Kipp Bedard - VP, IR Mark Durcan – Chairman and CEO Mark Adams - President and Interim CFO Mark Heil - Corporate Controller and Interim Principal Financial & Accounting Officer.

Harlan Sur - JPMorgan Steven Fox - Cross Research Mark Delaney - Goldman Sachs Monika Garg - Pacific Crest Securities Mehdi Hosseini - Susquehanna International CJ Muse - Evercore ISI Rajvindra Gill - Needham & Company Tristan Gerra - Robert W.

Baird Kevin Cassidy - Stifel Nicolaus Daniel Amir - Ladenburg Thalmann David Wong - Wells Fargo Securities Mark Newman - Sanford C. Bernstein John Pitzer - Credit Suisse.

Good afternoon. My name is Saied and I will be your conference facilitator today. At this time I would like to welcome everyone to the Micron Technology's Second Quarter 2015 Financial Release Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period.

[Operator Instructions] Thank you. It is now my pleasure to turn the floor over to your host, Mr. Kipp Bedard. Sir, you may begin your conference..

Thank you very much and welcome to Micron Technology's second quarter 2015 financial release conference call. On the call today is Mark Durcan, CEO and Director; Mark Adams, President and Interim Chief Financial Officer and Mark Heil, Corporate Controller and Interim Principal Financial & Accounting Officer.

This conference call, including audio and slides is also available on our Web site at micron.com. In addition, our Web site has a file containing the quarterly operational and financial information and guidance, non-GAAP information with reconciliation, slides used during the conference call and a convertible debt and capped call dilution table.

If you have not had an opportunity to review the second quarter 2015 financial press release, again it is available on our Web site at micron.com. Our call will be approximately 60 minutes in length. There will be an audio replay of the call accessed by dialling 404-537-3406 with a confirmation code of 6063446.

This replay will run through Thursday, April 9th, at 11:30 PM Mountain Time. A webcast replay will be available on the Company's Web site until April 2016.

We encourage you to monitor our Web site 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. You can also follow us on Twitter @microntech. Please note the following Safe Harbor statement.

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 Web site.

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.

And now I would like to turn the call over to Mr. Mark Durcan.

Mark?.

Thanks, Kipp. I am pleased with our team’s performance this quarter. Our diverse product portfolio and balanced customer base produced solid financial results. Revenue was within our guidance at $4.2 billion and GAAP net income was $934 million or $0.78 per share. Gross margins in DRAM and trade NAND were in line or better than guidance.

Importantly, we are starting to see the early benefits of our NAND product and technology repositioning. Free cash flow was approximately 400 million in the second fiscal quarter based on operating cash flow of 1.25 billion, plus CapEx of 853 million.

We finished the quarter with $6.35 billion of cash and short-term investments after successful execution of $1 billion straight debt offering. We remain very positive on the long-term prospects for our business despite short-term headwinds in certain segments.

We expect to continue generating strong operating cash flow as we optimize technology, operations, product and segment mix. Micron’s fiscal Q3 guidance is $3.8 billion to $4.05 billion. The midpoint of the range is about 6% lower than revenue in Q2. This guidance indicates the willingness to hold inventory if needed.

Let me talk a little bit more about technology. Today the significant majority of our mobile DRAM and non-Inotera production is on 25 nanometers. Our advanced DRAM technology deployment is going very smoothly. The 20 nanometer yield ramp is exceeding both our plan and results achieved on previous process node introductions.

We continue to expect commercial volume in the second half of 2015 with the majority of our DRAM bits on 20 nanometer in the first half of calendar year 2016, 1X nanometer DRAM development is also proceeding well and we recently started the early silicon in Hiroshima.

We’re currently in pilot production of our gen 1 32 layers 3D NAND with early sampling in progress. We expect to be in full production of both MLC and TLC versions by calendar Q4 of this year with system level solutions following soon thereafter.

3D will be a meaningful percentage of our trade NAND supply in calendar 2016 and will represent a majority of our bits during 2017. Our gen 2 3D NAND technology is progressing nicely in R&D.

Turning now to bit growth, we expect our calendar year 2015 DRAM bits produced to be up mid-teens although product mix adjustments including an increased mix of DDR4 and mobile DRAM could impact bit growth. Mix adjustment decisions are based on margin optimization and strategic positioning and are not necessarily aligned with maximizing bit growth.

In 2015 we’re focused on technology enablement and we’re comfortable growing bits below the market in the near-term in favor of driving long-term market opportunities for Micron. For 2016 as we see the benefit of 20 nanometer conversions we expect to be in line with or slightly above the industry bit growth.

We expect our trade NAND bit growth to be below marketing calendar ’15 as we tune our product portfolio to more value-added applications and prepare for a 3D manufacturing ramp throughout 2016.

Once complete our Singapore fab expansion and ongoing conversion of existing planar capacity to 3D NAND could support 40% to 50% bit growth per annum over an extended time horizon. The exact timing of these investments is dependent on market conditions and the expected ROIC but this is an exciting initiative for the company.

With respect to capital allocation we continue to believe in long-term value of investment in our business to drive manufacturing efficiencies and future growth. We also continue to prioritize appropriate investments in R&D including memory sub-systems and systems development and manufacturing capacity.

We’re actively managing our cash balances including the deployment of $2.8 billion over the past six quarters to reduce dilution associated with convertible debt. We also repurchased approximately $200 million of common stock in fiscal Q2 under an existing $1 billion stock repurchase program.

