美光科技 (MU) 0 Q0 法說會逐字稿

Good afternoon, I will your conference facilitator today.

At this time I would like to welcome everyone to the Micron Technology first quarter 2009 financial release conference call.

All lines have been placed on mute to prevent any background noise.

After the speaker's remarks there will be a question and answer period.

(Operator Instructions) Thank you, it's now my pleasure to turn the call over to your host, Kipp Bedard.

Sir, you may begin your conference.

Thank you very much and welcome to Micron Technology's first quarter 2009 financial release conference call.

On the call today is Steve Appleton, Chairman and CEO; Mark Duncan, President and Chief Operating Officer; Ron Foster, Chief Financial Officer and Vice President of Finance; and Mark Adams, Vice President of Worldwide Sales.

This conference call including audio and slides is also available on Micron's website at MIcron.com.

If you have not had a opportunity to review the first quarter 2009 financial press release it's also available on our website at Micron.com.

Our call will be approximately 60 minutes in length.

There will be an audio replay of this call accessed by dialing 706-645-9291 with a confirmation code of 76127953.

This replay will run through Tuesday December 30, 2008, at 5:30 p.m.

Mountain time.

A webcast replay will be available on the Company's website until December 23, 2009.

We encourage you to monitor our website at 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.

Please note the following Safe Harbor statement.

(Recorded audio played) During the course of this meeting 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 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 in the investor relations section of Micron'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 are under no duty to update any of the forward-looking statements after the date of the presentation to conform these statements to actual results.

(Recorded audio finished).

With that I would now like to turn the call over to Mr.

Ron Foster.

Ron.

Thanks, Kipp.

For those listeners who haven't seen our press release, which is available on our website and includes a reconciliation of the non-GAAP numbers discussed on this call I will briefly review the summary financial results for the first quarter which ended December 4.

Revenue for the first quarter decreased 3% compared to the prior quarter and gross margin declined to minus 32% as megabit DRAM and NAND ASP declines outpaced cost reductions.

Memory revenues included $36 million in royalty and technology fees.

The sharp declines in memory ASPs during the quarter triggered a $369 million non-cash write down of memory inventories to estimated market value.

Including this write down the Company recorded a net loss of ($706) million or $0.91 per diluted share for the quarter.

Compared to a loss of $344 million or $0.45 per share in the prior quarter.

In the DRAM space quarterly ASPs declined by an unusually high 34% while our cost per gigabit declined by 12%.

These DRAM cost reductions results came at an aggressive end of our forecast due to successful process node migrations and manufacturing efficiencies.

Fiscal Q2 forecast is for DRAM cost reductions to be flat and bit production will decline as a result of factory production slowdown over the holiday season.

In NAND average selling prices also declined significantly by 24%.

While our cost per gigabyte declined by 14%.

Successful ramp of our new 34 mm MLC NAND product helped us achieve the cost reduction.

Now more than half our wafer starts at Lehi are produced on the 34 nm process node and we will begin to realize increasing benefits as we come down the cost curve after Q2.

NAND bit production in the second quarter is forecast to decline.

As a result of factory slowdowns.

However, continuing cost reductions, and the 34 nm node transition will improve cost per gigabyte despite the factory slowdowns.

Imaging revenues were flat quarter quarter with consistent positive gross margin performance.

Progress in reducing our operating cost structure continued in the first quarter, despite a 14 week quarter, we were pleased with SG&A expense controls.

They were $102 million, a decline of 5% in absolute terms versus last quarter, due to the Company's cost cutting and restructuring activities.

R&D expenses $178 million also came in below our projections for the quarter due to ongoing cost management efforts and progress moving key development products into production.

We anticipate SG&A expenses to be in the 100 million to $105 million range, in the second quarter, and R&D expenses to be in the 165 million to $170 million range, during the same time frame.

We will continue to proactively manage cost structure to enable Micron to remain competitive in this environment.

Also of note Micron's net loss includes a restructuring credit, which incorporates two major items.

First we recorded restructuring costs of $22 million related to employee severance.

Second, we recorded an $88 million credit for termination of the Boise supply agreement related to our joint venture with Intel.

Given the challenging market environment, Micron has undertaken additional cost savings measures to enable us to increase our competitiveness.

These actions include reductions in executive and employee salaries, and elimination of bonuses.

A continued hiring freeze, and reduction of other discretionary costs such as outside services, travel and overtime.

These actions are anticipated to save an additional $200 million of manufacturing and operating cash costs, in the remainder of 2009.

Also in Q1 head count declined nearly 7%.

To 21,888 quarter to quarter.

We ended the quarter with just over $1 billion in cash and short-term investments.

Operating cash flow contributed $359 million in the first quarter.

