美光科技 (MU) 2012 Q4 法說會逐字稿

Good afternoon.

My name is Karen and I will be your conference facilitator today.

At this time, I would like to welcome everyone to the Micron Technology's fourth-quarter and fiscal year-end 2012 financial release conference call.

(Operator Instructions).

It is now my pleasure to turn the floor over to your host, Kipp Bedard.

Sir, you may begin your conference.

Thank you, Karen, and I would also like to welcome you to Micron Technology's fourth-quarter and fiscal year-end 2012 financial release conference call.

On the call today is Mark Durcan, CEO and Director; Mark Adams, President; and Ron Foster, Chief Financial Officer and Vice President of Finance.

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

If you have not had an opportunity to review the fourth-quarter and fiscal year-end 2012 financial press release, again it is available on our website at Micron.com.

Our call today will be approximately 60 minutes in length.

There will be an audio replay of this call, accessed by dialing 404-537-3406 with, a confirmation code of 30042904.

This replay will run through Thursday, October 4, 2012, at 530 PM Mountain time.

A webcast replay will be available on the Company's website until September 2013.

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.

(Recording plays)

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 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.

(Recording ends)

And with that, I'd like to turn the call over to Mark Durcan.

Mark?

Thanks, Kipp.

I'd like to start today with a brief overview of the key developments during the quarter and an update on the proposed Elpida acquisition, followed by a recap of fiscal 2012 and our focus heading into 2013.

After that, I'll turn it over to Ron for a financial summary, and we'll close our comments with Mark Adams discussing key developments in our business unit and operations, as well as an update on market conditions.

Revenue in the quarter was down about 10%, primarily due to a reduction in DRAM bits.

You may recall that we had forecast in our previous earnings call that this would be occurring as we transition significant production to more 4 gigabit densities.

Also impacting this comparison was a significant reduction in inventory for both DRAM and NAND that occurred in our fiscal Q3.

Gross margins were pretty flat quarter over quarter, with improvements in NAND and NOR and offsetting reductions in DRAM.

From a market perspective, NAND flash demand improved during the quarter, and this, coupled with muted industry supply, led to improved ASPs compared with the quarter-to-date estimate we gave you in late June.

On the other hand, DRAM market prices deteriorated during the quarter, primarily related to weakness in the PC environment, although our net DRAM ASP was essentially flat due to mix improvements.

NOR revenue remained stable in the quarter, and we were pleased to see NOR gross margins improve by about five percentage points, mostly due to cost reductions.

Total inventory was down again in fiscal Q4.

We're continuing to focus on improving our turns over the next several quarters.

In DRAM, 30-nanometer yields on track, and we should see a nice jump in production and cost improvements over the next few quarters.

From a NAND perspective, we had the first full quarter of results following the restructure of our supply and technology agreement with Intel in April.

All product coming out of IMFS in Singapore and our Virginia fab now flow to Micron.

As a result, we have a much larger base of wafer capacity in our trade NAND business targeting key growth segments, including SSDs, smartphones, and tablets.

Although we would have preferred to be reporting better financial results for fiscal 2012 today, looking back we had some significant highlights in the year.

We achieved increased manufacturing scale and performance as we completed our volume manufacturing ramp of our world-class Flash memory facility in Singapore on both 25-nanometer and 20-nanometer technology, and transitioned Micron's DRAM operations to 30-nanometer DRAM manufacturing.

We launched a Hybrid Memory Cube product line, reinforcing our leadership in high-performance DRAM technology.

We completed the successful implementation of our new global supply-chain management system.

We achieved the successful outcome in the Rambus antitrust trial.

We redefined and expanded our joint venture with Intel.

We signed a sponsorship agreement to merge Elpida's operation into Micron and which, upon close, will place Micron as the industry's leading memory pure play and one of the top five semiconductor companies in the world.

Relative to Elpida, let me elaborate on a few of the items and update you on the timeline to close.

The Japanese court and Elpida trustees ran a rigorous and thorough sponsor selection process and determined Micron's sponsorship proposal to be the most attractive alternative.

We believe the proposed agreement represents the best solution for Elpida's debt holders, employees, customers, and the Japanese semiconductor and electronics industries.

For Micron, the deal will provide greater manufacturing and R&D scale, as well as significant product, customer, and cost synergies, all at attractive economics for Micron shareholders.

The combined company will be well positioned to grow and thrive, optimizing the potential return for all involved.

The financial terms and expected timeline to close have not changed since our announcement in July.

On September 11, the US HSR waiting period expired, and depending on the timeline for other government approvals, we still expect to close sometime in the first half of 2013.

Entering fiscal 2013, we are focused on driving our return to profitability with a continued emphasis on cash flow.

We do face some headwinds from the macroenvironment and from the demand profile in a number of segments.

Specific to DRAM, prices are currently soft.

While a certain amount of supply has come off-line, we still need to see improvement in demand in the market to get things back on track.

The upcoming Windows 8 launch and proliferation of DRAM in mobile devices should help get the ball rolling.

Although it's hard for us to predict the timing of a recovery, Mark Adams will comment later on this.

