Good 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.

Thank 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 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. I'll now turn the call over to Mark Durcan. Mark?

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…

Thanks, Mark. The company's third quarter fiscal 2012 ended on May 31. As usual, we provided a schedule containing certain key results for the quarter as well as certain guidance for the next quarter. That material is presented on the few slides that follow, as well as on our website. The third quarter results posted a net loss of $320 million or $0.32 per share on net sales of $2.2 billion. The higher revenue in the third quarter came primarily from higher DRAM sales volume. Consolidated gross margin was relatively flat compared to the previous quarter, reflecting improved margins on sales of DRAM products, offset by lower margins on NAND. Micron entered into a settlement agreement with a customer after our second quarter earnings release, but before the filing of the quarterly report 10-Q with the SEC. As a result, a $58 million accrual was pushed back into the second quarter results as a charge against DRAM and DSG revenue, and was reflected in the Q2 10-Q filing. This accrual is also reflected in the second quarter results presented today. The cash payment to the customer occurred in the third quarter. Inotera continues to improve both production output, as well as yields. Our share of Inotera's results reflects this improvement, although there's still a net loss in the third quarter of $38 million. In the second quarter, we entered into a short-term loan to Inotera for $133 million. In the third quarter, Inotera repaid the loan and Micron made an equity investment of $170 million, increasing our ownership interest from 30% to 40%. This entitles us to an increased share of 30-nanometer node output in the future. As Mark mentioned during the third quarter, the Board of Directors of Transform, a development stage joint venture in which we have a…

Thanks, Ron. Today I'm going to walk through some of our business highlights, provide a few technology updates, as well as discuss the current market dynamics in the memory industry. Our DRAM Solutions Group exceeded our forecast for sales bit growth and achieved record shipments in all of our segments which include server, networking and storage, graphics and consumer and personal computing. In particular, our specialty DRAM growth continued to outperform. The server market is a good example of a specialty segment where Micron has performed very well over the years achieving strong market share, which is approximately double our overall DRAM market share. This success demonstrates the strength of our product performance, quality and overall customer support model. We believe the combination of unit growth, driven by data center and cloud applications in addition to performance-driven growth in DRAM per system will generate over 40% bit demand growth this year and over 50% in 2013. In the PC segment, we have seen some improvement in demand after 2 quarters of stagnant growth, somewhat related to the improved availability of hard drives. We also believe we are experiencing lower industry supply growth, with 2012 year-over-year bit growth estimates now in the mid to high 20% range. This lower supply growth and demand recovery has led to an improving PC pricing environment. The demand catalyst for the second half of the year include ultrathin product launches utilizing our recently announced DDR3Lm and soldered down 4-gigabyte DDR3-based modules, as well as seasonal recovery and the upcoming Windows 3 -- Windows 8 launch on both Intel and RM-based platforms. In aggregate, we believe PC DRAM content in 2012 will average around 4.5 gigabytes compared to 3.5 gigabytes in 2011. This, in addition to our forecast, is calling for small increasing units. PC DRAM…

Great. Thanks, Mark. We will now take questions from callers. [Operator Instructions] Please open up the phone lines.

[Operator Instructions] Our first questioner in queue is James Schneider with Goldman Sachs.

I was wondering on the NAND side, if you could talk about the impact of the higher MLC and 3 level per sales recorder, how did that swing your bit shipments and your ASPs? If you can provide some quantification on that. And specifically with respect to TLC, going forward do you expect to increase the proportion of that?

Well, I think that the -- the first part of your question is that some of the application markets that we're building products for are able to adopt the MLC and lower-end products to TLC shipments. We have said all along that our technology lead in NAND has allowed us to ship MLC competitively in the marketplace, even competing with some of our competitors over technology TLC platforms. As we said, going forward, we've enabled both MLC and TLC in these products, and you can see that the -- there's an increase in our shipments in the past quarter, that being that we've been able to enable some of this technology in some of the broader product portfolios.

Okay. Then maybe on the SSD side, can you talk about the inventory level you're seeing out there in the channel or your customers right now? We've heard some data points suggesting there may be -- may have been elevated. Do you still see those elevated inventory levels and do you expect them to be kind of fleshed out over the next quarter or so?

Yes. We actually commented on the last 2 calls that we saw that pretty earlier in the cycle driven primarily that if some of the OEM and channels took in a lot of inventory pre-Christmas, and they were sitting on a bunch of inventory. We think it's actually working its way out fairly well and we've seen pretty strong demand over the last month in the channel and especially on the client SSD side. So we agree that that's been a trend. We think it's working itself out in our -- at the end of Q3 and certainly during Q4.

Just a clarification. Could you provide a number for how much of the TLC was as a mix of your NAND sales in the quarter?

TLC was about 9%.

Our next questioner in queue is Alex Gauna with JMP Securities.

