Micron Technology Management Discusses Q3 2012 Results - Earnings Call Transcript

download Micron Technology Management Discusses Q3 2012 Results - Earnings Call Transcript

of 27

  • date post

    12-Jul-2015
  • Category

    Technology

  • view

    380
  • download

    4

Embed Size (px)

Transcript of Micron Technology Management Discusses Q3 2012 Results - Earnings Call Transcript

SEEKING ALPHA

SEEKING ALPHA

Micron Technology Management Discusses Q3 2012 Results - Earnings Call TranscriptEXECUTIVESKipp A. Bedard - Vice President of Investor RelationsD. Mark Durcan - Chief Executive Officer and DirectorRonald C. Foster - Chief Financial Officer, Principal Accounting Officer and Vice President of FinanceMark W. Adams - President

ANALYSTSJames Schneider - Goldman Sachs Group Inc., Research DivisionAlex Gauna - JMP Securities LLC, Research DivisionKevin Cassidy - Stifel, Nicolaus & Co., Inc., Research DivisionShawn R. Webster - Macquarie ResearchChristopher J. Muse - Barclays Capital, Research DivisionAda Menaker - MKM Partners LLC, Research DivisionUche X. Orji - UBS Investment Bank, Research DivisionBrian C. Peterson - Raymond James & Associates, Inc., Research DivisionMicron Technology (MU) Q3 2012 Earnings Call June 20, 2012 4:30 PM ET

OperatorGood afternoon. My name is Huey, and I'll be your conference facilitator today. At this time, I'd like to welcome everyone to Micron Technology's Third Quarter 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.

Kipp A. BedardThank you very much. I'd also like to welcome everyone to Micron Technology's Third Quarter 2012 Financial Release Conference Call. On the call today is Mark Durcan, CEO and Director; Mark Adams, President; and Mr. 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 third quarter 2012 financial press release, again it is available on our website at micron.com. Our call will be approximately 60 minutes in length. There will be an audio replay of this call, accessed by dialing (404) 537-3406 with a confirmation code of 90798592. This replay will run through Wednesday, June 27, 2012 at 5:30 p.m. Mountain Time.

A webcast replay will be available on the company's website until June 2013. We encourage you to monitor our website, again 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. 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'll refer you to the documents the company files on a consolidated basis from time to time with the Securities and Exchange Commission, specifically the companys 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 Microns 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. I'll now turn the call over to Mark Durcan. Mark?

D. Mark Durcan:Thanks, Kipp. I'd like to start today by giving a brief overview of the quarter, including some color on where we performed well and where we need to improve our execution. After some thoughtful discussion on company strategy, I'll turn it over to Ron for financial summary, and we'll close our preliminary comments with Mark Adams providing an update on the market conditions and key developments in our business units. Revenue in the quarter was -- obviously exceeded expectations as a result of solid manufacturing performance and good work on inventory improvement by our business units and sales force. There is yet room for improvement on inventory management, but it was certainly gratifying to see the results this quarter.

And with the closing of the Intel debut restructuring, we expect benefit from an ongoing structural improvement in our NAND inventory turns. In the quarter, we completed the rollout of a new supply-chain management infrastructure and though there were a few inevitable bumps along the way, the process is complete and we look forward to building from here to new levels of customer service and responsiveness. The 30-nanometer DRAM yield ramp picked up steam during the quarter in all 3 DRAM manufacturing facilities, and is now focused predominantly on higher-density 4-gigabit DRAM products.

The technology team made solid progress on a number of new technology nodes including NAND, DRAM, NOR, PCM and some emerging memory part types. The DRAM market found its footing during the quarter and while NAND market softened significantly, since quarter end we've seen its improved stability here also. Mark Adams and Ron Foster will comment more on all these areas. Given the current memory industry climate and changes here over the last 4 months, I'd like to spend a few minutes sharing some thoughts on the opportunities currently presenting themselves to Micron and our path forward. Two weeks ago, I marked my 25th anniversary at Micron. When I started, we had one 5-inch wafer fabs and goats grazing out the front. I've clearly seen many changes in the company, as well as in the competitive landscape of our industry. One constant has been Micron emerging from tumultuous times as not only a survivor, but a stronger company.

While the memory markets are obviously somewhat soft currently, we believe they are bottoming and we will have the wind more to our backs moving into the second half of the year. We've taken steps over the years to broaden our product portfolio, improve our cost competitiveness, strengthen our technology position and capitalize on the right strategic opportunities when they arise. It is my intent to continue to move in this direction. My focus is on building an operating and financial model that can deliver sustainable free cash flow and dependable ROI. There are many levers to pull in order to achieve these goals. As always technology, capital efficiency, product differentiation, close customer engagement, effective sales channels, timely and low-cost investment and manufacturing efficiency and effectiveness are key to optimizing our results.

In addition, however, being cognizant of and reacting appropriately to memory industry supply and demand dynamics is important to achieving this result. There's currently considerable interest, of course, in whether Micron will consummate the purchase of Elpida, which represents 15% to 20% of the DRAM industry capacity. As most of you are aware, we announced previously that we were selected to negotiate exclusively to become the sponsor for Elpida in the bankruptcy process. We are in a unique strategic and financial position to take a look at this opportunity and are interested in pursuing it, if it can be done under the right terms and conditions. In my mind, these include making sure we do not unnecessarily dilute our equity nor incur excessive interest-bearing debt that might overly hamper our flexibility moving forward. A deal with Elpida in this context should enhance our scale and operating expense efficiency.

Elpida also has a strong product portfolio, leading-edge technology, strong IP and talented workforce. I think our track record of successful M&A transactions, which by the way includes avoiding deals which do not fit financially and strategically, speaks for itself. . If a deal cannot be done on terms that are acceptable to us, I want to emphasize that we're also comfortable with our organic opportunities. Our customer base is fantastic and almost all are looking to do more business with Micron. Let me give you a couple of examples of other things you can expect we'll be doing outside of the effective ongoing management of the existing core business. On the product and technology front, 2 key opportunities include our Hybrid Memory Cube and enterprise SSD products. These premium products are pushing Micron further up the value chain with our customers and will help improve our margin structure over the long term.

Key to success in these and other more system-oriented memory solutions we are pursuing are the right partnerships up and down the value chain, including those with suppliers, customers and service providers. We will continue to forge close relationships with other parties to ensure that Micron solutions are the most widely available, flexibly configured and most value-add for our customers and the end markets. While we're building core competencies internally to support these initiatives, I believe we can best enhance return for our shareholders by partnering closely with industry leaders in adjacent spaces to optimally leverage our individual strengths. We've got a good history of success in this area and existing partnerships to continue to evolve and new ones to emerge. Mark Adams will cover a few highlights on some previously announced system products during his market discussion later on.

On the cost and capital efficiency front, we recently took the tough but necessary steps to terminate our Transform Solar joint venture. While we felt like our technology was strong, the marketplace dynamics did not support ongoing and potential future capital investments which would have been required in order to move the business forward. We will continue to scrutinize all of our businesses t