Increased to 48% from the prior quarter.

This increase was realized primarily through improved working capital management and inventory and trade accounts receivable.

During the first quarter Micron received strategic financing of $285 million, with favorable terms, as part of the $400 million acquisition of Qimonda's 35.6% stake in Inotera.

Which was completed on November 26.

Through this acquisition Micron will receive 50% of wafers produced by Inotera, once fully transitioned.

This will represent capacity of over 60,300-mm wafers per month for Micron.

Going forward approximately 36% of Inotera's net income or loss will be reflected as a non-cash item on Micron's financial states and other nonoperating income or expense.

In other financing activity during the quarter Micron paid off debt including borrowed in Japan of $101 million.

Total debt increased by $140 million, to $2.87 billion in the first quarter.

Capital expenditures for the first quarter totaled $334 million.

Down significantly from $759 million in the fourth quarter of 2008.

Anticipated capital expenditures for fiscal 2009 have been revised downward to approximately 650 million to $750 million from last quarter's FY '09 guidance of 1 billion to $1.3 billion.

Micron and Intel agreed to delay the IMFS fab buildout in Singapore until market conditions improve.

In addition, the capital contributions previously committed to our MeiYa joint venture with Nan Ya have been deferred.

We anticipate that the MeiYa joint venture will be folded into Inotera in the near future.

Inotera is a publicly traded company that manages its capital requirements separately from Micron.

Micron has not made any capital commitments associated with Inotera.

I will close there and turn the commentary over to Mark Adams.

Thanks, Ron.

Despite continued industry oversupply and the global economic downturn, Micron was able to drive DRAM bit segment growth of 35%.

And NAND bit segment growth of 40%.

In these tough market conditions we have found that our key customers are looking for Micron to increasingly support their memory needs.

While PC desktop systems showed signs of weakening demand going into the Holidays the notebook segment continued to show positive growth.

Memory content for system was 2 gigabyte in Q1.

In addition, we are seeing a growing demand for our DDR3 product, with shipment growth of 96% quarter over quarter.

Clearly Micron is in strong competitive position as a leader in DDR3 technology.

Our server and networking shipments were flat quarter over quarter.

We remain optimistic that we can increase our leadership position in these segments due to competitive reduction and output for these products.

The mobile segment continues to be a bright spot for Micron.

Shipment of MCPs, multi-ship packages were 1.9 million units, a dramatic increase quarter over quarter.

We anticipate increasing density per unit in this category to drive growth for Micron in 2009.

Our product portfolio in Mobile has evolved in the second half of 2008.

Micron i in a unique position to drive bits in the mobile handsets with MCPs, embedded NAND technology and mobile memory cards.

In Q1 '09, Micron began shipping our 34 nm 32 gigabit flash product in high volume production.

As we enter calendar year 2009 Micron is in a cost leadership position, which translates into a stronger operating performance from our NAND business.

On our TRM technology side Micron launched our 50 nm product which boasts the smallest die size in the industry.

Our customers and partners are excited about efficiencies in this technology that will generate as we move forward in 2009.

During the last six months our Lexar business began shipment of two major retailers that are ranked in the top ten in North America, Lexar is now solidly positioned in the number two position in the North American retail market space.

At a time where our channel competitors face severe challenges we continue to see a renewed confidence Micron's commitment to the retail channel and major customers worldwide with the Lexar and Crucial brands.

Lexar announced a number of industry leading performance products in photography, mobile and gaming for the holiday season.

In fact the Lexar shoot and think product was featured today on the CBS early morning show.

While the combination of industry oversupply and the overall global economic crisis continues to put pressure on Micron and our competition we feel confident at our position of strength in the eyes of our customers.

Our recent announcement regarding the acquisition of Inotera Capacity further highlights that Micron can be a scale technology partner assuming a broad array of market segments.

As we enter 2009, we will continue to monitor the industry reductions in capital expenditures already in the mid-30s in 2008, and projected to be 18 to 20% in 2009.

With that I will hand it back over to Kipp.

Thanks, Mark, appreciate that.

Now what we would like to do is take questions from callers.

Just a reminder, if you are using a speakerphone, please pick up the hand set when asking a question so we can hear you clearly.

(Operator Instructions) Your first question comes from Betsy Van Hees.

Thanks for taking my call.

Could you give us bit of color in terms of when we look at (inaudible) of fiscal Q2 what type of reductions we are going to see in bit growth?

So bit supply?

Let me take that one, Betsy.

I think given the market conditions and the slowdown we already have in place, throughout the holidays, we want to try to stay away from precise bit guidance this quarter.

We are going to be pretty reactive on a go forward basis and see what plays out in the marketplace.

And I think throwing any guidance out there right now might be as likely misleading as helpful.