I was wondering if you could give some insights into how you see the end-market dynamics specifically on the server side, the notebook side and maybe the mobile wireless side. And I think there's a lot of investor concern that maybe, particularly in the area of notebooks, we might be seeing an artificial strengthening in DRAM because of the hard disk drive recovery and maybe also some safety stocking against Elpida. I was wondering if you could give some insights on how you see demand holding up going forward here with those considerations.

So let me break that up to you. You asked about notebooks, you asked about wireless and the server business. I'll tackle the notebook market, the desktop, notebook market. In general, we do think there has been some support for hard drives, that, that inventory situation's improving, and I think there's a little bit of a catch-up as mostly Corporate PC buying picked up after being away for about 6 months. I don't think they adopted the SSD platform as aggressive as everyone might like, which contributed to the inventory discussion I just had. So I think the notebook market did get some support from an improving hard drive environment. But I also think as we talked about the ultrathin product launches as well as Windows 8, will provide for some support beyond just the hard drive availability, and we think it'll be a better back half of the year. In the server environment, we continue to see a lot of new opportunities, not just the traditional data center main applications. But when you think about some of the new customers, the Facebooks and Googles of the world, we're dropping in data centers more in a shrink-wrapped environment with large server content. We're seeing large volume orders for servers. And on top of that, as I mentioned in my comments, the density per server continues to increase for performance reason. So we're pretty bullish on servers, and we've had 3 consecutive quarters of record bit shipments in the server segment. On the wireless market, as I mentioned earlier, we see growth there as well, especially for us to recapture some share with our low-power DRAM 30-nanometer product as we get into increased ramp for that product in Q4 and beyond, so we have good customer access and the quals are in place to drive some additional volume there.

And real quickly as a follow-up with regard to the SSD opportunity in notebooks going forward here, there's been a lot of models being released with hybrid drives and then obviously the MacBooks came out with some very high-density, complete solid-state drives. What are your expectations in terms of hybrid versus solid state? What are the OEMs telling you with regard to the price points to accelerate the full SSD versus the hybrid solution?

Well, I think that we're seeing about a 50/50 split in terms of a hybrid configuration with a pure SSD play configuration. I would say that -- one of the comments I made upfront was that given some of the pricing we're seeing, as well as the improvement technology from a technology node perspective and lower costs in the market today, the economics are getting there. We've been asking the question what will it take to accelerate SSDs, and we think we're pretty close to a fast acceleration of SSDs in the notebook, given the gigabyte -- cost per gigabyte equation. So while -- I think it continues to be fair, but we see about 50%-50% ratio on hybrid versus pure SSD.

Our next questioner in queue is Kevin Cassidy with Stifel, Nicolaus. Kevin Cassidy - Stifel, Nicolaus & Co., Inc., Research Division: I'm just -- if I could go to the Elpida negotiation. Are you able to advise them at all on wafer starts for DRAM?

This is Mark. Absolutely not. We -- first of all, we don't have an agreement with them at all yet, and yet to be seen whether we do. Secondly, were we to reach that point, there's also deregulatory approval still required, so we're a long way out before we would have any impact on the Elpida operation. Kevin Cassidy - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And can you say what percentage of your DRAM revenue was specialty DRAM?

Well Kevin, this is Kipp. Sorry for the delay there. We're about 60% within the specialty category.

Next questioner in queue is Shawn Webster with Macquarie.

So for your fiscal Q3, your DRAM bit shipments were up 12%, what did your production do sequentially for DRAM? And on the NAND side, I think you said somewhere that your total NAND shipments were up 40% sequentially, and I was wondering what your production did sequentially.

Yes. We quit giving away the production bit numbers because we just didn't find them very helpful for you. But I will say we're pretty close to guidance for DRAM and actually NAND was up pretty nicely, as we had some pretty good execution through the quarter.

Okay. Well, sticking with production. For your capital expenditure guidance for fiscal '13, what kind of bit growth does that level support for you guys in both the DRAM and NAND side?

Hard to give out a year-over-year number, which is why a few quarters ago we switched to giving you quarters, maybe 1 to 2 quarters out, because we can make such a pretty dramatic change in bits when we look at the mix effects, so we're just not going to go on a year-over-year basis.

Okay. And then in terms of the channel inventories. You talked a bit about NAND, can -- how many weeks are -- is the DRAM market looking like right now?

DRAM right now is in the 3- to 4-week inventories.

Would you characterize that as normal or lean or...

That's pretty normal. Yes, we think it's about right. We've seen, as I said, pretty good activity around our DRAM and with improving price and I won't say favorable, improving price in the market.

And maybe just a final one on the Elpida negotiation, is there -- isn't the ideal situation for you not be the sole bidder, but for there to be no bidder for the assets? In other words, I mean, wouldn't it just going through the bankruptcy proceedings on its own and you guys benefiting directly from potential industry consolidation the best outcome?

