美光科技 (MU) 2005 Q2 法說會逐字稿

Good afternoon, ladies and gentlemen and welcome to the Micron Technology second quarter 2005 financial release conference call.

At this time all participants have been placed on a listen-only mode and the floor will be opened for your questions following the presentation.

It is now my pleasure to introduce your host, Mr. Kipp Bedard.

Sir, the floor is yours.

Thank you very much.

I'd like to also welcome you to Micron Technology's second quarter 2005 financial results conference call.

Of course, on the call today, are Mr. Steve Appleton, Chairman, CEO and President, Mr. Bill Stover, Vice President Finance and Chief Financial Officer and of course Mike Sadler, Vice President of Worldwide sales.

The slides are also available on Micron's homepage. [inaudible] The press release is available on our Website at micron.com.

Our call will be approximately 60 minutes in length.

There will be a taped audio replay of this call available later this evening at 5:30 p.m.

Mountain Standard Time.

You can reach that by dialing 973-341-3080 with the confirmation code of 5793466.

This replay will run through Wednesday April 6, 2005, at 5:30 p.m.

Mountain Standard Time.

A Webcast replay will be available on the Company's Website until March 29, 2006.

We encourage you to monitor our Website, at micron.com throughout the quarter, for the most current financial information and information in general 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 that you such statements are predictions and that actual events or results may differ materially.

We refer you to the documents the Company files on a consolidated basis from time to time with the Securities and Exchange Commission, specifically the Company's most recent Form 10-K and Form 10-Q.

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 reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.

We're under no duty to update any of the forward-looking statements after the date of the presentation to conform these statements to the actual results.

With that I would like to turn the call over to Bill Stover.

Thanks, Kipp.

Let's repeat our summary financial results for the second quarter, which ended March 3.

For those listeners who may not get - - have access to our press release.

For the second quarter net sales totaled 1.31 billion and the Company recorded operating income of 126 million and net income of 118 million or $0.17 per diluted share.

That compares to net sales of 1.26 billion in the immediately preceding quarter and a net income of $0.23 per share.

We were quite pleased with sales in our second quarter which extends into the seasonally slow first calendar quarter of the year.

While average selling prices declined approximately 15% quarter over quarter net sales, for the quarter, increased approximately 4%.

Indications are; that we likely recaptured market share as our megabit sales increase was 23% quarter over quarter.

Even with ASP erosion of about 15% Micron realized a 27% gross margin for the quarter as a 28% increase, in megabit production quarter over quarter, allowed for significant reductions in cost per megabit.

Operations at our 300 millimeter wafer fab in Manassas, Virginia, are broadly on track with expectations set at the beginning of the year.

The strong production output resulted in an increase in finished goods inventory of $53 million.

Selling, general, administrative expenses, for the second quarter, came in at 85 million, slightly better than was anticipated.

Our current outlook suggests SG&A will run between 90 and 95 million per quarter.

Research and development expense for the last two quarters has approximated $150 million.

This level reflects significant investments on our part into next generation systems memory and mobile memories that's inclusive of NAND Flash, and specialty DRAM, as well as in CMOS image sensors.

Our current estimate of R&D expense is that it should run between $160 and $170 million per quarter.

Cash and short-term investment balances remained at approximately 1.1 billion.

Capital expenditures totaled 353 million for the quarter.

And our forecast for capital spending for fiscal '05 remains at approximately 1.5 billion.

I'll turn the commentary over to Mike.

Thanks, Bill.

This was a particularly strong quarter for us in terms of productivity and accelerated production output.

As noted in our last earnings call, we had expected flat to modest growth in sequential DRAM market demand in this period.

This was primarily due to extended holidays around Christmas and Chinese New Year and typical hangover from the calendar year end.

Demand unfolded about as expected for the industry.

However as Bill noted we shipped over 20% more megabits into the market, The end result being that we grew sequentially at a multiple of the market and we're in the mode of taking DRAM market share.

As expected we encountered DRAM price pressure resulting in about 15% sequential ASP decline.

The falling prices can be attributed to seasonally slow demand.

We are seeing what I would call typical seasonal patterns from the computing markets.

The demand increases we did see came from boosted memory content per system as opposed to system unit growth.

With memory price declines taking hold we see accelerating memory content per box and look for our OEM customers to promote memory performance and content as selling features in coming months.