When we are looking at pricing, can you give us from when your quarter started, if DRAM ASPs were not to decline any further what type of price reductions we would see.

I'll grab that one Mark.

It looks like Betsy we are going to see if nothing changed from here to the end of the quarter we would be about down mid teens on the DRAM side of the business and closer to down to high 20% mid-30s in NAND.

I just want to qualify that that doesn't factor in the last week of activity in pricing which has been quite favorable both in DRAM and NAND.

We are hesitant to make too much of a conclusion on the uptick in DRAM pricing and NAND over the last five business days or so but certainly positive about it and want to stay on top of it going into the post Christmas season.

Your next question comes from Glen Yeung.

I was wondering if you can talk about your expectations for bit supply growth on DRAM and NAND in fiscal '09 and how it will compare to the industry.

You bet.

Similar to what Mark's comments were about our production and our view on how we will react, you can imagine that the estimates for bit growth in calendar '09 from the industry are wide as well.

What we've seen out there so far expectations in DRAM and bit growth as low as 20%.

Maybe as high as 40.

In NAND we've seen anywhere from about 70% bit growth up to maybe potentially 100%.

Okay, thank you.

Can you talk about inventories that you seen in the channel currently?

And you talked a little bit about being hesitant to make any comments on the recent movement in DRAM spot pricing, but I guess if you can discuss what you see for any potential for increases in first half January.

Sure.

The inventory position at channel is quite favorable both in DRAM and NAND.

Actually we think that's very much connected to the activity of last week in the spot market.

The dramatic increase in pricing on both DRAM and NAND to us was a pretty good indicator that people have been pretty prudent in planning their inventory going into the Holiday season and even managing to get through up to where we are today.

The big question mark becomes the demand profile that comes out of Christmas and the inventories that the resellers and the retailers after the Christmas season which I think will drive which way the price moves, but again I think the indication we got as of last week is that the inventories are pretty light, very light on NAND.

And I'd say what we learned last week was equally light in the DRAM segment.

Thank you.

Your next question comes from Tim Luke.

Thanks.

I was wondering if you could provide a little bit of color on some of the factors that have contributed to the somewhat stronger than expected bit growth in the quarter that you had reported.

And I was wondering, if you could comment on how you perceived the potential for any actions in terms of consolidation, further consolidation in the time of use market in terms of DRAM?

Mark, I'll handle the first part and maybe hand it over to Steve on the consolidation.

Relative to the cost improvement I think there's a number of factors but I wouldn't want to down play the efforts we have been making on just an operational cost of wafer perspective and the controls we have over all manufacturing costs.

Technology transitions have also gone very well on the 34 nm and NAND continues to move ahead smoothly with better than expected yields there and on the legacy 50 nm node, and the transition of 68 nm on DRAM going on as well.

Mark on consolidation, I said now for I think several months that the current environment is right for driving some type of activity and consolidation, clearly there has been a number of announcements around governments willing to help out in the industry.

I would say that although I think the initial interpretation of that might be to believe that that would essentially cancel any consolidation efforts I don't think that's true at all.

I think that there is quite a desire among both the companies and probably some of these entities that are involved in these discussions around providing funds to deferred data or some injection working capital, that there is still a large interest to try to do something.

It takes time.

I don't think anybody thinks that the next few months are going to be awesome for the industry.

As a result I think all of the discussion around potential consolidation will continue, obviously I said before as well that Micron is continuing to work out, I didn't see if there is an opportunity for us to participate in that and so that's where we are at right now.

We got to go through the next week to see if there is too much activity.

But I'm not under the belief at all that consolidation goes away now that some of these governments will start trying to help out the industry.

One other thing, Steve, with respect to the gross margin, it's also been under significant pressure, can you give us what you think is the key elements of the road map to get that back in to a more favorable territory?

If you look at the gross margin, there is is a couple of different ways to look at it, one of course is with and without the NIV charge, and NIV makes the gross margin look pretty bad.

But that's obviously based on the forecast going forward.

That's what ASPs are going to do and well, pretty conservative.

We don't know a lot of what is going to happen there.

(Inaudible) The other impact on gross margin is really on the ASP cost side, and I just mentioned the ASP forecast side gets pushed back into the model of others on the cost side.

As Mark described we will continue to make a lot of efforts on that and use the costs.

It's a little bit of a misperception although it's very helpful to have ASPs increase, obviously it can improve our margin quarter by quarter if we get a little bit of stability in the pricing as opposed to what Ron described which was decreases in pricing and what anybody can do in terms of cost reductions.

If we get some stability in the pricing itself, or if it doesn't begin to decline at those kind of rates then we will start to build margin back in.

I think that's the way it's been.