Now for an update on our finance team, we have a number of outstanding CFO candidates under consideration and are working to identify the best fit for Micron. While we work through that process the finance team is reporting to Mark Adams as Interim CFO.

Our finance leadership team has decades of collective experience at Micron and other leading semiconductor companies. The team includes among others Mark Heil Micron’s long time Controller and current Interim Principal Financial Accounting Officer. I have asked Mark to cover the financial portions of our prepared remarks today.

Before I turn the call over to rest of the team I would like to reiterate that there are a number of significant factors that we believe will deliver growth, margin improvement and strong financial results for Micron towards the end of 2015 and heading into fiscal 2016.

Among other things these include 20 nanometer DRAM, 16 nanometer TLC NAND, 3D NAND, mobile NAND, eMCPs, enterprise SSDs, and the Inotera contract change. I’ll stop here and turn it over to Mark Heil and Mark Adams before turning for Q&A..

Thanks Mark. The second quarter of fiscal 2015 ended on March 5th. When comparing the Q2 results to the first quarter recall that the first quarter was a 14 week period rather than our normal 13 week period.

The results for the second quarter include net income of $934 million or $0.78 per share on net sales of 4.166 billion; gross margins came in at 34%. Our reported income from equity method investments for the second quarter was $208 million substantially all of which was attributable to Inotera.

Our share of Inotera’s results includes a benefit of 65 million from their release of a valuation allowance on their deferred tax assets that was reflected in their December 31, 2014 year-end results. Aside from recurring items the benefit from Inotera’s tax adjustment is the only other noteworthy non-GAAP adjustment this quarter.

So non-GAAP income for the second quarter was $941 million or $0.81 per share. Relating to our non-GAAP guidance for the third quarter please refer to the dilution table that’s posted along with the other materials for this call on our Web site. The dilution table reflects the anti-dilutive effects of our capped calls at various assumed stock prices.

Looking at the results and other guidance for the third quarter by product line let’s start first with DRAM. DRAM revenue decreased 13% compared to the first quarter reflecting a 9% decrease in bit sales volume and a 6% decrease in average selling prices. Lower bit sales were largely attributable to the extra week in fiscal Q1.

DRAM gross margin was better than anticipated being stable comparing Q1 to Q2 as bit cost decreases nearly offset decreases in selling prices.

DRAM gross margins for the third quarter using quarter-to-date ASPM projected mix for the quarter should be down compared to Q2 based on bit sales that are guided to be flat, average selling prices down high single-digits and cost per bit down low single-digits.

Key items affecting our DRAM guidance for the third quarter include bit production up high single-digits over each of the next couple of quarters as 25 nanometer yields continue to improve. This increase is net of anticipated affects of increased mix of mobile and DDR-4 products which generally have lower bit densities.

Our sales guidance anticipates taking strategic action to reduce PC DRAM sales this quarter given the recent demand and price weakness. Therefore we’re guiding bit sales to be flat for the quarter. We believe the PC DRAM segment will show improvement in the second half of the calendar year based on the stabilizing demand profile.

Fiscal Q3 to-date mix adjusted ASP is below the second quarter average due to pricing pressure in PC DRAM over the past several months and a high volume of products sold in die form.

On the trade NAND side revenue increased 3% in the second quarter with a 12% increase in bit sales volume, partially offset by a 9% decrease in the average selling price. Trade NAND gross margin declined to the low 20% range as cost reductions per bit only partially offset decreases in selling prices.

Trade NAND gross margins for the third quarter using quarter-to-date ASP and projected mix for the quarter are expected to be relatively stable compared to Q2 based on bit production down low single-digits, ASPs up single-digits primary from a higher mix of mobile products and cost per bit up mid single-digits also primarily on mix.

Key trends for the third quarter affecting the guidance are like-for-like pricing relatively flat, relatively stable component and client SSD markets, lower bit sales into the component spot market which had a negative effect on bit growth and cost per bit but improving effect on average selling prices.

And finally continued focus on mobile and managed NAND products which has an improving effect on margin with increases both in ASP and cost per bit. On a consolidated basis, we’re guiding total revenue for the third quarter to be in the range of 3.8 billion to 4.05 billion.

Looking at other P&L and cash flow results and guidance, SG&A is expected to be relatively stable over the next several quarters in the 180 million to 190 million range. Research and development expense in the second quarter was just below our guided range primarily due to a lower volume of wafers used for development.

We expect R&D expense to trend up slightly over the next couple of quarters in line with development activities. The Company generated operating cash flow in the second quarter of 1.25 billion and ended the quarter with 6.35 billion in cash and marketable investments.

During the second quarter we received $1 billion in proceeds from the issuance of high yield notes our first successful offering of straight debt with near investment grade terms. We anticipate utilizing proceeds to repurchase or convert outstanding convertible notes and other debt and for other general corporate purposes.

We also replaced our $255 million Singapore-based AR backed credit line with the $750 million line no amounts have yet been drawn under that facility. The second instalment on the Elpida creditor’s debt of approximately US$150 million was paid during the second quarter.

We also repurchased 6.5 million shares for $192 million under the Board authorized $1 billion share buyback program.

Expenditures for property, plant and equipment year-to-date are 1.5 billion and we continue to expect expenditures for the fiscal year to be between $3.6 billion and $4 billion with the stepped up level of spending in the latter half of the fiscal year as we execute on 20 nanometer DRAM and commence 3D NAND investments.

