well. I cannot because we have not completed a transition program. We will do that some time over the next few weeks.

Okay. Thanks.

Thank you. Our next question is coming from [Scott Merbis] of [_____] Capital. Your line is live.

Two questions; could you just discuss a little bit about what the advantage would be for you guys to only buy a minority stake in Hynex?

Again, I cannot comment on any discussions that we are having with Hynex other than to say, I do not think that a minority position of Micron and Hynex would really be of any advantage.

Okay. On that topic, can you just kind of, on that topic and talking more theoretical, it has been your previous strategy to be the low-cost guy, have the best balance sheet and put the high-cost players out of business. Doing a deal with Hynex seems little counter to that.

What assumptions are you making when you say that?

Excuse me?

And what assumptions are you making when you say that?

I am making the assumption that if you buy the business you do not close everything.

We don't close...well, it is a little difficult, I suppose to discuss the basis on the phone, but there are all kinds of assumptions that you have to make in order to assume that it will not be cost-effective for us to acquire Hynex.

I am surprised somewhat...

Well, sure. There are all sorts of assumptions that somebody has to make on the equity, on the debt, on the price, total consideration and so forth and I just do not think that any of those assumptions can be made right now.

And the last question ... the inventory write-down that is being talked? W.G. STOVER, Jr.: Correct. The inventory adjustment. The reporting of the [NRB] to lower cost of market does relate to cost of goods sold.

So, ongoing operations number...you said that was $0.18, would that be more like a $0.26 cents loss without the write down? W. G. STOVER, Jr.: It is $173 million pre-tax we gave you and estimated after-tax to the effect of $0.18 cents per share on the quarter. Does that answer your question?

Yes. Fine.

Okay. Thanks. Next question, please.

Our next question is coming from [Charles Brusher] of Bear Stearns. Your line is live.

A couple of questions. First, the average price 128 in the quarter, I think, you quoted it as about $1.40 ... what is that analysis rebound where you see the average being sort of this at this point in time and the following question is if you back up the inventory charge your gross margin would be around negative 9 or 10% if prices are in fact recovering a little bit and yet this ongoing cross reduction that imply that if prices all you could actually see a positive gross margin score?

I will tackle the current market price issue. I think 140 was the average price throughout the quarter it is fair to say that we ended the quarter at something lower than that and it is also fair to say that the current prices substantially higher than that. We have implemented two price increases to our OEM customers since the middle part in November and in general the stock market prices has been moving up if not on a daily basis at least a couple of times for week since the first part of November. So, we are on the high one-dollar range pushing close to two dollars on 128 negative equivalent basis currently.

Charles this is Kipp. I am going to take the cost with full question. We are going to let you guys look that one out. Clearly, the tough part of our guy in cost control is of course is trying to make predictions on pricing, we are just not going to do that. We continue to make great strives it the manufacturing side in terms of technology advancement bringing cost down, but the prediction on the pricing we are just going to say.

Okay fair enough. Thank you.

Our next question comes from [Joe Moore] of Goldman Sachs.

Thank you. I wonder, question on the inventory write down as well. Of the 466 million you wrote down in August, can you tell us how much of that was basically sold in the November quarters, how much of the product was written down was sold in November quarter? And a followup.

Our best estimate on that is approximately 2/3rd of the inventory and which there was an nrb at the fourth quarter has move in the first quarter.

And the charge this quarter was smaller than I would have thought given that inventory falling down 20% and prices are up you know less than I guess you had a slightly a bigger charge, is there are thing unless understanding in terms of why the charges are so much smaller?

I think you understand all the variables that are necessary to make that calculation estimates of future pricing estimates of when product is going to move so I don't think there is anything that you are misunderstanding as to what needs to be taken into account.

Great thank you.

Thank you. Our next question is coming from [Eric Ross] of Thomas Wiesel Partners. Your line is live.

Thanks guys. Can you give me a sense of what kind of market share is in DDR right now and may be what percent of the STR market is now occupy when it goes to provision?

Sure. I think currently the market share that is represented by DDR is very low probably the first calendar quarter of 2002 will be the first point of which is meaningful and our best estimate would be may be 15% of the total market in first calendar quarter of 2002 and based on what our customers are telling us in the second half of 2002 probably reach 50% or higher. So it will be the DDR market will be greater than the SDR market if you will by the end of calendar 2002. Our production by the way is paid to lead the market by about a quarter so where I said in the first calendar quarter the market might be 15% in the current timeframe or 15% in the first calendar quarter will be 25-30% and the market will move there by the second calendar quarter. So we are going to be ahead of the market by roughly one quarter with respect to taking our outlet to the market.

Do you have a sense that where your market share may be and roughly in that market?

Like I said, the market today for DDR is not that meaningful it is just still in the ramp up phase, but I think it is safe to say because what I said earlier about us leading the market by a quarter it is probably significantly higher in the DDR's phase than it is in the overall phase, but its really hard for us to estimate it right now.

Sure. And as far as the inventory levels could you actually give that to us in a weeks likely you normally do is that possible?