NAND market prices are currently up quarter to date, following the nice ASP recovery over the summer, and we don't see any disrupted supply coming online in the near future.

We expect strong demand for SSDs in ultrathins and enterprise server and storage, as well as the proliferation of smartphones and tablets to fuel significant NAND consumption.

From an operational standpoint, we continue to drive manufacturing cost reductions and optimize our product mix, focused on the best margin and growth opportunities.

We also intend to be very disciplined in our spending profile, both in terms of overhead and CapEx, and manage our inventory levels carefully.

I'll stop here and turn it over to Ron and Mark before returning for Q&A.

Thanks, Mark.

Our 2012 fiscal year ended on August 30.

On our website, we have provided a schedule containing certain key results for the fourth quarter, as well as certain guidance for the next quarter.

That material is also presented on the few slides that follow.

First, the fiscal 2012, it ended at a net loss of just over $1 billion, or $1.04 per share, on net sales of $8.2 billion.

Fiscal 2011, comparatively, showed roughly breakeven net income on sales of $8.8 billion.

Total sales for 2012 decreased about 6%, compared to the prior year, as a result of generally severe price pressure in the memory industry as a whole.

DRAM sales for 2012 reflect a 12% decrease compared to 2011, the product of a 59% increase in DRAM bit sales, offset by a 45% decrease in average selling prices.

Bit sales into premium DRAM sectors increased 62% in 2012, compared to 2011.

Trade NAND sales grew 19%, the product of bit sales over 2.5 times the 2011 level, offset by a 55% decrease in selling prices.

Trade NAND sales were favorably affected by the higher mix of Micron SSDs in 2012, which comprised 14% of trade NAND for the year.

Sales of NOR products decreased year over year, in line with the general decline in market demand and the performance of our customer base in particular.

On the cost side, DRAM bit cost in 2012 decreased 32% compared to the prior year, roughly consistent with the long-term industry trend.

NAND bit costs over the past year decreased 45%, compared to the prior year, as we leveraged our industry-leading process technology.

Broadly, annual sales for 2012 were comprised of about 44% NAND, 39% DRAM, and 12% NOR.

Turning now to the fourth-quarter results, we posted a net loss of $243 million, or $0.24 per share, on net sales of $2 billion.

These quarterly results compare to a net loss of $320 million, or $0.32 per share, on net sales of $2.2 billion for the third quarter.

Fourth-quarter revenue was sequentially lower in total, as well as for both DRAM and NAND on generally flat pricing for DRAM products and slightly lower pricing for NAND products.

Although DRAM pricing was generally down in the fourth quarter, as Mark mentioned, improved mix in our premium segments yielded an overall flat average selling price.

Both DRAM and NAND saw lower volumes of bit sales.

As a result, when combined with stable bit costs for both DRAM and NAND across the two quarters and at better NOR margin performance, consolidated gross margin was fairly stable for the third quarter in a row.

Depreciation and amortization in the fourth quarter was $509 million.

This decrease, compared to recent historical periods, is due to certain production equipment, primarily in the Lehi and Virginia NAND and 200-millimeter NOR operations that have become fully depreciated.

We anticipate depreciation and amortization expense will be approximately $2 billion for fiscal 2013.

As a result of the changes to the IM Flash joint venture with Intel that occurred in the third quarter, NAND sales to Intel decreased by half in the fourth quarter, consistent with our previous projections.

That volume has now shifted to trade NAND going forward.

However, trade NAND bit volume growth for Q4, although consistent with our projection, did not reflect the magnitude of this shift for two reasons.

First, one-time WIP sales to Intel, which were a part of the IM Flash transaction, masked the normal Q3 to Q4 growth rate.

And second, some production volume went back into WIP as we rebuilt the manufacturing pipeline with Micron trade products.

So you can better ascertain the underlying growth rate by comparing trade bit growth from Q2 to Q4, which grew 78% over that period.

A higher volume of SSD sales in the fourth quarter mitigated the decrease in trade NAND selling prices compared to the third quarter.

Price decreases for NAND components enabled increased penetration into the client SSD space.

Sales of enterprise SSDs were also up nicely, albeit on a lower base.

Trade NAND selling prices are up a couple percent quarter to date, while trade NAND cost per bit is expected to be down a few percent in the first quarter.

Trade NAND bit growth is projected to be flat in the first quarter, compared to the fourth quarter, as we transition to a new technology node.

DRAM revenue in the fourth quarter decreased 9%, compared to the previous quarter, as a result of a 9% decrease in bit sales volume, consistent with our prior guidance, due to a mix shift to lower density specialty DRAM, as well as initially lower yields on our new 4-gig DDR3 ramp.

Selling prices for specialty DRAM products improved slightly in the fourth quarter, while prices in the PC sector dropped significantly due to weakness in demand.

Quarter to date, selling prices are down in the high teens, compared to the Q4 average.

DRAM costs per bit declined slightly quarter to quarter, and we are forecasting bit costs for DRAM in the first quarter to be down in the high single-digit range as we continue to transition to our 4-gig DDR3 product.

This transition is also driving bit production up low to mid-teens in the first quarter.

NOR sales increased slightly in the fourth quarter, compared to the third quarter, and represented 12% of total revenue for Q4.