Now, I’ll turn it over to Mark Adams for his comments on the operating results..

Thanks Mark. Good afternoon and thanks for joining our call. I am going to change my format a little today and begin by providing some thoughts around both our DRAM and NAND business and the respective markets followed by a deeper dive into our business units.

Fiscal Q2 showed some seasonal weakness which is not uncommon coming out of the holidays considering the timing of Chinese New Year is within our quarter I was pleased with our operating performance. The strength of our diverse product portfolio contributed to relatively stable gross margins quarter-on-quarter.

We saw some pricing pressure in the PC segment, but generally all other market demand remained healthy. DRAM represented 65% of our total revenue in Q2.

As a percent of that DRAM revenue mobile represented mid-20% similar to Q1, the PC segment represented low-30% down from mid-30% from prior quarter and server business was about low-20% up a few percentage points, while networking, AIMM and graphics were each below 10% similar to the Q1 mix.

We are allocating less production to the PC segment and continuing to shift more bit stores towards the other faster growing segments. We also continue to move production from DDR-3 to DDR-4 as our customer demand grows.

Although these manufacturing move generally weigh on production bit output guidance, our DRAM process transitions will more than make up for the bit and wafer effect as a result we are guiding to high single-digit sequential output growth for each of the next couple of quarters.

Our DRAM team is executing through key technology transitions over our second half. We’re driving expanded 25 nanometer production and preparing for second half calendar year ’15 conversion to 20 nanometer across our fab network. DRAM technology enablement remains a key focus for our teams.

We are pleased with the market acceptance of our DDR4 technology as major OEMs are adopting Micron’s products for their value-added segments. We are qualified across all Intel server platforms and we’re seeing very strong demand signals for our 8 gigabit DDR4 products and in particular from the enterprise server and networking customer base.

DDR4 ASPs remain at a premium to DDR3. The NAND market has gone through some challenging quarters of late, but we’ve seen signs that the market pricing has stabilized. As a percentage of total revenue trade NAND represented 29% with gross margins down slightly quarter-on-quarter as we guided during our first quarter call.

Within trade NAND, the sales components represented about 50% in the second quarter. SSD units approximately 20%, our mobile NAND was roughly low teens while AIMM and other embedded were roughly in the mid single-digit percentages. We continue to leverage our industry leading MLC NAND flash in key segments that demand higher performance.

We’re significantly reducing our NAND supply to the spot market down 30% quarter-over-quarter and as a result our trade NAND bit growth in the coming quarters will be limited.

Working with our partner Intel, we recently showcased our new 3D vertical NAND technology an innovative manufacturing approach that extends more large trajectory for flash storage cost and performance.

Micron’s high density 3D NAND flash devices will enable small form vector drives with 1 terabyte of storage and standard 2.5 SSDs with greater than 10 terabytes of storage. We expect the improved performance of Micron 3D NAND technology to open up expanded segment opportunities.

We plan to commence early 3D production in the second half of the calendar year. Our 16 nanometer TLC product is coming along nicely and we are on-track for initial component shipment in late May, early June.

And moving onto our business unit discussion, in our Computing and Networking Business Unit, referred to as CNBU, our revenue was 1.8 billion in fiscal Q2. The PC notebook business saw a reduced demand and pricing pressure, yet turned in operating profit up only slightly at 27%.

Interestingly, customers took forecasted delivery which we interpreted to be generally positive as it pertains to overall channel inventory and future shipments. We saw continued growth in our server business driven by cloud computing and enterprise. Server DRAM bit growth is forecasted up roughly 40% year-on-year in 2015.

The growth in server memory is based on increasing server workloads that require a high DRAM performance and density. We continue to invest in expansion of our server business, as this segment offers a growth demand profile that is less sensitive to price fluctuations.

The Networking segment delivered strong gross margins while achieving flat revenue quarter-over-quarter despite ASP pressure in the broader DRAM market. Demand remained stable driven by LTE build out in the emerging markets.

Demand for DRAM supply in growing data communications, video and gaming content is estimated at roughly 20% in calendar year 2015. We believe this will drive higher demand for Micron’s memory products and networking going forward next year. Our Graphics business led by DDR5 is another growing specialty DRAM market for Micron.

Last year Capital doubled their memory content per system and there will be additional content growth this year as the use of these devices continues to expand beyond gaming into compute and home entertainment. Graphics products for the PC segment also reported growth in Q2.

Demand for overall DRAM graphics is projected to be up 25% year-over-year in 2015. The revenue for our Storage Business Unit or referred to as SBU was recorded at 954 million in Q2, down slightly quarter-over-quarter.

Although our SBU operating margins were down quarter-over-quarter we believe the business is stabilizing and it should improve going forward. We announced three new enterprise products, the co-developed fast drive, a new PCIe express drive and a new database solution.

We also announced strategic alliances with Seagate and IBM in the enterprise storage market. Our agreement with Seagate provides an opportunity to sell high performance MLC components and accelerates our expansion into the enterprise flash SSD market.

Micron’s current plan in our enterprise drives are based on our award winning 16 nanometer MLC technology which more and more of our customers are seeking due to superior performance compared to competitors’ planar TLC drives.