We don't normally give it you in weeks, but I think we provide a range and if I am not mistaken when we had this call last quarter we estimated that the industry was probably in the 8-12 week range and we were towards the lower end of the that range. My best estimate at this point would be the industry as probably in a 4-6 range and more also at the lower end of that range. [ERIC ROSS] Great. Thank you very much.

Thank you. Our next question is coming from [John Joseph] of Solomon Smith Barney. Your line is live.

Yeah. I apologize I am on a cell phone may be a little bit noisy, but Mike I want to ask you with regard to your outlook for a possible seasonal slowdown. Can you give us a real color on that, it seems that the overall demand has been strong pretty late into the season even until you know very recently as you said and one we would expected that the Christmas still has pretty well done so I want to just get you to comment on sort of the timing and the continuing strength past perhaps the peak. What say a calendar Q1 or a fiscal Q2 would on an normal seasonal basis look to you like and then third what the mix of demand on your PC customers looks like in other words is it Europe or is it Asia, is it US consumer, or USA corporate? So those are three questions. Sorry for the long question to you.

I think this seasonal strength is lasting a bit longer than we would have anticipated. John it also started a little bit later. We really did not see the seasonal strength until the first part of November we have typically released earlier and I think primarily can be attributed to the fact that PC makers are no need really taken the inventory position and as soon as they saw their demand starts to pick up which would have been in the early part of November they started increasing their orders. So that is probably explains why it started a little bit later and also why it probably has a little more late than otherwise would have been indicated. Because it is still late you at least strive up through last week to the weekend generally pretty strong. Having said that this week we have some pretty good barometers on real time measurement of demand and our upgrade business is a unique a crucial technology as a good barometer for that we have seen daily order rates tick down slightly this week. So there is some indication that seasonally things may start to taper off here a little bit. We manifest to what would have happen in the first quarter our customers are telling us to speak that you expect a typical first quarter which would be from a memory consumption standpoint may be flat slightly down from calendar Q4 level.

Slightly would be what 5% or more than that?

Obviously, slightly.

And then with regard to the demand [probes] are worldwide in segments?

I don't really see a demand that is strong relative to geography or relative to any other particular geography I guess with respect to granularity in the consumer area, both consumer notebook and desktop area we are seeing strong demand relative to the commercial side and that can probably be attributed to the you know the XP penetration in the consumer side as well as the pretty rapid memory content acceleration on the consumer PC side. Associated with XP as well as the typical price elasticity.

A quick follow on you had said non-PC applications were generating significant demand. What are those applications and what percent did they ...

The big one today is Mobil phone and in terms of percentage for us its still you know less than 5% of our business is really going towards those applications and that is really our flash memory product offering, but that would be the most significant active application today that was really relatively inactive I would say a quarter ago for us.

Okay. Thank you.

Ladies and gentleman, if you do have a question or comment, please dial the numbers 1 followed by 4 at this time. Our next question is coming from [Bill Disolan] of Davidson Investment Advisors. Your line is live.

Thank you. I wanted to follow up on last comments on relative to content. The box makers I am curious whether you are sensing any reticence on their part to increase content due to the concern that since prices are down roughly 90% versus prior year levels that there is an inevitable rebound to common in their to some degree taking that in to account when they look at the cost of memory will be as a percentage of the box?

Well, I think you would probably have to you would be better of getting that from our customers I can kind of translate what they are telling us. Certainly they watching it, but with respect to event at 256 megabytes as a percentage of the overall material cost of a system is relatively low even with some price increases assumptions built-in its still relatively low compared to what it has been historically. So I don't think there is certainly not an obsession among our customers with respect to where memory pricing might go and the impact that may have on content going forward.

And Mike to follow up do you see any indication that you are customers are far more willing to reduce content for box if and when prices arise?

Well I can only look to history for that we have never seen significant actually I think we haven't seen any absolute reductions in memory content at all regardless of the movement of pricing or actually the relative demand balance.

Thank you.

Thank you. Our next question is coming from [Henry Wosboniock] of First Union. Your line is live.

I have a couple of questions. What percentage of sales when this [_____] market last quarter?

Sorry, I can't quite understand the question.

What percentages of your shipments went into this [_____] market last quarter?

I don't know the number of precisely so I am not going to provide a range I am think it's probably in the 20-30% range.

Okay. Do you guys have a number as to what percentage of your DDR revenue went into the x box product?

We are not in a position to be able to provide that data specifically.

Now that you are guys are buying some Toshiba. Why do you think this Infineon in terms of the overall competitive landscape will they [though it tends] to be a major player?

This is Steve. Clearly, Infineon is large producer today and the fact that we were ended up doing the Toshiba transaction as opposed to them. I don't think changes in the potential landscape for Infineon. They clearly have there is a lot of other players that need to exit this business. So, I don't think that there is a lack of opportunity for further consolidation for Infineon leader.

Do you think that [this] Infineon in a position to be and acquire as supposed to be inquired themselves?

I do not know. You're after that depends on Infineon and [_____] and what they think is would be a strategic event for particular acquisition.

Thank you.

Thank you. Our next question is coming from [Dan Scobel] of Needham & Company. Your line is live.