NOR revenue in the first quarter is expected to be in the same range as the fourth quarter.

We anticipate NOR cost reductions will continue to outpace selling price reductions in the first quarter.

Turning now to business units.

The NAND solutions group revenue declined from the third quarter, due to the one-time impact of selling back-end inventory to Intel during the third quarter that I mentioned earlier.

Trade NAND sales and NSG were up in the fourth quarter on increased volume and stable average selling prices.

NSG was able to achieve positive operating income from the third-quarter level on improved product mix sold in the fourth quarter, including a 67% increase in bits sold in SSD form, as well as lower cost based sales to Intel.

Operating income for the DRAM solutions group in the fourth quarter primarily reflects the lower DRAM revenue trends I commented on earlier.

DSG sales into the personal systems sector decreased as we moved volumes into higher-margin areas, notably networking, as pricing into personal systems came under additional pricing pressure, particularly in the latter part of our fourth quarter.

DRAM sales into the personal systems market were just 14% of total sales in our fourth quarter.

Our wireless solutions group performance continues to reflect weakness of the feature phone market segment and our customer group in particular.

Revenue declined for the third quarter, primarily due to lower NAND sales as we transition to new products and configuration and as customers work through existing inventory.

Wireless DRAM and NAND declined ahead of product transitions, while wireless NOR sales remained steady quarter to quarter.

The embedded solutions group results continue to reflect growth, particularly in the automotive and industrial sectors.

In fact, in the fourth quarter, ESG reported its highest revenue level since the establishment of our business unit.

The revenue growth came from the broad strength across the technology portfolio as NOR, NAND, and DRAM revenue increased from the third quarter.

In addition to the topline growth, ESG operating income strengthened as the fourth-quarter results included better cost performance than the previous quarter and improved factory utilization.

In operating expenses, SG&A expense in the fourth quarter was slightly below our projected range as a result of lower costs associated with pending legal matters and lower personnel costs from our variable pay plans.

We expect SG&A expense to be between $135 million and $145 million in the first quarter of fiscal 2013.

Fourth-quarter expense for R&D was right at the high end of our guided range.

These expenses vary primarily due to the volume of development wafers processed and the timing of product quals.

R&D expense in the first quarter is expected to be between $220 million and $230 million.

The Company generated $450 million in cash flow from operating activities in the fourth quarter.

Comparing operating cash flows in the third quarter to the fourth quarter, the IM Flash restructure transaction had a favorable impact on Q3 from the $300 million deposit received from Intel in the third quarter, while the fourth quarter operating cash flow was negatively impacted by $45 million of product sales, invoices, charged to that deposit.

We ended the fiscal year with a cash and investments balance of $2.9 billion.

This balance increased $718 million compared to the previous year-end as we generated $2.1 billion of cash from operations, raised $1.5 billion net new financing, and spent $1.9 billion in capital expenditures.

Inventory declined $82 million quarter to quarter, where finished-goods reductions more than offset the WIP increase related to refilling the back-end pipeline after the Intel transaction.

We expect expenditures for property, plant, and equipment for fiscal 2013 to be between $1.6 billion and $1.9 billion, slightly weighted toward the earlier part of the fiscal year.

Now I'll turn it over to Mark Adams for his comments.

Mark?

Thanks, Ron.

Today, I'm going to walk through some of our fourth-quarter operational highlights, as well as discuss the current market dynamics in the memory business.

Our NAND solutions group recovered from a weak ASP environment in the beginning of the quarter.

If you recall, ASPs were down mid-teens quarter to date during the first few weeks of our Q4.

Prices recovered during the quarter, and the trade NAND business ended up with slight revenue growth and stable gross margins.

In addition, finished-goods inventory declined quarter over quarter.

Micron SSD revenue was up 33% in the quarter with unit shipments up over 50%.

We're seeing steady growth of our client SSDs at key OEM partners and continued growth of Crucial-branded SSD drives in the channel.

Where other channel competitors have struggled to generate a profit, Crucial continues to drive solid financial performance.

We are now shipping client SSDs to five of the top OEMs in the world and plan to grow our share in the coming year.

Client SSD revenue was up close to 30% in Q4.

For fiscal-year 2012, unit shipments more than doubled.

Also part of our growing client portfolio is our new mSATA SSD, which was selected as Best of Show award winner at this year's Flash Memory Summit as the most innovative Flash consumer application.

On the enterprise side, our SATA drives, the P300 and P400e continue to be the lead drives for us this quarter in terms of shipments.

We also maintained steady progress in qualifying our P [value] drives with leading OEM customers and are now gaining traction through our distribution channels as well.

In Q4, enterprise SSD revenue was up over 50%, albeit off of a relatively low base.

We're gearing up for some new products this fall, including an enterprise-grade SATA drive and our first SAS drive.

Both drives are in qualification now with OEMs.

Unique features we provide with these new products showcase our silicon to system strategy, including the firmware and hardware management schemes that are only available from a Micron-integrated SSD.

Another example of our growing system capability is the acquisition of Virtensys this fiscal year, which has provided Micron with a virtualized appliance.