The increased memory content and transition to stronger seasonal system demand in calendar Q2 and beyond provide with us confidence that the computing markets will drive megabit demand growth of around 40% to 50% for this calendar year.

The computing memory interface transition from DDR to DDR2 is continuing to progress.

We now have multiple customers deploying DDR2 memory solutions across server, notebook and desktop platforms.

The price premiums for DDR2 relative to DDR are continuing to dissipate and this is facilitating the transition.

Based on customer input, we are expecting a DDR2 versus DDR megabit crossover to occur throughout second half of the calendar year.

This will coincide with the full production ramp at multiple facilities of our [6x2] DDR2 devices.

As this occurs and DD2 becomes the computing market standard, the price per megabit relative to DDR will become irrelevant as DDR2 becomes a market on its own.

We have commercialized a 1gigbit DDR2 device and could not be more pleased with our product lineup.

It now includes 256 megabit, 512 megabit, and 1 gigabit components in module configurations ranging from 128 megabytes all the way up to 4 gigabytes.

We continue to believe that we are well positioned with this lineup relative to any and all competitors.

The mobile phone market is increasingly becoming more significant as a demand driver for our DRAM, flash memory and image sensor product families.

As is the case with computing in the phone market we have the compounding effect of a growing opportunity both in terms of unit volumes and richness of semiconductor content.

Our lineup of low power DRAM, pseudo-static RAM, NOR and NAND Flash and CMOS Image Centers puts Micron in a unique position.

We have the ability to provide a broad functional set of semiconductor solutions to customers in this space.

This is also an area where we have demonstrated the ability to differentiate ourselves, significantly, with the performance of our products.

This is particularly true in the case of our low power memory offerings that contribute to extended battery life in handsets.

And our sensors that enable brilliant images in camera-enabled mobile phones.

About 10% to 15% of our revenues in the just completed quarter, were derived from the mobile phone space.

And this is continuing to expand nicely.

As we ramp the NAND Flash products to meaningful volumes over the course of the next several quarters, we are increasing the amount of business being done in the consumer electronics markets.

The NAND devices are a compliment to our lineup of DRAM and provide further inroads for the consumer electronics markets.

As we have discussed in previous forums NAND Flash is a solid vehicle for to us effectively leverage our R&D and capital spend.

We believe that the strategy of broadening the product portfolio, to seize opportunities in emerging markets, while maintaining a strong position in the computing market is sound.

Execution of this strategy is paying off with both stronger customer relationships and higher ASP's and relatively stronger margins.

As these emerging markets, inevitably develop to a point where we have multiple large segments driving demand for our products, we believe that the Company will benefit nicely.

Thanks for your continued interest and support in the Company.

With that I'll turn it back to Kipp.

Thanks Mike.

We would now like to take questions from callers. [OPERATOR INSTRUCTIONS] With that we'd like to open up the line.

Thank you.

The floor is now open for questions. [OPERATOR INSTRUCTIONS.] Our first question is coming from Michael Masdea of Credit Suisse First Boston.

Good quarter.

I guess the first question is a bit of a surprise on the production side and also on the spending coming in a little bit lower.

Could you walk us through the details of what happened on the production side and the spending side and the sustainability?

Sure.

Couple things that we teed up I think at the last conference call, Michael.

One was we're continuing to see the maturing of the [PL11] The 6-F squared is now more than 50% of the output.

And then the yields are maturing nicely there as well.

And of course, we're ahead as Bill had mentioned on the 300 millimeter ramp also.

We had all those three things coming together for us kind of at the same here.

And then if you look into the May quarter those are all sustainable?

And what kind of production growth are you looking for?

We're guiding right now to mid single digits as we continue to move capacity into some of imagine sensor type products and some of the specialty DRAM's.

Great.

And Mike you had mentioned bit per box.

It sounds like it was a fairly normal change in bit per box.

Is that fair?

And we should we see that increase given the price weakness here recently?

Yes.

I think the increases that we saw in the - - what would be the first calendar quarter were typical, Michael.

And we're receiving some input from our customers based on, as everyone is aware, the lower memory pricing profile that's in the market today.

An acceleration - - a pretty nice acceleration in memory content, going forward over the course of at least the next couple of quarters.

Last question real quick.

On DRAM ASP are we getting near the level where it's a critical paint point for the Tier 2 players?

And do the Tier 1's, given their flexibility capacity, do they have a little bit lower pain point when you kind of blend the whole picture?