We see a value segment in the channel for planar TLC SSDs and are expecting a late Q3, early Q4 calendar year shipments of our Micron branded 15 nanometer TLC client drive. The mobile business or MBU had another strong quarter. MBU revenues came in at 856 million with operating margins at 31% in Q2.

We have indicated on prior calls that our main focus on mobile is optimizing the business for profitability and diversifying the customer base. The team has done a nice job in executing to these objectives.

We continue to see strong demand for our mobile products, one example is the increasing prevalence of 3 and 4 gigabyte low power DRAM configurations and a super mid and high-end smartphone segments. We also continue to see significant growth opportunities for Micron in eMCPs.

eMCPs generally include 1 to 2 gigabytes of low power DRAM and 8 to 16 gigabytes of NAND in an integrated package. With our innovative DRAM known good die offering and 16 nanometer NAND technology Micron is uniquely positioned to cash for this growing opportunity as eMCPs replace eMMC in the large segments.

Revenues in eMCP were up 70% quarter-on-quarter as mobile NAND bit shipments nearly doubled when compared to Q1. We remain bullish on memory content in mobile as evolving system architectures steadily increase density requirements in all handset segments.

Higher performance 64 bit application processor SOCs supporting at your OS platforms the richer applications as well as large screen sizes and more advanced gaming all contribute to increased memory density delivering more rewarding experience.

Our embedded business posted revenue of 502 million and operating margins were up slightly quarter-over-quarter to 23%. The automotive segment continues to drive EBU performance with the revenue increase of over 10% when compared to the same quarter in fiscal year 2014.

We continue to invest in custom segment solutions to drive our leadership in the embedded memory market across all the EBU segments, including IMM Industrial Medical and multi-market, gaming and the connected home.

We’re seeing strong market reception for Micron’s next-generation serial NOR Flash product family and should benefit from the signing up of an open industry standardization agreement.

We initiated qualification sampling of 16 and 32 gigabyte eMMC version 5.0 to customers in Q2 and began production for the embedded SSD product that addresses the needs of our auto, IMM and gaming customers.

A complete portfolio of memory solutions including DRAM, NAND and NOR along with industry consolidation is strengthening Micron’s embedded value proposition as a stable memory focused solutions supplier to the embedded market. In fact now DRAM and NAND now make up more than 70% of our overall embedded business and growing.

In closing we’re confident in the long-term dynamics of the memory industry and remain focused on optimizing our margins and returns over the long-term. With that I will hand it back over to Kipp..

Thanks Mark. We now like to take questions from callers. [Operator Instructions] And with that please open up the lines..

Thank you, sir. [Operator Instructions] And first question comes from Harlan Sur from JPMorgan. Your line is open. Please go ahead..

Good to see your DRAM bit supply in upper trajectory, I know that there was some concern that 25 nanometer and 20 nanometer transitions and some of the initial prep work may have inhibited some of the supply growth here in May but it’s good to see that back on a growth trajectory.

Can you just help us understand what are the drivers for the bit supply decline in NAND in the May quarter and do you guys expect the resumption of supply growth starting in the August quarter?.

Well, there is a couple of things, one, the primary issue is the mix issue as we shift our products directed more towards mobile and end product SSDs.

The second factor is we are getting our factories ready for both transition to new process technology, 16 nanometer TLC, as well as prepping for - in Singapore starting the process for 3D manufacturing..

And then I think on the last call you talked about relatively high levels of inventories of SSDs coming out fiscal Q1. What’s your assessment of SSD inventory levels exiting Q2 and then if you can just give us an update on your 16 nanometer SSD products.

I think you might have mentioned it, sorry if I have missed this but I think you were talking about last time sort of ramping 16 nanometer SSD kind of second half of this year?.

That’s right. Our assessment is that the industry inventory position on SSDs is improving.

We actually think the pricing in the NAND business is stabilized quarter-to-date, and relative to Micron’s performance we've got a number of products that are going out [in qual] [ph] to OEMs that are based on our 16 nanometer MLC, interestingly enough for us we’re seeing a lot of people or some of our customers revert back to an MLC-based SSD drive based on some of the issues that have come up with competitive offerings on performance and endurance and reliability..

Thank you. Our next question comes from Steven Fox, Cross Research. Your line is open. Please go ahead..

I was wondering if you could dig in a little bit to the storage business unit. The business swung to losses, I think you partially explained that but maybe we could talk about that a little bit. And then you’ve given some reasons why those losses should reverse back to profits.

But I was wondering if you could talk through maybe a roadmap to get into acceptable margins and where you see maybe margins exiting calendar year, et cetera? Thanks..

So this is Mark I will take the question we try to avoid speculating on future pricing and in projecting margins out in the future but I will comment that we continue to feel very good about the execution of the team in delivering against closing the gap competitively and for all the reasons we’ve talked about in the past those signs are happening; I have talked about in my earlier comments how our mobile NAND business is growing quarter-over-quarter - had a very successful growth trajectory.

I think that the 16 nanometer MLC SSD that I communicated just a second ago are pretty good.

Our alliance with Seagate and the SaaS development in getting access to these SaaS market earlier than we otherwise would have is pretty good and as we commented into the market last week in our announcement with Intel on the 3D NAND technology we still continue to feel that we’re in a very competitive and market leading position in 3D NAND.

So, with all those things in place we are pretty bullish about NAND and we continue to think we’re going to close the gap..

Thank you. Our next question comes from Mark Delaney from Goldman Sachs. Your line is open. Please go ahead..