In combination with our P320h PCIe cards, it provides much more storage in the appliance versus local server storage, and when we hook these up via PCI interconnects, you can share the storage across an enterprise environment.

We've also made significant strides in the quarter and in the fiscal year with our internal controller development.

Our controller strategy is really two pronged, using both internal and externally-designed controllers.

We're focused at the high end of our system solutions for our internal-design controllers; however, our approach is modulized and can be scaled down to lower-end client systems over time.

On the NAND technology operation front, we continue to be pleased with 20-nanometer ramp and expect production crossover in the first half of calendar-year 2013.

MLC represented about 75% to 80% of our wafer production in Q4, with SLC and TLC essentially splitting the remainder.

Although fiscal Q1 will only see a small reduction in trade NAND cost per bit, we expect to average down mid to high single digits over the next several quarters, mostly related to the 20-nanometer execution.

As I mentioned earlier, following a tough first half of the calendar year, NAND prices started to recover over the summer, and we have seen continued improvements in market prices subsequent to our quarter-end.

In terms of NAND inventory, we see the channel balance to about three weeks.

We're excited about the drivers for NAND, including SSDs, tablets, and smartphones, and believe the industry bit demand [countdown] is over, annually, 50% from 2012 through 2016.

In 2013, industry bit supply forecasts are up in low 50% range, well below historical levels.

We continue to seek balance between our current capacity and serving our customer needs.

Our DRAM solutions group achieved record shipments in networking and storage, graphics, and consumer segments this quarter.

On the server side, we increased market share with existing customers and won critical qualification slots at our new customers in the high-growth data center market.

We did, however, see some price pressure in the server market as OEMs compete for this growth [warranted] data center business.

Nonetheless, this server growing market segment share is helping to drive DRAM bit demand over 50% year over year.

The networking segment had another strong quarter, exceeding targets for revenue, bit growth, and gross margin.

In terms of demand in this segment, LTE adoption is progressing well.

While the Americas and Japan have strong investments in the infrastructure, so does China will continue to grow, despite some weakness shown in the European market segments.

During Q4, we have seen softness in PC demand, although we were able -- still able to maintain minimal ASP declines in the quarter.

That being said, we have seen price weakness in Q1, and see short-term challenges with channel inventory overhang and OEM customers remaining generally cautious.

As demand count less for improvement in the PC DRAM segment includes the upcoming Windows 8 launch with both Intel and [RM]-based products expected in key OEMs, in particular with the ultrathin category.

From a technology perspective, our 30-nanometer process node saw volume ramp in fiscal Q4 with qualifications across a broad customer base.

The timing of our 4-gigabyte transition actually limited our output in fiscal Q4, but we expect to catch up this quarter, which, coupled with the 30-nanometer technology, is providing significant bit growth and cost reductions.

Another key aspect of our cost per bit and output improvement over the next couple quarters is Inotera's execution.

In fiscal Q4, they took steps to remove a production bottleneck during what was a slow demand period.

Moving forward, the throughput in percentage of wafers on leading-edge technology from Inotera will improve.

In aggregate, we expect crossover output on 30-nanometer in the current quarter, putting us in a much stronger competitive position.

We are also progressing with a 30-nanometer design shrink, which will give us additional cost reductions over the next couple quarters.

Our 20-nanometer process node will commence in calendar-year 2013.

All in all, we see quarterly cost per bit reductions averaging mid to high single digits over the next several quarters.

DRAM market prices were generally stable coming into the quarter although things began to weaken in July, and we've seen that trend continue as we head into fiscal-year 2013.

In terms of DRAM inventory, we believe that the channel is currently running about six to eight weeks, on average.

Some of the short-term weakness in PC DRAM seem attributable to a pause prior to the Windows 8 launch.

We anticipate things will improve with the new OS in combination with ultrathin form factors, although timing is difficult to predict.

Outside of PC, we're generally pleased with DRAM demand with several segments driving bit demand well over 40% year over year.

That said, continued mild or even lower industry supply bit growth might be the required catalyst to get the ASPs back to profitable levels in the future.

Current industry bit forecasts are high 20s for -- 20% for 2012 and similar for 2013, although there's no certain possibility of further supply or CapEx cuts in the industry, given current ASP weakness.

Revenue in our wireless solutions group declined in both DRAM and NAND as we're continuing to work on aligning our product portfolios to customer demand.

NOR sales stabilized and were essentially flat quarter over quarter.

As we rebuild our wireless business, we remain focused on profitability.

Despite the topline revenue decline, we see better operating performance in WSG, which will be our focus as we prepare for combination with Elpida's wireless business.

Fiscal Q4 saw the introduction and rapid growth of the smartphone open market in China.

This is expected to represent the majority of the rapidly growing Chinese smartphone market, which is forecasted to grow from 50 million units in 2011 to 600 million units in 2014, due to the rapid transition from feature phones to smartphones.

During fiscal Q4, this emerging market adversely affected our wireless revenue, due to abrupt NAND [ntb] density changes.

However, in the long run, we anticipate this market's growth to be a huge opportunity for Micron, due to our future portfolio alignment.

One example is the ramp of our 4-gigabyte low-power DDR2 mobile DRAM, which is growing at present significantly in the portion of the market.