At least in the near term, that's the way it's going to be going forward.

And your cash balance is around just a billion, where do you feel comfortable maintaining that going forward?

How do you expect that to trend?

We think it's going to, I think in particular in the next quarter it will trend down.

We have, I think that Ron mentioned our cash flow from operations was pretty positive in the quarter that we just announced.

We think that will decrease although we still remain positive for the quarter we are in.

Obviously we have been dialing the CapEx down.

We've done lots of other things on the cost side.

We will continue to be pretty diligent about making sure we have a pretty good cash flow.

I will also say though that I think Ron and his team has done a great job.

We can obviously operate the Company on much much less cash than that.

We are still going to remain pretty conservative in our approach.

And try to make sure we maintain a pretty good balance.

Thank you.

Your next question comes from Shawn Webster.

Thank you, good afternoon.

I understand that you don't want to give specific guidance on production for Q2, can you share with us what the sequential change in production in Q1 was for both RAM and DRAM?

Yes, we can do that.

We had bit growth on a production basis and DRAM was up at mid teens range, 14%.

We had NAND production bit go up 8%.

8%?

That's correct.

You might recall the original guidance was around mid teens, but we initiated the shutdown of the MLC in Boise midway through the quarter.

Are the affects that are happening in Q2 in terms of a sequential decline in bits mostly related to Boise or is there other stuff you are doing as well?

Well, we have a, if you're referencing the slowdown that's worldwide depending on the product line.

Some product lines are impacted less than others.

As you know, we know and build what you think of as the more multi stop, life specialty DRAM and some of those products have pretty good margin in them.

And also (inaudible) and we've got to continue to split the customer base.

It's not 100% worldwide.

That's why we called it a slowdown as opposed to a shutdown.

Most facilities around the world are being impacted.

What did your wafers do sequentially in Q1?

We were up about 9%.

And inventory write down, what was the mix between NAND and DRAM?

We don't normally break that down between the two, because we have a lot of complex computation and crossover inventory et cetera, but in general it's a little heavier to DRAM this quarter out of the total [3069].

Then finally all the, I guess discussions on government funding for memory company globally can you talk about Micron's role what your plans may be to the extent you can talk about them both in Asia as well as in the USA?

Well, (inaudible) in the USA so can't say too much about that.

I don't have any idea how we might participate in something there going forward.

I haven't done any analysis.

With respect to some of the other regions, obviously in particular there's a lot of news coming out of Asia.

We have operations in Asia as you know.

We now have partnership, we have a fab operation that's in Taiwan and already operating in Singapore, and to the extent the government is interested in assisting their industries, we are interested in understanding how that might impact what we are doing in those areas and how we might be able to participate in that and the benefit of the joint ventures et cetera.

We are continuing to look at that and have interactions with most people in that region.

And undetermined at the moment how that will play out.

Thank you very much.

Your next question comes from Jim Covello.

Good evening, thank you for taking the question.

A lot of good questions have been asked already.

My question would be on content for box for the industry as you move through 2009 it seems like it's holding up okay for now, a lot of concerns in the market that that would slow down considerably as we go through '09, what are your thoughts?

Thank you.

Mark?

I will take that.

On the PC side, PC service segment we continue to see driving across the box, density, and while there has been a lot of discussions and comments on that slowing down we see it along the same trend lines.

On the other devices i.e., mobile phones we are pretty optimistic there as well, what we're seeing especially in terms of the smart phone segment growth, we are seeing increasing applications driving the density in a, well up from where it was in the first half of '08.

Which was more on the gigabyte per system per phone, we are seeing that kind of a lot of cost reasons and new applications driving across 2 gigabyte.

We think pretty heavy increase in density over 2009 from where we are today on the NAND and DRAM side.

How about specifically on notebooks including the net book impact?

Well, I think on the notebook segment, we are seeing that get more in line with the overall density of the overall desktop and notebook category.

We think that will be somewhat positive.

The net book obviously given the application usage, we think that's also a fairly good market for us, the challenge for us there is trying to understand how big that market will be.

We have seen estimates from 10 to 15% of the overall PC marketplace and even down as low as 5% of all notebooks.

The effect of that in the overall market size for us is challenging but positive for us.

Thank you very much.

Next question comes from David Wong.

Thank you very much.

To push a bit further on Tim's question just now.

Do you expect your cash balances may drop to a level of which you will have to raise cash up the next few quarters, and if so are there already any plans in the the works for you to raise cash?

What is your question?

Do you think you may have to raise cash?

At sometime in the near future?

I don't know how you define near future.

We think our current cash balance will be in pretty good shape for a while.

Whether we choose or not to raise additional money is depending on what happens in some of the markets.

I think one thing that Ron pointed out or referenced is that we are actually decreased our debt levels.