Thank you. Can you comment on the mix of flash and Static RAM business?

Between Flash and Static RAM?

No flash and Static RAM is a percentage of whole?

Yeah, I think we have stated it was less around 5% or slightly less than 5% of our total.

So that's of revenues?

Yeah that's correct.

Okay. Can you comment on price premium and the DDR and 256-meg DDRRAM space?

Yeah that is a good question. Currently; with our OEM customer base there is a price premium for DDR and its in the neighborhood of 20-30% in the [_____] market I think primarily in anticipation of a pretty significant ramp of DDR systems in the market place from first quarter, the price premium for DDR relative to SDR at any given density is lets say higher than 50%.

And how about 256-meg versus 128?

They are priced roughly at bit parity.

Okay. Can you comment on what bid gross you are expecting for production this quarter?

Yeah, we think that will be flat.

Okay and finally, on the Toshiba deal. Can you give us any more indication in terms of cost, I mean is it stock, is it cost, is it significant, or is it insignificant? What should we be looking to happen to your finances?

Well, again I cannot comment because that almost all the terms are confidential, but we do not I repeat we do not expect it to be a significant cash impact.

Okay. You mentioned as supply agreement who is providing parts to who for what range and what time?

Well, again we have supply agreement Micron will be providing parts to Toshiba, but we cannot comment on this?

Okay. And finally, what is the approximate line with that Toshiba is running on the Dominion?

Well, again I cannot comment on that.

Okay. Thank you.

Thank you. Our next question is coming from [Merry Brodmann] of [_____]. Your line is live.

Yes, I wonder to what's limiting the demand and output for DDR right now, is chipset delivering limiting demand at all and how about supply? Is the market pretty well supplied at this point?

I think the demand limiter is essentially you had it right on ahead it is chipset in any moment from Intel and that should be a non-issue as we move through the first part of calendar 2002. On the supply side, I think, it is just a matter of the various players getting there respective designs into production and once that happen and we believe it is going to happen fairly seamlessly here that should be no virtual limiter on DDR supply. I would ask by the way there are expectation, I mentioned price premiums associated with the early ramp up DDR in the market place are present today. Our expectations are that DDR and SDR will be priced at parity once this really contractions [adapts] for DDR in the market place because essentially they can be manufactured at virtual cost bearings.

Alright. Thank you

Thank you. Our next question is coming from [Jack Garret] of [_____]. Your line is live.

Thank you. I am bit of dropped off because the cell phone battered that you comment on what your bid growth might be in the second quarter?

We did Jack. We think it will just be flat.

Flat. Okay. Thank you very much.

Thank you. Our next question is coming from [Eric Rocovich] of [_____]. Your line is live sir.

Thank you. Could you give an idea, which your product mix is by geometry, and also could you comment on whether or not you are operating your fabs at the full capacity at the moment or if you have skill back way for start?

I can take the first part of that in terms of a percent line geometry and then may be Steve would like to discuss the relationship full capacity versus where we are today. We are currently running up about 30% and we did it, you know, in our fiscal Q1 and we are about 30% 0/18 about 65% 0.15 and then around 5% currently is being around at 0.13.

Yeah with respect to the full capacity, we have [_____]optimizing for product mix as I mentioned before and cycle time so that we could react quicker to the market that has some impact and obviously we have been transition in to higher density products. So, our position today is that we have given the parameters that we put in place for product mix and cycle time while we are running full the capacity. Now, we have the ability to dial that in up on what we want for density and mix in cycle time, but I would tell you that you know we do have to deal with the holidays season here coming out so, you know, I have some impact although we don't think it is going to be that negative impact.

Okay and just [keep] a question on the 0.13 Micron represent that's the 5% on 0.13 Micron is all in believe is there any international component to that?

Actually happy to report that we are starting to run 0.13 in almost every facility we have now.

Great. Thank you.

Once again, ladies and gentlemen, if you do have a question or a comment, please dial the numbers 1 followed by 4 at this time. Thank you. We do have a followup question coming from [Joe Asha]. Your line is live.

Hi, it's just a little further on the production mix. Is that 30% 0.18 largely in your JV fabs or are you still any running any 0.18 in Boise and UK. Can you give us some inside as to how quickly the remaining 0.18 is going to drawdown?

Primarily the 0.18 is in the international fabs. Most of Boise's transition 0.15, we still have some legacy Boise. Just in terms of the continual transition will respond to the market that transition will occur as feel comfortable with making those changes.

Okay. Thank you.

I would like to be now thank everyone for participating on the call. If you please bear with me, I need to repeat the safe harbor projection line. During the course of this call, we may have made forward-looking statements regarding the company and the industry. These particular forward looking statements and all other statements that may have been made on this call that are not historical facts are subject to a number of risks and uncertainties and actual results may differ materially. For information on the important factors that may cause actual results to differ materially, please refer to our filings with the SEC including the company's most recent 10Q and 10K. Thank you.

Ladies and gentlemen. This does concludes today's teleconference. You may disconnect your lines at this time. Thanks for participating. Have a good day.