We're also excited to announce the official qualification of our 1-gigabit phase change memory-based MCP product with two key mobile customers.

We expect volume shipments to commence in fiscal 2013.

I also want to take this opportunity to welcome Mike Rayfield, who recently joined Micron as our new Vice President of the wireless solutions group.

Mike has an impressive background in the wireless business.

I know he's excited to hit the ground running and help position this segment for growth and profitability in the future.

Our embedded solution group had another solid performance with record revenue and gross margins, driven by strong quarter-over-quarter shipment growth in DRAM, NAND, and NOR and across all regions outside of Europe.

We had strong design wins across all technologies, and particularly strengthening the networking and automotive sectors during the second half of the year.

In automotive, we are now ramping the e-MMC product tailored for this segment, which is expected to drive significant revenue in fiscal 2013.

We've also completed qualification on over 150 platforms at 60 chipset partners during the last year.

These qualifications spanned all segments, with particular strength in consumer networking, ensuring that Micron-embedded memory solutions were supported and pre-validated with chipset solutions to enable our customers fastest time to market.

We're leading the NOR industry from a manufacturing and technology perspective with 40- and 5-nanometer now ramping in mass volume on 200 millimeter, and then the recent introduction of 45-nanometer, 300-millimeter NOR in our Virginia fab.

Moving into 2013, we'll continue to focus on growing our share in key embedded segments, leveraging our product portfolio, technology leadership, and manufacturing scale.

Our operational performance in fiscal 2013 is to continue the deployment of advanced technology, which I described earlier in the business units' discussions, as well as improved cost efficiency in our fabs, optimize our inventory, and enhance supply-chain management.

Our broad product portfolio, expanding the scale, and global manufacturing presence requires a greater focus on supply-chain management.

The same goes for inventory management.

We're tasking our business units and our sales teams to increase turns and quarterly sales linearity for high-volume products, while also ensuring we have the right levels of strategic inventory for premium-margin specialty products.

While we have experienced [volatile] market conditions over the last 12 months, we are optimistic that we can see an improved memory market looking out over the next 12 months.

While DRAM prices have indeed weakened, we have seen a nice recovery in net ASPs and our overall NAND demand, while we're benefiting from slower industry supply.

Our NOR margins improved in Q4, and this business continues to generate substantial free cash flow.

We remain focused on optimizing our product portfolio, as well as leveraging our technology leadership and manufacturing efficiency to enhance our financial performance in 2013.

Now I'll turn the call back over to Kipp.

Thank you, Mark.

We would now like to take questions from callers.

(Operator Instructions).

(Operator Instructions).

James Schneider, Goldman Sachs.

Good afternoon and thanks for taking my question.

I guess, first of all, on the NAND side, I think you referred to some industry bit growth estimates for 2013 in the low 50% range.

I was wondering, based on what you see today, do you think we're going to end up for the industry on the high- or low-end side of that?

And where do you expect Micron to come in in terms of that industry bit growth, higher or lower?

I think the answer to your question is probably both on the low end, both the industry and Micron.

Okay, fair enough.

And then, could you maybe talk about, in the wireless solutions group, what are the steps you're going to take to start turning around the profitability in that segment?

I think you obviously referred to improving gross margins in the NOR Flash space, but can you talk to maybe some other actions you might look to take, either operationally or in terms of [kelly the pot] portfolio there?

Sure, I think it's important to note that the business -- our wireless business has evolved from both the acquisition of Numonyx and kind of where this segment was, and we had a pretty high, heavily concentrated business in the feature phone market.

We've been moving our product development efforts, as well as product roadmaps, towards the smartphone piece of the business, and our advancement in terms of low-power DRAM will allow us to get more aligned with the broader demand cycles in the mobile phone market.

So I think from a product perspective, we're well aligned going forward.

We also have been taking a look at our spending across NAND, DRAM, and NOR to make sure we're focused on these future products and making some tough choices on some of the existing or historical legacy products that have not generated profit.

So between the expenditure side and some product alignment, and, of course, our new leadership, we feel pretty good about the business going forward.

That's great.

And last question for me would be I think you gave a number in terms of the SSD sales for fiscal 2012.

Do you care to make any kind of guess about what that number could be like on a year-over-year basis for 2013?

You know us, James.

We try not to predict anything like that or forecast it.

But nice try.

Fair enough.

Thanks so much.

C.J. Muse, Barclays Capital.

Yes, good afternoon.

Thank you for taking my question.

I guess first one on the DRAM side.

Can you talk about what you're seeing there in terms of utilization rates, particularly from the Tier 2 guys?

Are you starting to see them ratchet back or are they still lingering?

You know, really, we just read the same stuff in the press that you guys do, and it's hard for us to comment beyond that sort of speculation.

Okay.

I guess thinking a little bit longer term, can you share with us what the mix was -- you know, PC, server, mobility, et cetera -- in August, and where you think that could move to 12 months from now, and how we should think about the implications to gross margins for that business?

Sure.

On a revenue basis, we were exposed to the personal systems by about 15%, and this is of total revenues.