It was up a little bit because of the Inotera purchase and because we borrowed some money that was related to that purchase, obviously from coverage over there.

That increase took a net net, if you think about the ongoing debt that we had prior to that purchase we have been actually decreasing debt.

Not only did we buy the Japanese debt down but we are now initiating any new debt regarding our typical ongoing equipment financing that we might normally do.

I think that if the finance markets are more available moving into the next quarter too, I think you would expect us to see us to continue to try to do more of that as we have in the past.

It's not a change in our behavior it's that we continue to do that.

With respect to anything else which you might consider more strategic, whether it be in partnership or whether we do something with any of these other areas where the government was look at money et cetera, I don't know right now.

We will just have to wait and see what evolves over there.

Let me just say we feel pretty good about where we are at at the moment in our cash balance.

So we are going to move forward and evaluate what we want to do in terms of the available on the more strategic phasing.

You should expect us to move forward in the event we couldn't finance normalizers probably continued to replace -- on ongoing basis a lot of debt we have.

It's important to point out that that's actually been decreasing and has not been doing that in recent months.

Can you give us your weeks of finished goods inventory at the end of the quarter?

We can do that.

I will take that one, Mark.

We are looking at core DRAM in the two to three week range.

Specialty DRAM a little bit higher than that, NAND actually less than that.

And averaging pretty close to the specialty DRAM area

Next question comes from Manish Goyal.

Your inventories declined quite rapidly in the current quarter.

I was wondering how low can you take your inventories?

This is Ron.

Couple of observations.

Our inventory went down in the current quarter both from good management of our total inventory and total units.

But also related to the net realizable value write down that we had in the quarter.

So both those affect our results as you're looking for dollar number on inventory.

In terms of how far you can go down, I can tell you we got a significant efforts going on to improve our working capital management, both in inventory, and in other elements of working capital such as accounts receivable.

You saw some of the results of that this last quarter with the improvement in operating cash flow which obviously is extremely important in these market times and tight financing times as Steve already commented on.

In terms of further improvement we do expect to get further improvement in our inventory management over time in FY '09 going forward and I think we made good progress this last quarter even independent of the write down of the NRV value.

Just a couple of things.

Obviously we have what you think of as inventory in the entire chain of operation a lot of what Ron is referencing and then we have inventory in terms of finished goods.

We are trying to get much more -- I think -- much more precision around managing inventory.

In addition to that, in terms of finished goods inventory, that's also had been improved.

In addition to that in terms of finished goods inventory that's also had some improvement.

I think if Mark Adams wants to comment on it or not but historically we have run with, I would say probably about two weeks of inventory on hand is where we get uncomfortable in our ability to properly service the customer base.

That's about right Steve.

The only other comment for those of you on the Q4 '08 earnings call, you recall that I mentioned we kept some inventory in August to go in to September to help support our modular buildup for finished goods into the Holiday shipping schedule.

And obviously we don't need that same level of inventory to support post holiday.

I think that also contributed pretty separately.

We did a good thing in not trying to sell inventory in the spot market in late August.

We carried it over in September and then we sold through to the channel and again helped put our finished inventory in a much better position coming out of this quarter.

Just a couple more things.

What do you think your depreciation will be next quarter?

It's in the low $500 million range.

Why would depreciation if I'm looking at this December, or into December, does the 594 includes amortization as well?

Yes.

But you got a 14 week quarter in Q1 going to a 13 week quarter in Q2 and we depreciate by week.

Got it.

The February quarter number will be in low five, so 520, is that a reasonable number to think about.

In that kind of range.

Lastly, if I look at your current quarters operating cash flow, it was predominantly helped by working capital production especially inventory.

I just wonder how much more room is there to squeeze the working capital needs and where we in a quarter so we end up at running with negative operating cash flows?

Actually there were two elements, inventory which I already commented on, and also trade accounts receivable which increased significantly about $100 million, other receivables related to the Boise supply agreement that also were in the receivable number.

We had substantial improvement in our trade AR.

In terms of how far we can go with that we have actually been developing plans and modeling internally to drive our working capital down which is the driver of minimum cash requirements and we believe we've substantially improved our position already as we go through the year in terms of minimum cash requirements to support the operations of the business.

So I don't have a specific construct for you but I think you can anticipate seeing improvements notably in the inventory category as I mentioned and continued focus in AR.

Thank you.

Your next question comes from Daniel Amir.

Thanks a lot.

There have been a lot of good questions.

My question is more focused on the cost structure.

How do you see yourselves comparing your cost in DRAM and NAND compared to the rest of the industry right now?

Seems like last quarter you were thinking that you were still one of the lowest cost in DRAM, can you expand where you think you stand on the road map for next year?