I was hoping you could elaborate a little bit more on your outlook for the DRAM industry for the second half of the year and if you could just talk I know you don’t want to give specific pricing guidance.

But if you could at least just talk to the trajectory and linearity of DRAM ASPs over the course of the second quarter and what sort of confidence that may or may not give you as you look into second half overall DRAM’s bottom-end trends?.

Mark, this is Mark Adams. I think that we remain bullish in general on DRAM going forward for the following reasons. First of all, we think that the second half of the calendar year is going to be pretty strong in mobile and all signs are indicating to that.

We do think that the PC capacity needs to be shifted over that to address that opportunity and that will balance out some of the current market conditions around PC.

I am not sure how to call the PC market other than to say that we think it could improve from here because it is not doing so well and we think the back half of the year with Microsoft new OS and holidays and so on so forth we think it’s just got to be better and hopefully than that it is today.

Beyond that when you look at our business we think as we have talked about in the past that it’s a more rational industry and with that is coming better behaviour and as Mark talked about earlier we’re going to do the right things to run our business and if that means not selling inventory below acceptable prices we’ll do it.

So if I look at all of that I think about other end market growth I think we’re still in a pretty bullish perspective about DRAM will play out in the second half here..

That’s helpful, and it actually kind of gets to my follow-up question, which is around your comments you’re making about holding inventory.

Could you elaborate about how long you think you could hold inventory and then can you just talked about how would have to happen if you’re sitting on inventory and market pricing continued to decline just how quickly you have to true up your inventory with pricing in the market?.

Interesting, let me comment on one thing around inventory that you didn’t really asked for but I will get to your answer. General inventory has increased a little bit since the first quarter. Now my interpretation of that is pretty positive.

The people who accumulate this inventory on channel that’s how they make money, they make money by taking inventory and waiting to sell in a better market and the accumulation of this is just not dramatic but it’s probably now four or six weeks in DRAM and NAND and as you think about that they’re buying memory at current market pricing and they’re betting on a rebound and these are some people who have been in the business for quite some time I happen to believe that’s a pretty positive sign.

Now relating back to the question on how we can do that, well I am not going to give you a number or weeks on-hand or what have you but we do believe that given the diversity of our end markets it is more a matter how we shift our capacity and now that we sit on a bunch of old aged inventory we would just move our capacity to better end markets..

Thank you. Our next question comes from Monika Garg from Pacific Crest Securities. Your line is open. Please go ahead..

Just two for clarification, you are guiding high single-digit for production of DRAM bits but for more - for shipment and revenue purposes it’s flattish?.

That’s right..

So the second question I have is if you look quarter to-date ASP guidance of DRAM you’re guiding minus 9%, it was about minus 6% last quarter.

When do you think we see some stabilization in PC DRAM pricing and also if you could talk about pricing the other segments of DRAM like mobile DRAM and server DRAM going forward?.

Sure, Monika this is Mark Adams, relative to pricing it’s hard for us to get on that and try to make projections out in the future. What I would say is the comparison between the 9% and 6% Q2 and Q3 remember the 6% was off a much higher base coming into Q1 and so the 9% and 6% are not really apples-to-apples.

We do believe that for the reason I say it is earlier that the overall DRAM business will remain in pretty good shape we don’t see massive price pressure in any of the other segments - are down 6% actually and Q2 was PC down a lot more than 6% and the other segments flat to even some better.

So what I would say there is that we don’t see a lot of pressure in the other segments at this point.

Now remember each of the businesses this is what is great about diversification, each of these businesses act differently, meaning for example the commodity component DRAM business is what it is and we have noted to be it is a lot smaller portion of our business, but when you look at things like mobile, mobile is a different business.

It's a design in business, more concentrated customers in the number of 10 to 15 major customers that we sell to and we negotiate with them and we negotiate more long-term and so that’s a different business. So the pricing dynamics are much different.

The fact that pricing stays good it is a great sign for us in mobile and our costs can get better and as we grow our market share we are going to continue to expand our business and that’s true if we look at each of the segments whether it’s the embedded, mobile, networking and automotive that’s all true in terms of how we look at the business, we take each of them as individual segments that run differently..

Thank you. Our next question comes from Mehdi Hosseini from Susquehanna. Line is open. Go ahead..

Just a question here first, given your ASP cost and bit production and shipment trend, how should we think about trends in DRAM margin profile by different segments particularly for PC, mobile and server DRAM from the coverage quarter to the current quarter and I have just another one?.

We’re not going to dive into gross margin by segment, but we’ll give you another chance to ask a different question if you like..

How should we think about the impact of use of the inventory since you think demand is going to high, how should we think about the impact of the inventory of that on margin profile in the current quarter?.

Yes, I think the answer maybe it is Mark Durcan I think the answer is the same that we’re not going to try and predict margins, but the fact that we’re talking about this and by the way it's nothing new. But the fact that we’re talking about our willingness to hold some inventory here.

Is really reflective of the fact that we’ve got a lot of confidence, as we move into the back half of the year we’re seeing a lot of signals, Mark talked about a bunch of them I’ll say even with the compute business we get signals from some customers that maybe they want to look at longer term ordering patterns et cetera.

So, we got a lot of confidence that this is going to be pretty solid in the back half of the year and that’s probably about all we can say about it..