Had a pretty strong server business, low double digits; networking and storage, mid-teens; mobile, low double digits; and then, AIM was around 10%.

Do you care to talk about where you see that going 12 months from now?

Can I just say, I'm going to repeat my answer from the last question.

It's really hard, especially when we're talking about revenues.

You have to also predict not only your growth rate in bits, but also what the ASPs are going to be doing, and that's just a pretty difficult order.

Sure, very fair.

And then, last question for me, on the NAND side, can you walk through the road map there on 20-nanometer, when we should start to see -- you talked about, I guess, mid to high costs down each quarter.

Will that commence in calendar Q1, Q2?

How should we think about that?

Go ahead, Mark.

I think the answer is we're really focused on hitting more of a production crossover towards the end of the first half of 2013.

So then you'll see some of that cost flow through to our NAND COGS.

So today, we're shipping the product, but we expect to continue to increase volumes that allow us to realize cost savings.

If I can add, I can just refer you as well to your guidance sheet.

You can see there for Q1 2013, we're suggesting down a few percent in NAND and then a more aggressive cost down in the next few quarters after that.

Okay, thank you very much.

Daniel Amir, Lazard Capital Markets.

Thanks a lot.

Thank you for taking my question.

Can you a bit expand how you see the PC market playing out in the next year, given Windows 8, ultrabooks, some of the changes that you've done also to the DRAM franchise?

And then, I have one follow-up.

Thanks.

Well, I think we commented earlier that currently we're in a soft PC DRAM market conditions, and we do have some belief that between Windows 8 and further enhanced delivery of ultrathin products from across the OEM base can infuse some higher demand signals.

It's hard to call.

It doesn't seem like it's going to be in the real short term, but we think over the fiscal year we see some imbalance there in terms of the markets, some recovery in the PC space.

But it's really around those two demand drivers, offset, obviously, by smartphone and tablet growth and how that impacts the overall long-term piece of the business.

Okay.

And then, in terms of how should we look at the best guess a bit on cost-downs in the DRAM space here in the next year?

I don't know how much you want to comment on potential Elpida, but maybe without Elpida?

We're looking around 30% to 40% on DRAM.

Okay, great.

Thanks a lot.

Stephen Chin, UBS.

Hi, thanks for taking my questions.

The first one I had relates to your mobile DRAM product.

I know it's still a relatively modest business for you currently, but was wondering, from your perspective what's the current average content for mobile DRAM in the smartphones that you guys have exposure to?

And also, is your ability to produce more mobile DRAM, is that going to be the, do you think, the limiter to how quickly you guys can grow your MCP business?

Sure, I can start with the first part of that, the raw data, then maybe Mark can jump in with some of his thoughts around how the market is headed.

But today, on average of all handsets, you're looking at about 315 megabytes per phone, average handset, and about 3.5 gigabytes of NAND.

In the smartphone segment itself, you're currently looking at smartphones at about the tall 600, low 700 megabytes per handset and more in the low 30s gigabytes in NAND in the smartphone segment.

The average megabytes per handset next year by third-party analysts are expected to grow again over 100% and NAND up around 50%.

Okay, perfect.

And just looking at your solid-state drive business, it's obviously that you have a number of different products that are helping to expand the portfolio, both on the client side and the enterprise side.

Care to take any guesses as to what kind of margin profile the overall business will look like in a year's time, just given the different enterprise pieces, whether it's PCIe or the [nash] drives?

You guys are really making it easy for me to answer.

I just keep saying sorry, too hard to predict.

Okay, thanks.

And I guess one last question, just in terms of capital equipment reuse, can you remind us, given the latest generation of NAND lithography equipment that you have, what would be the smallest node that it can be reused on for DRAM?

Thanks.

This is Mark.

You know, there's really a lot of fungibility, and we have really state-of-the-art lithography equipment in all of our manufacturing fabs.

Depending on the manufacturing technology we use, that equipment is generally fungible down to 15 nanometers on either technology.

Okay, great.

Thanks.

David Wong, Wells Fargo.

Thank you very much.

In terms of your technology, you were talking about NAND transitions down to 20 nanometers.

What's your visibility at the moment for future line width transitions and when do you expect you'll have to have EUV to keep progressing?

Well, you know, we -- as I just mentioned, David, we can take the existing immersion high NA capacity on down to the 15-nanometer range.

Obviously, we'd love to have a low-cost EUV solution available.

If the manufacturing costs were there today, we'd use it today.

But we can continue to migrate our technology without it, and we'll just continue to monitor that and we'll be adopters as soon as we see the return.

Right, and on Elpida, if I understand correctly, in addition to the regulatory agreements, you still need a final decision from the court for the deal to progress under the negotiated terms.

Is that correct?

And if so, is there a deadline for when the court will make that determination?

You know, we still see this deal closing in the first half of 2013 and we see that the -- from our perspective, the bottleneck in that process is likely to be the regulatory approval.

The court process will run its course, and we think that the regulatory approval will overlap or extend beyond the end of that process.

Great.

Thanks very much.

Ryan Goodman, CLSA.

Hi, thanks taking my question.

I have a question on the DRAM side of things.