Yes, it's -- you have to be careful how you talk about cost.

Obviously we have a pretty broad portfolio including some specialty parts and legacy parts and cost per bit mode is not always going to be the best in the industry.

When you look at segment by segment what is going in the commodity space in both NAND and DRAM, we are very comfortable with the process capability we have deployed and our ability to be at the leading edge relative to cost competitiveness.

So specifically when you look at NAND in 2009.

Micron on a primarily 2 bit per cell, 34 nm node versus competitors something roughly 35% bigger, we think that's going to drive a substantial gross margin advantage for Micron on a go forward basis.

On the DRAM side, moving 50 nm as we already alluded to that's the industry leading die size there and we're also layering in in the second half of the year additional low cost capacity for Inotera.

So we are pretty happy with what we got going on the cost side and we think we will actually continue to make improvements.

On a relative basis.

Following up, where do you stand on 3 bit per cell in NAND, and do you feel that your current 34 is basically cost competitive to the 3 bit that's out there by some of your competitors?

Well, taking the second question first, yes we do.

We think what we have out there is the most cost competitive offering.

We haven't seen anything at 34 nm 3 bit for sale from anyone.

We have seen 56, and some samples of 43.

We think actually today those are really hitting just a very small piece of the marketplace, and aren't really capable of being a solution for this small piece.

Relative to Micron, we have our own in bit per cell offering, those will be coming out on the leading edge 34 nm later in 2009.

And at that point we believe that will be something that's cost beneficial to Micron.

Thanks a lot.

Your next question comes from Kevin Cassidy .

Thank you for taking my call.

I was wondering if you can give a time line on the Inotera ramp?

Yes, by ramp you mean Micron Technology deployment in Inotera?

Right.

When you start receiving the wafers.

Yes.

There is two pieces.

There is Windows Micron transition so the wafers are accruing to Micron.

The other is technology transition.

In terms of the wafers transitioning to Micron that will happen on a graduated basis really over the next nine months.

By the time we get nine months out Micron will be taking its full share, 50% of the Inotera output.

On the technology conversion, which will of course drive some manufacturing efficiencies, that will be a second half of '09 story really, and we will continue to fine tune that business land per market condition.

Is that when you recognize the licensing fees.

As the technology converts?

Well, we have really a complicated relationship with our partners there.

There are a couple of components for fees of transfers as we talked about in previous calls.

Some are more associated with the development cycle and those are on going, and some are more associated with volume ramps, and you expect those to see that portion of it increase more substantially as the volume continues to increase.

Thank you.

Your next question comes from Daniel Berenbaum.

Along those lines actually, can you tell us what royalty revenue was in the quarter and can you maybe give us a little bit of guidance for how that RAM is recognizing that it's complicated and there is licensing and some royalty?

And then on the CapEx side, can you break out that full year CapEx by which project it's going to and can you help us understand how much your partners are contributing CapEx for '09?

This is Ron, in terms of the royalty construct is about $36 million in total royalties in Q1.

Going forward, that will be roughly the construct in terms of technology, license fees et cetera, then in addition as Mark mentioned, there will be the ramping of volume, and that will be a percentage royalty base off of that flow of volume activity as we move out quarter by quarter.

We don't have a specific estimate of that piece.

But the number at this quarter is represented with the technology fees going forward.

In that kind of ballpark.

This is Mark, I will cover with a CapEx piece.

Think of it as roughly 40% Ion flash, 20 to 25% the joint venture at Tech Semiconductor and the remainder Micron.

So the Ion flash piece that's really, there is really two pieces to that, one is the completion of the manufacturing fab in Singapore, just the build out and set up of that fab.

And there's a small amount of residual capital in 2009, especially with the 34 and a couple of tools early in to the 2x mode for NAND.

On the Tech piece, that piece is, sorry on the flash piece, that's shared 50/50, 51/49 per partner.

On the Tech piece that's essentially 70% is Micron, 30% partners, and that's really associated with the completion of a 68 nm transition and smaller board 50 nm node.

Then the Micron piece is pretty distributed, dribs and drabs around some completion of 34 nm, 34 nm NAND, and 50 nm DRAM and NTB as well as some packing and other facilities around the globe.

Just what do you expect depreciation and amortization to be for the full year?

Roughly in the range I gave for Q2, $500 million the quarter kind of range, low 500s.

Running sort of $1.5 billion for the rest of the year on on the of the $600 million for Q1 is that a way to think about it.

Just a little bit above that, closer to 2.

Thanks very much.

Including Q1.

Including Q1.

Closer to 2 billion all in including Q1?

Yes.

Next question from Hans Mosesmann.