And looking into the NAND and alliance with Seagate and the recent optimism about 3D NAND especially looking into this 48th layer and the fact that Intel also has some collaboration Western Digital, how do all these dynamics play out into 2016 but maybe 48 million 3D NAND would become cost effective to commercialized, do you have direct alliance with Seagate and you have indirect supply into Western Digital through Intel, and any thoughts or any qualitative assessment that you can offer us looking into next year given this kind of a dynamic?.

Yes let me just say this Mehdi, we compete with Intel in the marketplace, we have for a long time and we expect that Intel product whether it is hit by Intel or by Western Digital will be competitive or will be competing with my comp solutions in the market in 2016.

Now the good news is, we think we’ve got a great 3D NAND solution and we also have a lot of capacity at Micron and so we think that overtime, we’re well positioned to do well in that business..

But if 3D NAND is going to be the disruptive technology it is going to be the canvas, how you're going to be able to manage the conflict of interest when you're effectively supplying these three different entities?.

Well it's -- remember Mehdi it is -- the partnership we have with Intel is the co-development, the core technology that’s a big piece of the solution, other areas are the SaaS controller, the firmware, the software and the go-to-market capabilities that each of the other people are interested in it is the Seagate and Western Digital references that comes into the equation of going to market with a full-fledged enterprise SaaS SSD.

So as we look at that it's our core technology we have dealt with our partner and there is really two avenues one with Intel taking it through their channel, and one with us taking through our channel..

And by the way if they do well, we’ll be happy to sell them some NAND flash..

Thank you. Our next question comes from CJ Muse from Evercore. Your line is open. Please go ahead..

I guess first question regarding your pricing guide for DRAM down high single-digits, can you talk about what like-for-like pricing looks like versus mix shift?.

So when you think about the pricing like-for-like, the overall price I think we have guided down was 9% for the quarter.

So high single-digits and as I made the comment earlier that, that was really driven by where we have exited Q2 going into Q3 as some of the mix changes that to think about our business mobile server and the other markets have pretty stable pricing.

So a lot of the fluctuation in the guidance we are giving you is coming out of a quarter that started higher, ended lowered and then we’re starting kind of in the lower base..

And then as my follow-up, can you walk through the progression that you see in terms of the 20 nanometer ramp at Inotera when you start to see bit production and then when you expect that will have shipment in revenues.

And then I guess overtime what are the milestones in terms of percentage of your overall DRAM mix and whatever timeframe you want to discuss?.

So let me characterize it generally for Micron and then I think relative to Inotera you can get some more specifics from them.

But for 20 nanometer we've said the second half of calendar 2016 will be -- sorry the second half of this calendar year will be ramping, and by the time we get into the first half of 2016 it will be the majority of our debt mix..

And will you say ramping that is production or that is shipment?.

That is production..

And how should we think about the…?.

Let me say it this way then, there will be significant shipments in Q4 of the calendar year for Micron..

Thank you. Our next question comes from Rajvindra Gill from Needham & Company. Your line is open. Please go ahead..

Wondering if you could discuss a little bit about the competitive pricing environment in DRAM and NAND, you gave some highlights in terms of what the actual numbers are, but wondering kind of qualitatively what’s happening in the market, and a lot of this positive pieces on the DRAM industry where some rationalization that’s occurring in the industry a rational behaviour.

So I’m just wondering if you are seeing that continue if you could describe a little bit about that it will helpful..

As I have highlighted today in our script and some of our comments that the real catalyst for some of the disruption here in not just the PC segment was really the demand side.

And I think if you talk to other people in that business in the PC business the hard drive guys, the CPUs, the unit declined in the PC notebook segment kind of drove some of this and an interesting thing for us is that none of the other segments kind of showed that, and when you think about where our business is today where it might have come from years ago is, yes our pricing in one of the segments had some pressure in the first quarter, I am sorry in the second quarter.

We felt pretty good about the rest of our business and it kind of showed up in our performance. So as I think about driving for us, we clearly in Micron if you look at industry pricing and you look at kind of pricing for gigabit and DRAM for example Micron is clearly the leader in pricing in ASP terms.

And so at least historically we've been and we feel like we’re today, and we’re going to continue to try to drive it up and with that, that might mean holding inventory like we said it might mean moving to other segments, server, networking, mobile so on so forth.

And so that’s kind of the picture today, I think that my comment earlier about what the timing of channel inventory and even our customer reaction we've had customers try to who initially wanted to get off the quarterly pricing come back to us in this past quarter and want to go back to quarterly pricing.

So we’re generally bullish on the dynamics of pricing in the market. And yes there was an industry catalyst in the form of demand for PC, notebooks that drove a little bit of disruption in the business we don’t think it’s major, yes it’s if so you can measure it but the rest of our business is pretty good..

And on the NAND side, you talked about NAND pricing stabilizing a bit, just wondering what’s driving that stabilization.

And can you comment in terms of what percentage of your NAND business will be TLC exiting this year and should we start to see NAND gross margins increases as we exit this year?.

Well as we think about our business, we think about the end-markets where they are going where the products will be generating the highest return and as we achieved our strategic objectives in NAND.

And on a competitive basis okay we believe we will be closing the gap between our competitors in the second half of our fiscal year and throughout 2015 calendar, we believe that will happen. TLC today is less than 10% it’s not a large number today, and as we ramp our staffs it won’t be materially much larger.