In the past, you've talked about specialty DRAM prices as trailing the commodity trends with lower highs and then higher lows, so sort of a smoother trend over time.

But then, if we look back over the past year, there really wasn't that boost early in the year in prices when commodity was doing well.

Last quarter, it sounds like you kind of tracked in line with flattish trends, and then looking ahead, you're talking about down in the high teens.

So, I guess, how should we think about this business going forward relative -- how it will trend relative to the commodity trends?

Go ahead, Mark.

Well, I think that certainly there are certain segments that are experiencing significant growth, but there's also new dynamics going on in the market segment, and I'm thinking specifically about server where we've seen tremendous application growth, but also on the low end of that segment, some level of commoditization with generic platforms and non-branded solutions where, when you look at the likes of a Google now being one of the largest server manufacturers in the world.

So I think we're seeing peaks of -- parts of that segment under some price pressure due to the commoditization of it, but overall we remain very bullish about the server business, and I think it will continue to behave as such.

I think the other side of the equation is that there wasn't really a big rebound as you might've suggested in the first half of the year.

We didn't see that.

It might have slowed, but still DRAM didn't really have a recovery in such that it's just been a longer prolonged pricing environment that the specialty business has lagged and now kind of in line with where it normally is.

Okay, and then just a question on the NAND side of things.

We've seen kind of a reshuffling in the competitive landscape, at least on the custom embedded side of things where some of the larger buyers out there have shifted their supplier base.

Just curious what you guys are seeing in terms of how that's impacted the opportunities you have.

Has this opened up anything or are you seeing increased competition on fronts where you haven't in the past?

Really, Ryan, we haven't seen much of a change.

The opportunities to increase our market share are available to us from various customers, and as we -- as Mark noted, we're excited to get our hands on additional trade NAND bits that we can go service these guys in a higher manner.

Okay, thank you.

Doug Freedman, RBC Capital Markets.

Great, thanks for taking my question, guys.

Mark, you made mention that you guys have the fungibility on the equipment front to go to lower nodes.

How about transitioning from DRAM to NAND, and when I look at what's happening in the marketplace, it sounds like the NAND market clearly is in better shape than the DRAM market, but yet your output is increasing fastest on the DRAM side.

How do we reconcile that?

Well, Doug, I think that's -- that flexibility is definitely there, and that's certainly something we have the ability to do as we migrate to future nodes.

The opportunity to take DRAM capacity and move it to NAND is there.

It's cost effective and efficient.

It's not something you want to do with high frequency, but it is something you can do if you plan a road maps and technology node transitions to efficiently take DRAM capacity and migrate it to NAND.

And for that matter, it's the opposite of your thesis, but you can do it the other way around as well.

I guess my question is really looking at next quarter, you're getting production up in DRAM faster in bit terms than your NAND side, and I'm trying to understand why you wouldn't have inverted that this quarter, given the condition in the marketplace?

The simple answer, Doug, is just the timing of the strikes.

We've got a real nice, deep ramp here on 30-nanometer DRAM in Q1, and our real steep ramp in NAND bits going to 20-nanometer really happen in Q2 and Q3.

I guess as sort of a follow-up, how should we think about the status of your inventory and whether you -- you know, inventory did come down a little bit this quarter.

Is that the right level of inventory?

And how should we think about your ability to model inventory for the next year, so to speak?

Is there an opportunity to run your factories a little leaner so that there's higher turns?

How should we think about that?

Doug, as I commented on in my opening discussion, we will continue to look at inventory.

Over the last couple of quarters, I think the team's done a pretty good job on that front.

And then, we also -- as we take a look at some of these more system-level solutions, enterprise SSD, for example, when we take capacity from just selling raw components to building solutions-oriented products, it might limit some of the future reduction potential, but we will continue to look at it and we feel pretty confident we're putting the right controls in place to make sure inventory stays the appropriate level for the business.

And my last question for you, can you guys give us an update on new technologies?

I mean, we talked at the last analyst day about a whole laundry list of potential candidates for the next-generation technology.

Where do we stand on that?

And any timeframe?

Well, you know, we continue to make good progress on a number of different technologies targeted at really slightly different applications.

Obviously, we're in volume manufacture now on phase change, so I don't know if you'd count that as an emerging memory anymore because we really don't.

We count it as here today and going into volume applications in 2013.

But beyond that, some of the ReRAM technologies and other more advanced next-generation memories, we're making good progress on them.

I don't see any of them having significant impact in 2013, or really in 2014, with the possible exception of some volume on the vertical NAND technologies, if you include those in that bucket.

Great, thanks for answering my questions.

Alex Gauna, JMP Securities.

Thanks very much for taking my questions.

If I heard you right, you talked about both mobile DRAM and NAND being down in the mobile category.

And I was wondering, is that a phenomenon of your customers working down inventory during what should otherwise be seasonal strength?

Is it ASPs, or is it simply your customer mix and maybe not having the best share positioning as we go into the holiday season?

You know, openly, I think it's really the latter area.

We are working ourselves through some customer concentration and customer mix issues that don't really reflect the longer-term potential as we transition.

But that's what's causing some of the impact to the financials.

How long would it take you to maybe realign that customer concentration?

How can you -- what kind of window should we look forward to?