Question about the bit growth which is pretty strong and it seems that even in the 14 week quarter you either to gain market share or bit growth is a lot stronger from an industry perspective.

Can you give more clarity on what actually happened there?

Let me repeat that question, Hans just so we capture.

You broke up a little bit.

Mark Adams I think Hans' question was we had very strong relative sales bit growth, do we believe we took market share or is there some is that representative of some of the things you seen in different channels within the sales in Q4?

Yes, I think we actually feel positive about the share growth.

There is a couple of things that gone on, and as I mentioned earlier, one of which is we optimize where we are putting those bits coming in to the quarter.

Secondly, I think we were able to drive more the volume through our retail channel than we had initially planned which slowed some of the bit growth.

And finally as you look at both DRAM and NAND for us we had larger customers who came back and asked us for additional share primarily due to our strength and position in the industry, and where we were from a product availability perspective.

So we coupled those three things with the focus from an operations perspective on the inventory management and driving some cash flow through those efforts, I think it's resulted in a pretty strong bit quarter for Micron.

Thanks.

Follow-up on the sensor business, it was flat and that's unusually strong too in this environment.

Are you gaining share or is that it you're not exposed to the markets where perhaps you are seeing a lot of more weakness than you saw?

We, we did gain some share in the quarter, but if you look to some of the other forecasts in the competition, I think that's indicative of what we will probably experience too.

In other words, I don't think we are going to escape a general economic decline.

We would expect, by the way it is also seasonally close is weaker.

We would expect for the what we call the Q2 calendar Q1, to be in line with what others are forecasting, it will be down for the quarter.

That's helpful, thank you.

Your next question comes from Bob Gujavarty.

Asked and answered.

Can you remind us about the inventory ramp up, so what you're planning in terms of the max capacity and how much you are going to get?

I think you mentioned it's going to happen in about nine months you will start to receive wafers in a significant way?

This is Mark.

First of all let me clarify, we will start receiving wafers sooner than nine months but by the end of nine months we will be taking our full 50% of the output.

Relative to capacity it's a big fab, we think that there is a lot of room to optimize it on a go forward basis.

So current production is in this roughly 100,000 wafer per month range.

We think that when optimized, and transition to our technology that the fab is capable of supporting as much as 50% more than that.

Then if you layer in the space on top, it could, that site could clearly exceed 200,000 wafers per month.

We don't have plans to do that today.

Our plan is in the second half of the year to transition or begin the transition to Micron's technology without necessarily increasing output as we wait and see how the market conditions play out.

Is it safe to say even if you're bits decline next quarter and maybe even lag the industry you can catch up quite a bit once the Inotera capacity slides over to you?

Oh yes.

Thanks.

That's it.

Your next question comes from Bill Dezellem.

A group of questions around CapEx and first one following-up with Inotera given the weak pricing environment, do you have any flexibility or do you want to have flexibility with your plans of Inotera transition to get that equipment moved over to the Micron process?

Bill, are you -- you mean in terms of deferring or accelerating?

That is correct.

We have total flexibility.

It's just a matter of discussing what we are going to do with our partners.

The best way to think about the industry, it's not just Micron is that the entire situation is pretty fluid at the moment.

You have obviously seen some of the announcements from a variety of other producers in the industry that they're either slowing down for Christmas like we are or they're actually doing capacity cuts.

Most of the companies I have already announced in the neighborhood of 20%, some 30%.

Inside of recent announcement we noticed in a press release that they are going to cut 30% of their capacity from January forward.

All that of course is pretty fluid and will have a impact.

The rate as which things transition or the rate at which capacity comes back on line, will all be determined by what the demand profile is in the first half of '09.

Having Qimonda taking part of the production from the Inotera fab that does not decrease your flexibility as far as you're concerned?

No.

I don't think.

Couple of other CapEx questions relative the Micron's CapEx, do you still see additional room to cut CapEx further, in fiscal '09 if you need to?

Then the second question is what's your perspective relative to the rest of the industry, where they are at relative to rock bottom CapEx, levels?

Well, as indicates historically, two companies that don't react as dramatic as most of us do in the memory business.

Obviously Samsung hs been one of them.

Although I think the equipment guys will tell you that they've substantially in the backlogs and the CapEx terms.

Intel is the other one.

Intel, they tend to run on their own course in terms of what they do for those different reasons.

Other than that, in particular in the memory industry, we don't have -- the reason we don't vp a lot of room for additional CapEx cuts is because we cut everything that could possibly be cut.

I think that is the current state for most of the others at least in the memory industry, and if you really the guys to talk to are the equipment guys.

If you talk to the equipment guys, they will tell you that they may not have any business in '09.

At least in certain categories and there is certainly no expansion going on.

CapEx if it gets in '09 will be for cost reasons.