You will see some growth in the back half of the year but it won’t be materially much larger because we've got other parts of our business whether it be mobile or I talked about the success of our MLC 16 nanometer product as Tier 1 OEM.

So we will seek TLC growth at Micron but we’re not going to do it just to do it, we need that mixture nature that we are getting the right value for it and that’s important to us and our business..

Thank you. Our next question comes from Tristan Gerra from Baird. Your line is open. Please go ahead..

Given the strength of the U.S. dollar there has been some concern about potential dispatching of the year one content that have been PCs.

Is that a trend that you are currently seeing or I expect in the second half?.

I think for us the question around FX is really more a question around what is worldwide GDP growth going to be. We’re a global company. We’ve got global customers some will do better in some FX situation some will do slightly worse.

But unless something dramatic happens to worldwide GDP growth we think we’re pretty well positioned with manufacturing all around the world and with customers all around the world some of which will do better in certain circumstances and some of which won’t. So we’re not overly worried about it.

Obviously we have manufacturing in Japan and there is a certain cost reduction associated with the weakening yen. Obviously we got some manufacturing in Singapore and certain costs associated with the strengthening Sing But net, net for Micron these aren’t huge effects..

And then what does the ramp of 3D NAND means from an equipment reuse and the point is this going to be a significant percentage of your existing equipment and could this impact the DRAM production next year if some of the equipment gets shifted to other product lines?.

Absolutely we plan a lot of equipment reuse as we transition planar NAND to 3D NAND I assume that was the question is 3D transition…?.

Yes..

So there is incremental equipment required the incremental floor space there is some amount of tooling all of which can be reused in other parts of our or the vast majority of which can be reused in other parts of our business. But generally speaking we will be trading out planar NAND wafers for incremental for 3D NAND wafers.

And we think that’s the most capital efficient way to run the business..

Thank you. Our next question comes from Kevin Cassidy with Stifel. Your line is open. Please go ahead..

May be along those lines also with 3D NAND, is that a drag on gross margins as it first ramps into production and when do you think would be the crossover where it could be a tailwind to gross margin?.

Sure, it’s almost always a short-term drag on GM when you make the transition like this you’ve got new tools coming in and it takes a while to qualify and get them loaded, et cetera, et cetera. And there are existing efficiencies associated with yields ramps et cetera.

So we’re pretty comfortable by the time we get to late in the year, late in this calendar year. We’ll be looking pretty good..

And you also mentioned that if the DRAM pricing isn’t what you’d expect you’re willing to hold inventory is there any willingness to cut CapEx or is that fixed for this year?.

We would be willing to do that if we thought the market situation were such that that would make sense to us. I can’t actually foresee that sitting here today. Clearly as we think about our plans for 2016 and things a little bit further out we’ll take into account where the market goes over the next number of months and quarters.

But as we sit here today we just told you we think things are looking pretty good so we’re not anticipating making any major changes as we sit at the table today..

Thank you. Our next question comes from Daniel Amir from Ladenburg. Your line is open. Please go ahead. Pardon me your line is open. Please go ahead, if you have your phone on mute un-mute your phone please..

So in terms of the DRAM side you have expressed that PC DRAM you’re thinking that’s going to decline here in the next couple of quarters.

What is the ideal mix that you kind of see your mix of DRAM a year from now? Is it PC DRAM kind of in the 20% level or do you expect it to decline and then come back maybe to 30%?.

I think directionally where you are going initially was right we think over time it will decline as a percentage of the mix and a lot of it does depend on the business but I think directionally we think you’re spot on..

And then the second question is related to it sounds like the eMCP business is something that one of your growth drivers here.

Do you feel that this is kind of the leading factor here to drive your mobile business? I mean it’s up 70% Q-over-Q in the eMMC space you probably didn’t have as a bigger competitive advantage is now that you have in the eMMC space given that you have a very good integrated product then with the DRAM side?.

Yes I think it absolutely I mean in full transparency we’re coming off a somewhat lower base but I think we have stated in prior calls we have stated we think eMCP is for the mobile business coming out of our fiscal year will be somewhere around 25% little bit lower than 25%.

But somewhere up from zero in the last 12 months so we as you identified it’s a strategic play for us leveraging our portfolio and quite honestly given our make up in the mobile business we think we’ve got advantage over just about anybody in the space..

Thank you. And our next question comes from David Wong from Wells Fargo. Your line is open. Please go ahead..

Could you give us some idea about the ownership of the IP associated with 3D NAND technology between Micron, Intel or joint venture entity? And so there was some concern about someone encroaching on your IP or the prosperity of licensing the IP who does the negotiations will drive the legal action?.

We’re not going to talk about intellectual property strategy, David but I can tell you that we do that, we fund the development together, we do it jointly and we both own different pieces of the intellectual property but beyond that it is not a lot I want to talk about..

Well then could you give us some idea of the proportion of your DRAM production in the May quarter between PC DRAM for memory, how you're allocating what you're actually making?.

Well I think David, I’ll kind of get back and give you some of the comments I gave earlier. We think PC DRAM in the quarter will be down from mid-30s in Q2 to low to 30% kind of range and we think that that will signal increases in other areas such as mobile in the mid-20% server in the low 20% of our business.

And so we see kind of a blend it is not just one category picking up with the PC business, mobile is the more capacity will allocate the server some PC business to server and we’ll look at networking on those as well, so that’s kind of a full suite of things we evaluate..