I would just say this, without trying to predict too much in the future.

Alex, I think that we've been working on this for some time.

And remember, some of the product technology that we have that goes to that space, the value of commodity line in the wireless space we can also use in other segments, namely embedded.

So as we're focusing our customer engagement and development efforts on some of the better pieces of the wireless business, we're able to use some of that capacity and drive ESG, for example, to their highest quarter since they've been formed as a BU.

So, I don't want to predict the future.

I would just say that this is a known process that we're going through in the Company.

Obviously, it hasn't yet hit the financials, but we're pretty encouraged by things like low-power DRAM on our 30-nanometer node and the uptick that we can see from wireless, in addition to our longer-term prospects of a combined Micron and Elpida wireless business.

Okay.

And then, if I could ask, SSD seems to be performing pretty well, but the DRAM, as it pertains to the PC industry, is struggling.

How can you reconcile that?

Is the SSD business experiencing some of the similar weakness in DRAM or has your share gain been so great that it masks this?

I think when you look at SSDs, the client SSD business is coming from the sort of lower penetration rate that the business uptick and the more pricing adds and the value consumers are putting on it, it continues to improve, and the core DRAM growth obviously doesn't -- isn't aligned with the same traffic, so it's coming from a much larger share of the platform.

Okay, one more, if I could.

You mentioned Windows 8 being a catalyst, eventually.

It sounds like you're not yet seeing much of a boost.

Can you talk about your expectations around the build cycle there and maybe about average density as it pertains to now that we have Windows RT and we have Windows x86?

We believe that the builds have largely taken place, and as Mark mentioned in his commentary, PC OEMs are being extremely conservative.

They don't want to have a high risk of inventory obsolescence.

And in terms of -- the second part of your question, remind me again?

I guess I was wondering about what this does to average density, especially now that we've got to deal with the factor of the Windows RT versions out there?

Yes, let me answer it maybe two ways.

If you go onto a lot of the online website sales organizations for the various large OEMs, you're seeing a fairly large concentration now at 6 and 8 gigabytes.

That being said, when you look at the third-party data, they're only suggesting about a 20% to 25% bit growth in the PC area for next year.

Okay.

All right, thanks very much.

[Dean Grumlose], Stifel Nicolaus.

Hello, this is Dean Grumlose calling in for Kevin Cassidy.

Thank you very much for taking my call.

I have a question and a follow-up.

As we head into the next fiscal year, can you comment on your expected change in the NAND Flash wafer output?

We don't expect a large change in the number of wafers currently.

Okay, thank you.

And as a follow-up, do you have a projection on how your mix of SLC versus MLC and TLC may change, heading into next quarter?

It won't change all that much from where we are today.

We're running basically high 70% MLC and the balance is split pretty evenly between SLC and TLC.

Jagadish Iyer, Piper Jaffray.

Jagadish Iyer, your line is open.

Can you hear me?

Yes, can you hear me?

We can hear you now, sir.

Please go ahead.

Yes, I was just wondering, Mark, can you give us some color in terms of the past quarter in terms of how the sequential ASP trends were between the two SSD segments and how much more value can you add to strengthen the ASPs in that segment?

And I have a follow-up.

Sure.

I think as the track of cost per gigabytes and ASPs have gone throughout our 2012 year, the demand cycle for client SSDs went up significantly, and that's what's showing up in our financials as far as the client SSD performance.

When I look at how much more value is there, I think the value around that is driven by the industry's ability to remain competitive on the ASP front, to drive a good level of demand on the longer-term PC builds.

And I think that seems to be in a pretty good place today.

So I think there is -- with increased or newer ability to drive costs out over the next six to 12 months, we would anticipate continued demand growth there.

On the enterprise side, there's a lot more ability obviously to differentiate, both in terms of form factor as well as performance and reliability features that we think it's already in place, but will continue to grow as the development, as we talked about earlier, and our controllers and firmware and error correction, those types of things, fit into our product portfolio, which will, again, allow us to drive more differentiation and value.

Follow-up on this on, can you give us some color on the 2013 CapEx between the DRAM, NAND, and the NOR segments?

And does it include Elpida at this point of time or should we model something going to be incrementally for Elpida once the acquisition gets closed?

Yes, so think in terms of NAND and DRAM roughly balanced, and that number that we floated out there, [one six] to [one nine], you know we continue to work on that, and as we really tune our investment for 2013 just on what strictly needed to drive particular product introductions and efficiency in our technology implementation.

You know, Elpida is not included in that number.

Obviously depending on when we close Elpida, the numbers will change, but I think you should expect that to the extent we are investing in Elpida, we'll be trading those opportunities off against internal opportunities to make sure we're putting the capital where the highest return on investment is.

If I can just add one quick follow-up, can you just characterize how much was the supply cut in the DRAM between the first half of this year and the second half of this year?

Thanks.

You probably need to ask the people that actually made the cuts, to be honest with you.

Okay, thanks.

You bet, and with that, we'd like to thank everyone for participating on the call today.

If you would 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.

This concludes today's Micron Technology fourth-quarter and fiscal year-end 2012 financial release conference call.

You may now disconnect.