And I think short-term paybacks.

Improving the cost structure.

I don't think there's going to be much else, at least that's what I have been hearing from them.

I think that almost all companies at least in the memory industry are now approaching the minimum CapEx levels.

I will tell you that I think that some of the forecasts that I have seen for CapEx, at least attributed to memory for fiscal '09 are still too high.

I haven't seen announcement yet that's probably going to be what it really ends up occurring in '09.

Thank you.

Your next question comes from [Gary Hesch].

Thanks for taking my questions.

Most of my questions have been answered.

But bigger picture, bottom line, can you help us explain the financial bailouts of (inaudible) and potentially the Taiwanese DRAM companies and then, B, in near term production cuts that most of these companies mentioned how does it shakeout?

Gary, it's pretty tough to know with precision what happens.

That's predominantly because even though it's probably relatively easy to calculate what comes out of the market from the capacity cuts based on the decisions the Company's announce it's almost impossible to understand what the demand profile will look like and the economic environment is going to be like in the next three to six months.

With that in mind, I'm going to make two comments on what we see happening on bailouts.

Most of, in fact all of the discussion around the bailouts coming from the various governments are around trying to provide what I would characterize as either one of two things, debt relief, so they can defer debt repayment or immediate working capital needs because they frankly, can't even meet payroll.

None of it is around expansion.

None of it.

None of it is around capacity additions et cetera.

It's all around debt relief or short-term working capital to stay out of bankruptcy.

As a result, the bailouts to the extent that they occur may have a longer term affect in terms of those that are in the business.

I don't think they are going to have much of any affect in terms of capacity being put into the market place any anytime the next year or next two years.

This is a pretty big hole that the industry is in.

And I've seen a couple of statistics now if you were to just take the Taiwanese industry and talk about the difficulties they are facing, essentially the total market cap of the companies is around $2.5 billion, the total debt of those same companies is around $12 billion, and the cost just to convert the next (inaudible) is around 5 billion.

That's a interesting characteristic of how things exist right now.

I think that you got to keep that in mind when you think about what happens on the supply side.

The capacity cuts that are taking place are absolutely going to have an effect.

And the bailouts aren't going to do anything for new capacity coming in to the market in the next year or two.

But what we can predict is the demand profile and how much that consumes of the supply, even though it's less how much it contributes to the supply.

Well, that kind of leads me to my second question.

When you don't get consolidation clearly you can't really shed excess supply immediately, for DDR2 DRAM, I think it's going to be pretty complex picture even in '09.

If you look at DDR3 it's a real opportunity to wipe the slate clean.

There's not too many companies out there as you said that can afford the R&D to move to DDR3.

Are the economics, given the pricing today of DDR3, are the economics in DDR3 attractive for Micron at this point or is the premium on DDR3 really not enough to kind of offset hire manufacturing costs or larger die sizes?

Clearly it's attractive for us, I don't think we can subscribe too much if the current environment.

Just to follow-up I absolutely believe there is going to be consolidation.

I made an earlier comment on the conference call that just because some of the bailouts are occurring I think it would be a mistake to assume there is not going to be consolidation.

I think in fact some f the bailouts are occurring just so that we can get to a consolidation.

Otherwise the companies would be filing bankruptcy now.

I'm not going to talk about the politics of that, negative or positive it's just a reality that we have to deal with.

I don't think that's to eliminate consolidation.

When you say wipe the slate clean on DDR3, there are really only a few of us that are capable of (inaudible) in the marketplace.

We have an advantage we're really an early ramper of DDR3 and kind of more and more percent of our product line.

I don't think it's officially over for that device over what we're having to deal with on the DDR2 or the DDR.

Thank you.

Thanks, Gary.

With that I think we have time for one more question.

Your next question is from (inaudible).

You mentioned you have made no commitment to Inotera as far as CapEx.

I just wanted to understand for the transition they are going to have to Micron's memory, is that conditional on them being able to get the financing to do that or do you expect that to be discussed later as you get closer to that?

Obviously the desire at the moment is to have them finance their own transition to the technology.

We are remaining (inaudible) CapEx commitments with Inotera at this point.

I'll just tell you it's a little bit fluid.

Clearly that industry and the government how they get the companies (inaudible) technology and Inotera is included in that group of companies.

This are a couple of other models that are similar.

We just don't know.

I think that the most important thing to note is that over time it will transition.

The better capable it is to fund itself, the better it is for us.

As a partner if we think it's the best use of our dollars then we will look at doing that.

As of right now, there hasn't been anything determined.

Thank you.

With that we would like to thank everyone for participating on the call.

If you'd 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.

Thank you this does conclude today's Micron Technology first quarter 2009 financial release conference call.

You may now disconnect.