I really couldn't comment on what the cost structure is of our competitors relative to current market environment.

For us, obviously lower ASP's are less desirable.

However, we are increasing our exposure to non-commodity markets, if you will, and feel pretty comfortable with that strategy.

And it's really paying off for us with respect to us being able to obtain a much higher average selling price than the rest of the market.

Thanks.

Nice quarter.

Our next question is coming from Chris Danely of J.P. Morgan.

Hi.

Can you comment on what you're overall wafer starts did quarter over quarter?

And what you expect them to do going into fiscal Q3?

We can speak more to the outside.

We're running around 50,000 outs last quarter.

And we ran about 55,000 outs this quarter.

And over the next couple of quarters expect those to ease their way up to about 60,000 outs per week.

Up to 60?

Correct.

Over the next couple of quarters.

Yes.

And then a followup on - - can you add some color to what was going on with the tax expense line?

The taxes typically fairly complicated given our multi-jurisdictional presence around the globe.

Earlier in the year we had anticipated that we were going to run $10 to $15 million a quarter.

Still anticipate that you're going to be in the 10ish plus or minus.

Nothing particularly significant in the current quarter.

Our next question is coming from Andrew Root of Goldman Sachs.

Just on the OpEx controls, and I what you're saying for the run rate for SG&A and R&D.

Are most of the pressure points to that budgeted to the down side in the next couple of quarter?

Or was this kind of a unique quarter where you were able to keep things under control?

As we indicated, SG&A came in slightly better than we had anticipated.

And that was a result of slightly lower legal costs.

On the R&D side, as we've indicated, in prior period, it really does fluctuate fairly significantly depending upon the number of new devices that are going through a qualification state.

And the current quarter just had a slightly - - a lower than average population coming through.

So our reference of 160 million to 170 million going forward is our best estimate with the visibility we have.

Okay.

The - - Mike, it wasn't clear from the discussion on NAND Flash if there was a chance for significant revenues in the May quarter for NAND.

The market is very tight right now.

And probably the operating income profile is little better.

Well, I guess it all depends on what you mean by significant.

It's meaningful to us.

I think we're at a point now where we're devoting approximately 5% to 10% of our wafer starts to Flash.

And so knowing what you do know you about average selling prices and so forth you can convert that to revenue dollars on your own.

Okay.

And can you rank your products right now, in terms of order of gross margin?

Which - - from highest to lowest?

You bet.

Specialty DRAM is the highest followed by the image sensor products and then Core and Flash are about the same.

Core, DRAM and Flash.

Our next question is coming from Krishna Shankar of JMP Securities.

What percent of revenues this quarter would you describe as CC DRAM?

And are you still able to maintain that $1 sort of ASP premium relative to contract ASP?

I can probably expand on your question a little bit.

With respect to the end markets, our revenue by end markets for the just completed quarter, some were in the range of 60% to 70% would be attributed to the computing market.

And that would be of course both for our Flash products as well as our DRAM products.

About 10% to 15 % from the mobile phone market, roughly 5% to 10% from the networking infrastructure, 5% to 10% from the consumer markets and then another 5% to 10% from other markets such as industrial and automotive.

And was there there a second question?

Yes.

Are you still able to maintain sort of $1 premium in terms of your blended ASP versus sort of the street contract ASP?

You talked about that in --

We are maintaining a very nice average selling price premium relative to the market in the DRAM area.

I couldn't say off the top of my head whether it's $1 per unit or not.

But it's significant and again it's primarily the result of our - - what - - [inaudible]

And what gives the connection that the weakness we are seeing in DRAM pricing is seasonal and what kind of data points do you see that would suggest a strengthening in DRAM demand and price firming going forward?

Well if you'll recall - - this forum last quarter, so three months ago we had projected that DRAM demand from the computing industry was probably going to be flat and that was based on input from our customers.

If I aggregate the input we're getting, from our major customers for the following three period; demand is going to be up about 10%.

Now that ranges from a low of 1%, from one of our customers, to a high of about 21% from another one of our customers.

But if I add it all up it amounts to a 10% increase in megabit consumption from the computing market.

Some of that attributed to content per box, some of that attributed to system unit growth.

So again we're out of what typically would be a seasonally slow period from a [inaudible] standpoint moving into what would be more robust and if you look over the past several years you'd see that demand typically along that range in second calendar quarter.