Thank you. Our next question comes from Mark Newman from Bernstein. Your line is open. Please go ahead..

You talked about the inventory on the DRAM side and you're saying your production is going to be up high single-digits, what are the assumptions you're using for the mix shipments for Q3?.

Mark, I think in the business we can’t, we said basically flat on shipments that we know we don’t say a whole lot more in terms of future guidance. But I think it is just that in other comments around what we’re going to do what is right for the business to drive returning margins and it is not going to be fire sale advantage for us..

And then a follow-up question on NAND flash, I thought I heard you say components 50% of NAND, could you clarify that, perhaps I misheard? And then I wanted to get some of this kind of ideas from you about how is that going to be fixed over the long-term because clearly as you increase the percentage of your solutions and decrease the percentage of were NAND components that obviously very good for your margins basically moving up the value stack to create to catch more of the value but in addition to that it actually helps to consolidate the NAND market by essentially taking out the competitors because a lot of those were NAND customers are actually in the end of the day there also competitors certainly flash cards and SSD.

So could you give us some better roadmap for how we can expect that percentage of components to decrease going forward?.

So the data I spoke to in my opening comments was that in Q2 component shipments includes cards and components and now it is somewhere around the area of 50% of our overall shipments in the quarter Q2. In Q3 alone that number will be cut by 30% as we start the transition of what you just highlighted away from component card sales to mobile and SSDs.

Part of that dynamic by the way in discussing how this plays out is we now will be shipping in the quarters 16 nanometer MLC followed by drives that were in process and didn’t have that volume in Q2.

So the move from components and cards to mobile and then client SSD based on 16 nanometer certainly is a positive move for us as you say we move up the stack and we continue to drive things like in enterprise drive both PCIe and SaaS as we explained earlier.

That’s how you should think about our target and I mentioned also I think we gave guidance that NAND did grow will be flat to down in the Q3 timeframe as we think about the evolution for 3D manufacturing stuff as well as switch to some of our capacity to those 16 nanometer TLC.

We think that all kind of resonates to a better optimize mix of products for NAND portfolio..

If I could ask just one quick follow-up on for LP DDR4, my understanding is Apple was moving to LP DDR4 for the next iPhone and also I understand 2 gigabytes.

Do you have an update on your readiness or your roadmap for LP DDR4 when do you think that will be ready?.

So I think that Mark it is safe to say that we feel pretty good about our position there both existing 25 nanometer LP DDR4, as well as our 20 nanometer LP DDR4 offering. This is lesser about Micron readiness and more about customer demand lining up for the back half of the year and beyond..

Got it, thanks very much..

And it looks like we have time for about one more caller..

Thank you. And our next question comes from John Pitzer from Credit Suisse. Your line is open. Please go ahead..

I guess I want to back to some of this idea of building inventory in the May quarter, I am kind of curious why is that now and not sort of accelerating the transition to 20 nanometer more quickly because clearly I would argue if you had 20 nanometer at a larger percent of wafer outs your cost structure would be better, and just can’t remember a time of building inventory either internally or in channel has been a good thing.

So I am just kind of curious why the inventory decision is not a faster ramp in 20?.

John this is Mark. So we talked this quarter about how we were doing exactly what you just mentioned, which was in fiscal Q2, we made some adjustments in our manufacturing line to start positioning equipment for the 20 nanometer ramp.

These things always in our balance and certainly the market today is not the market of last year or the year before, we have pretty broad diversification in the segment customers and products where we feel pretty good about our ability to move some stuff overtime, if the market demand is out there this quarter.

We don’t know exactly what the market demand looks like this quarter maybe we end up not only anything else, we've left ourselves some room to manoeuvre there. But we’re trying to strike a balance between what you are suggesting as well as just building products and then seeing what the market looks like..

And maybe on my follow-up just on the OpEx line and specifically the R&D line continuous to kind of creep higher especially R&D kind of independent of revenue levels I am just kind of curious to what extent is this just kind of a new structural norm we should expect in R&D where you go after a lot of different market segments with a lot of different products or would you kind of characterize the current spend is kind of accelerating or elevated because of the where we are in the 3D transition or something else or just the long-term guidance on R&D and OpEx would be helpful?.

Yes so just on the R&D piece, there are a lot of different dynamics implying here, obviously we've got a lot of new 20 nanometer products that were going to want to qualify and ramp.

And so we’re always wanting to make sure that we don’t let the R&D dollar spend getting away with qualifying products on a timely basis and getting to the market, and you just said that we should be doing.

So there is that dynamic there is also I think there is an overlying dynamic as we start thinking about some of the storage class memories that we talked about making investments in and as we start continue to add resources to position the company deliver system level products that there is a different nature to the R&D spend than there have been historically as well.

Now overtime we may spend less on some of the other things we spend R&D dollars on. But what we are talking about right now in terms of over the next number of quarters being up a little bit. I think it’s more related to some of the short-term dynamic around technology ramps and new product introductions..

And with that, we would like to thank everyone for participating on the call today. If you will please bear with me I need to repeat the Safe Harbor protection language. During the course of this call we may have made forward-looking statements regarding the Company and the industry.

These particular forward-looking statements and all other statements that may have been made on the call that are not historical facts are subject to a number risks and uncertainties and actual results may differ materially.

For information on the important factors that may cause actual results to differ materially please to 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’s second quarter 2015 financial reviews conference call. You may now disconnect..