Well, Shawn, obviously the benefits of the deal will depend on the details of the deal. And I think sort of the framework I laid out was if we can acquire assets under terms and conditions that don't result in dilution or significant acquisition of interest-bearing debt that would limit our flexibility, then that can be beneficial to Micron shareholders and I think that's probably all I want to say on that topic.

Next questioner in queue is C.J. Muse with Barclays.

I guess first question, I was hoping you could provide a little color on time line and/or milestones and how we should think about progress in your discussions with Elpida and anything kind of mandated by the Bankruptcy Court. And I guess as part of that question, how you plan to toggle CapEx requirements that you may need both NAND and DRAM, and I said particularly on NAND.

So let me cover both those pieces. On the first piece, we're not going to speculate at all on what the time line might look like relative to activity in the Elpida case. It's -- these things are obviously very changeable and a lot of different inputs can move dates around and -- as well as -- also some other things. So what I can tell you is that were we to reach any sort of agreement, we'll obviously be letting you guys know. Having said that, the second part of the question was relative to CapEx and how we might modulate that. I think the $1.6 billion to $1.9 billion number that Ron gave you is obviously for Micron as it exists today. Depending on anything else we might do relative to Elpida, we'll obviously take a look at what most cost-effective place to spend our capital is and that would move our numbers around.

That's helpful. As a follow-up on the NAND side, I believe you said on your prepared remarks, you thought you would see big growth of mid to high 50s, both '12 and '13. Curious what you see for supply in both those years for the industry? And what would you -- what would get you excited to think that there we could see a faster growth in '13?

In fact, that reference to mid to high 50s is a supply prediction, and I think Mark also had in his comments that we look to the long-term average demand increase to be well over 60%.

And with -- I guess within that, what kind of underlying assumptions are you making in terms of ultrabooks and full solid-state drives versus hybrids as we enter 2013, and I guess exit as well?

Well, there's some pretty good third-party data, if you'd like to reference that. But ultras do take up a pretty good content leap in terms of consumption of the overall bits and the wide -- the range is pretty wide, so I might let you just go research that third-party stuff yourself.

Okay, sure. And last question for me, again in your prepared remarks, you talked about optimistic view on memory for the second half of '12, and curious whether you've greater optimism in NAND versus DRAM or both. And if you could provide any color on what's really driving that for you, that will be helpful.

I think for us, on the DRAM side, the segments that I highlighted in my comments around server density growth as well as unit growth, we see a bit of an improvement in the PC, desktop, notebook climate, as well as the networking and storage, we think they're all very favorable for DRAM. Hard for me to call DRAM versus NAND, I think there's -- obviously NAND has gotten negatively impacted on the pricing side over the last quarter to 1.5 quarter. And while we've been cautious in our remarks about NAND, even quarter-to-date, we still -- we've seen a recent drop based around improving demand, picture around client SSDs and we think improved densities on the tablets and smartphones. So we do think that the NAND was a mild supply, oversupply condition. We don't think it's structurally that far out of balance, and we think that the back half demand profile will help that be in a better place.

Next questioner comes from Daniel Berenbaum with MKM Partners.

This is Ada calling in for Dan. Since you've provided some details on negotiations with Elpida, can you give us some color on the rationale behind doing the acquisition in the first place? There's been a lot of speculation among investors about dilution from combining Elpida's operations into your own. So maybe you can help us understand how you think about absorbing the Elpida assets into your own and how that helps your business long term.

Sure. The Elpida business includes a significant amount of the worldwide capacity, and scale is always an important metric in our business relative to OpEx. It comes with talented employees, as well as a portfolio that while it overlaps with ours in many places, it also has some significant value-added products and technology that is, in some ways, different than ours and supports some segments that are attractive to us. Their customers, while they overlap in some cases, also -- or in other cases different than ours and the acquisition gives us access to an increased attempt. There is a significantly intellectual property available at Elpida as a support to the ongoing business. And finally, I think I would just highlight the wireless segment where they have clearly a strong product portfolio, but without all the various pieces to put together with it. We think that the combination of their portfolio with our portfolio in that area in particular will provide a compelling offering to customers worldwide.

So it sounds like you do expect concrete earnings and cash flow accretion from this?

Well we don't have a deal, so I can't calculate any of those numbers. However, I will tell you that yes, certainly over the long haul we would anticipate a stronger Micron were we to consummate the deal. If that's not the case, we're not going to do a deal.

Next questioner in queue is Uche Orji with UBS.

Can I just ask you a question? If I back up to the opening remarks when you talked about not wanting to add more debt and much more debt and not wanting to devalue equity holders. Obviously this year, and following up on the last question to say how is that even going to be possible, let me just back up a little bit and ask you for us to understand what your cash comfort levels are. How much cash do you need, minimum, to run this business, and if you were to hypothetically get it, given the increased scale of both companies, any sense as to what is the minimum level of cash flow you require on the balance sheet?