And final question.

By the end of this year would NAND Flash be you think 10% to 15% of revenues?

Well, looking on a revenue basis, we will be running in 3,000 to 5,000 outs a week in terms of wafer capacity.

And I don't want to predict revenues because it's hard to predict ASP's relative to two different products are pretty tough to do.

Our next question is coming from David Wong of A. G. Edwards.

Thank you very much.

Did you mention just now what the cost differential for you is on DDR2 versus DDR?

And if you didn't can you give us some idea?

We won't break it out specific for Micron.

But we've been pretty consistent in referencing the inefficiencies relative to [di-size] and then additional [inaudible] moving from an SDRAM or DDR to DDR2.

And we've estimated that for the industry at somewhere between 10% and 20%.

But DDR2 does cost more for Micron even if you're not giving us the exact number, is that correct?

We'd be no different than the industry.

Correct.

Our next question is coming from Gus Richard of First Albany Capital.

Could you just give us an idea of roughly what the non-DRAM portion of your revenue was last quarter?

Non-core DRAM?

Sure.

We're running about 20% range last quarter.

And then if you added specialty DRAM on top on that you'd be on the 35% to 40% range of revenues.

Okay.

And any more granularity on the CMOS image sensors as far as the split of revenues?

It's a sizable piece of the non DRAM piece.

We'll probably leave it at that.

It's going growing nicely.

The quarter we just completed it grew double digit percentagewise.

Albeit in what would be a slow seasonal quarter for our consumer electronics devices.

And based on the run way we have in front of us, we think we've got a - - we're extremely well positioned.

And we've probably got a couple of quarters ahead of us of stronger growth even than what we've just seen.

So we're quite pleased with the position that we're in and what the prospects are for the next several quarters.

Last final one for me.

On DDR2 RAM's, it would appear that pricing was very weak on DDR2 early in the quarter.

Was that attributable to like a slow ramp in notebook conversion to DDR2 or was there some other explanation for that?

Well, I think that the DDR2 pricing really paralleled what was happening to the DDR pricing.

We had expected that price premiums for DDR2 to dissipate somewhat to where there really won't be much of a price premium by the end of the calendar year .

In fact, that appears to be what's unfolding.

For the quarter that we just completed we achieved a price premium of about 10% on DDR2 versus DDR.

And again, we would expect that to gradually get down to where they're priced at parody.

At which point DDR2 market will really be a market on its own.

And then the price will fall where the price will fall.

So everything that's occurred is really about as expected to be honest with you.

Okay.

So that ramp was as expected.

Okay thanks a lot.

Our next question is coming from Bill [Gazellum] from Davidson Investments.

We had two questions.

First of all - - [inaudible]

We lost you, Bill, if you can hear us.

I can hear you.

I don't know where the static is [inaudible].

We'll move on to our next question, for the meantime.

Which is coming from Hans Mosesmann from Moors & Cabot.

I still hear the static.

Can you give us a sense on average selling price?

I guess last time you said that you expected ASP's to down for DRAM is about 10% to 15%.

What's your expectation for this current quarter?

Well, it's a little early in the current quarter to project what we think is going to happen for the next 70 days or so.

But they have fallen over the first three weeks of our quarter.

And I think you see what's happened to average selling prices.

It's a little bit early for us to say what we expect is going to happen for the balance of the quarter.

Okay and then a followup.

What percentage of your business was in the spot market?

Oh, that's a good question, and it was relatively small percentage.

But probably in the range of 5% to 10% of our DRAM in the spot market over the course of the quarter.

Okay.

And just for comparison sake, what was that level or percentage in the February [inaudible] and the November quarter?

Not a meaningful difference.

Okay.

Thank you.

Our next question is coming from Bill [Gazellum] from Davidson Investments.

Sounds like we're still having trouble getting you Bill.

If you like you can send an e-mail and we'll just announce the question on the call once we get it.

Our next question is coming from Alan Davis of McAdams Wright.

A couple of questions.

I was wondering if you can give us more detail on contract prices since the end of the quarter just in terms how much down is it?

And then secondly, you know, considering the Infineon/Rambus settlement one could speculate that perhaps Micron at some point is more likely to pay royalties to Rambus.

Can you just give us any information there, whether that would be a correct assumption or not, would be helpful.

Since the end of the quarter DRAM contract pricing, again for the competing customers, has been down in the neighborhood of 10%.

And relative to the legal questions as you know we have ongoing litigation and we just can't really comment on it that

Our next question is from Mr. Bill [Gazellum] from Davidson Investments.

I think the last time the operator was on the line having me to requeue.

When you asked for me last time.

Sorry about that.

No problem.

We can hear you good now.

Is it a collect recollection that you all had said that CapEx would be front end loaded this fiscal year?

And if that was the case does it continue to be the case?

And then the second question for those of us who don't follow plant by plant what's going on: Would you walk us through what recent comments or announcements there have been from competitors relative to production outlook changes that they have?

Bill, with regard to the capital profile, 1.5 billion still looks like a good number for fiscal year '05.

I think at the beginning of the year we had anticipated it might be as much as 60% in the first half of the year.

It's coming in slightly more than half but not 60%.

But 1.5 billion reference is still good for the year.

And on the production side, Bill, we haven't really heard much new out of competitors.

It still likes the appropriate production bid growth range is plus 45% to plus 55% for '05 over '04 for the industry.

That sounds like that's tying in with many of the advance projections which are 50 % plus or minus increase.

They seem to be reading the same data that we are.

We've got from customers and from external sources anywhere from high 40's to high 50's in terms of demand bit growth for this year.

Our next question is coming from [Mona Irabi from Bruzeta Group.]

I wanted to ask about the ASP for the quarter.

I don't know if you already said it, what was the ASP for the quarter?

It was around $5, and it was down about 15% from Q1.

Our next question is coming from David Wu from Global Crown Capital.

Can you just - - I missed point you said about the Q3 where in fact the increase in yields that you got from your top PC OEM's is a function of them having more, what do you call it, more memory content or a little bit better than seasonal demand makes out there.

The second one, I was curious about is with NAND Flash pretty much sold out for a good part of this year: how does that affect the swing capacity off of the largest dealer manufacturer?

And could that tighten and lessen the pricing pressure on the DRAM's?

On the demand growth, for our fiscal Q3, I did not break out how much would be attributed to content per system or to system unit growth.

Frankly speaking our customers don't do that for us either.

So I have to kind of go by old models to establish.

But I did mention that the demand growth on the PC customers would be about 10%.

And I would just guesstimate that approximately half of that would due to content per system and the other half due to increased number of units sold.

And David, on the question about swing capacity I'm sure they're looking at the same data that we are.

The industry today is running higher gross margins on NAND Flash product and if that continues then the expectation is there, then you'd expect competitors to probably look at moving more capacity that direction.

So when would it show up in DRAM pricing, or lessening of the supply?

That's probably a better question for you.

Okay.

Thanks.

Thanks, David.

Our next question is coming from Matt Gable from Calypso Capital.

My question has been answered.

Thank you.

Our next question is coming from [Manisch Goyle] from TIAA.

Just a clarification.

Did you say the gross margins for Flash were the lowest among your product mix and then DRAM was marginally better than that?

Yes.

That's correct, right now with the volume that we're running today, our fully loaded cost and then the resulting margin would be Flash and DRAM roughly the same.

And Core DRAM excuse me.

And next quarter you be increasing your capacity for Flash is that right?

That's correct.

We're on a rampup to about somewhere to between 3000 to 5000 outs a week by summertime.

And similarly you will also be increasing capacity for DDR2 for next quarter?

That is also correct.

So overall product mix will shift towards lower margin product.

Could you give some idea as to, is it like a 5% swing or a 10% swing from this quarter versus next quarter?

I wouldn't necessarily come to that conclusion because you'll see significant cost reductions as the unit volumes go up in NAND Flash, for example.

Okay.

So you expect the Flash margins to improve.

And could you just, from a capacity perspective what will be the - - from a production perspective what will be the swing between these two from this quarter versus next quarter?

In terms of say wafer allocations?

Yes, for flash and DDR2.

Or maybe if you can provide that separately.

DDR2 will move up about five percentage points and flash will more than double.

Thank you very much.

Thank you.

Our next question is coming from Ben Lynch of Deutsche Bank.

Sorry if isn't perfect conditions.

Hopefully you can hear me.

Could you maybe comment on the - - if you haven't done this already the sort of supply and pricing environment for 1.3 megapixel in the census currently?

And what you're projected resolution mix is for Q3?

And then I have a followup please.

The 1 megapixel demand situation is quite strong actually.