Uche, this is Ron. If you're looking at the current structure of Micron, it's a -- we were in a pretty good shape, I guess, when you look at the pieces of the -- of where cash is deployed. And we've got pretty good access to our capital around the globe in the current structure of Micron. So it's certainly, it's some $500 million operating cash balance that we could operate our current infrastructure. Now if you're asking about what it looked like in some kind of combination, obviously we aren’t in a place where we could speculate on that without, as Mark mentioned, having a deal, having more information.

Fair enough. Let me switch to some detail on the NAND business. So as we -- you mentioned some pockets of SSD improvement. Can you give us a little bit more insight into the various product categories and where you're seeing strength and weaknesses? And I say this because we've seen some recent data that shows the card market seemed to have -- had a seasonal bounce. I'm not sure whether that is essential to what you're seeing as well. So if you can talk to Micron SD cards, the other cards, USBs and all that end products in NAND, just to give us a sense of what you're seeing, that will be helpful.

I think actually, you got a good take on it. I think we've seen, believe it or not, retail has kind of helped, relatively stable for us in the NAND business and we've also seen what -- we think as an explainable rebound, at some level, on the client SSD segment as well. As we look at it, there was a -- there's a fairly heavy inventory build coming out of the holidays, and we talked about that in the last couple of calls. And we've started to see some increased channel shipment of SSDs over the last few weeks, and we're pretty optimistic that that's a good signal going forward.

Okay. And just finally, if I look at the lag effects you described for the specialty areas, any more details as to -- I know you said you see stabilization there in specialty memory. In terms of the demand drivers for those, I would have expected a little bit more given the initial ramp of Romley, I would expect a little bit more upside from the server side. Is that a misplaced expectation? And if where -- if Romley is ramping as well we seem to believe, when might you might start to see that? And then on the networking side, any more detail as to how you expect that strategy just based on demand factors you see on ground going forward?

Yes. Maybe I could reinforce, we're seeing that effect as we speak. As I mentioned, our server bit growth over the last 3 quarters has continued to grow, and that we've set records over the last 3 quarters. In the networking segment, the same; we have some great performance in terms of bit shipments. So we're pretty bullish about those 2 segments, and we think we're seeing the effects of that plus continued application growth around expanding data center application, as well as cloud architecture.

Sorry, I wanted to just specify, I was asking more about the pricing trends for those areas.

Well, I think as Ron stated in his comments, just there historically has been a lag effect that indexes up, the PC, desktop, notebook market, the commodity market. And as you see improvement in the desktop, notebook DRAM environment, there's normally a solid transition. We anticipate that there should be improvement in our business going forward.

I would like to apologize ahead of time for not being able to get to everybody in the queue. We do have time for one more question, but I would like to remind everyone we're hosting an Analyst Day in the fall here at the corporate headquarters in Boise on October 12. You can get more details on the website. And with that, we'd like to take one more call.

Our final question for today's event comes from Hans Mosesmann with Raymond James. Brian C. Peterson - Raymond James & Associates, Inc., Research Division: This is Brian Peterson for Hans. Just a question on the NOR business, it was actually a little bit better than expected this quarter, despite some exposure to the wireless side. Could you talk about how you expect that business to trend going forward?

I think we've commented in the past that the wireless NOR has been declining and maybe even a little bit faster than we had thought. Having said that, as I mentioned, our Embedded Solutions Group has done a pretty good job in growing the business and growing our units there. And certainly, NOR is the core foundation in addition to adjacencies around DRAM and NAND in that business. But the NOR business in embedded remains pretty solid with a good pricing environment, and really long-term design-in benefits there. So we think NOR will continue to be very stable around the embedded business going forward. Brian C. Peterson - Raymond James & Associates, Inc., Research Division: Okay. And just a follow-up on Elpida. Is there a certain period where you have exclusive negotiation rights? Or is there a time line where this deal needs to be worked out? Or just any kind of prospective you can provide there.

I'm afraid we can't comment on any of that detail at this point. We're obviously under NDA.

Okay and with that, we'd like to thank everyone for participating on the call today. If you will please bear with me, I need to repeat the Safe Harbor protection language. During the course of this call, we may have made forward-looking statements regarding the company and the industry. These particular forward-looking statements and all other statements that may have been made on this call that are not historical facts are subject to a number of risks and uncertainties and actual results may differ materially. For information on the important factors that may cause actual results to differ materially, please refer to our filings with the SEC, including the company's most recent 10-Q and 10-K. Thank you.

Thank you. This concludes today's Micron Technology's Third Quarter 2012 Financial Release Conference Call. You may now disconnect.