As a matter of fact, in the quarter that we are in currently we will come close - - the 1 megapixel sensor may be our largest volume product.

Overtaking the VGA sensors in the mobile phone market.

It will be neck and neck between those two in the current quarter.

Pricing is generally stable.

Actually, it's generally stable for both the VGA, the 1 megapixel and the 2 megapixel sensors.

Our production mix for - - in the sensors in for mobile phone market in the current quarter by pixel density will be roughly 40% VGA, 40%, 1 megapixel and the balance split between 2 and 3 megapixels.

Great thank you.

And the second question I had was, sorry again this was asked.

If ASP's were kept flat for this quarter from where they are now, sort of three weeks into the quarter, what sort of Q on Q decline would that imply?

I haven't done the math.

I mentioned that contract prices are down about 10% thus far into the quarter but that's from ending point of fiscal Q2.

I'm not that good at math.

Been out of school too long I think to do that math.

But that's - - we're down about 10% from where we ended the quarter at right now.

Okay.

Can I try another one, since you wouldn't answer that one.

I heard you say I think that in the market DDR2 cost premiums are anywhere from 10% to 20% and that at the moment the ASP premium is about 10%.

So unless you guys are at the low end of that cost premium range it would sort of suggest that you would be hitting lower DDR2 margins than you are DDR1 margins.

Is that right?

That's correct.

Our next question is coming from Terry Nguyen of Susquehanna.

Could you give sense in terms of your NAND Flash is it right now on 901 nanometers?

And is it a 2 gigabit?

That's correct.

And what is your road map?

You have - - what's your plan there you're going to have a single [Dye] 4gigabit coming out later this year?

We have a 2 [Dye] 4 gigabit and a 4 [Dye] 8 gigabit coming out here over the course of next month or so.

We will follow that up with a 70 nanometer version of a standalone 4 gigabit.

We're going also introduce a 1 gigabit standalone as well.

So we're rounding out the product portfolio here nicely over the balance of the year.

So the 3000 to 5000 wafer per week that's comming out the current quarter that is the 2 gigabit?

That will be the 2 gigabit chip and we will be bringing it to the market in the form a 2 gigabit standalone, a 4 gigabit dual chip solution and an 8 gigabit 4 chip solution.

And then currently on your DDR2 are you also on 90 nanometer?

And could you give us how's the yield coming out on that?

We've done a nice job.

The manufacturing guys really reserve a lot of kudos for how they've ramped DDR2.

And it's moving.

It's 110.

It will be moving I think by the end of summer almost exclusive to 6F squared as well.

And then towards the second - - towards the end of this year you'll start to see more of our product move towards the 95 nanometer operating mode in the DRAM.

[OPERATOR INSTRUCTIONS.] Our next question is coming from Adam Parker of Sanford Bernstein.

Hi.

Can you talk a little bit about what you think is causing the share gain in DRAM?

More output.

Just more volume, that simple?

Right.

We had a 28% increase in production output.

And as we mentioned we sold 23% more megabits into the marketplace in a market that was essentially flat to maybe up 5%.

So that's - - the math equates to market share gain.

Can you talk about your cost positioning a little bit versus your competitors?

I know in the past you've pretty much consistently stated that you're the lowest cost producer.

But how has that changed recently.

How do you think it's going to change toward the end of the year?

And is there some point here where you may be having a lower percentage on 300 millimeter for DRAM's is going to hurt you guys?

We thought over the last couple of years as we were going through product diversification and some of the changes we are that we lost some of the cost advantages we had.

We think we're on a better trajectory today that over the next six to 18 months that we'll start to close the gap pretty nicely.

Again, some of that will depend on hopefully, what product mix that we run.

In terms of being add a disadvantage at 300 versus 200 we still think our 200 is very competitive and that it has legs to it.

Thanks.

Our next question is coming from Hans Mosesmann of Moors & Cabot.

Can up give us a since of fiscal '06 CapEx.

It looks like it's going to stay the same as "05.

Looking like 1.5 billion.

Thank you.

[OPERATOR INSTRUCTIONS.]

With that we'd like to wrap it up.

I'd like to thank everyone for participating on the call today.

If you will please bear with me I need to repeat the Safe Harbor protection language.

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 10-Q and 10-K.

Thank you for joining us.

Thank you.

And thank you callers.

That does conclude today's conference.

You may disconnect your lines at this time.

And have a wonderful day.