Good afternoon. My name is Karen and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Micron Technology’s Third Quarter 2016 Financial Release Conference Call. [Operator Instructions] Thank you. It is now my pleasure to turn the floor over to your host, Ivan Donaldson. Sir, you may begin your conference.

Thank you, Karen and welcome to Micron Technology’s third quarter 2016 financial release conference call. On the call with me today are Mark Durcan, CEO and Director; and Ernie Maddock, Chief Financial Officer. This conference call, including audio and slides, is also being webcast from our Investor Relations website at investors.micron.com. In addition, our website contains an earnings press release filed a short while ago and supplemental information including quarterly operational and financial metrics and guidance, GAAP to non-GAAP reconciliations, slides used during today’s conference call, and a convertible debt and capped call dilution table. Today’s call will be approximately 60 minutes in length. A webcast replay will be available on our website for 1 year. We encourage you to monitor our website at micron.com throughout the quarter for the most current information on the company, including information on the various financial conferences that we will be attending. You can also follow us at Twitter @MicronTech. As a reminder, the matters we will be discussing today, includes forward-looking statements based on the environment as we currently see it. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from statements made today. We refer you to the documents the company files with the SEC, specifically our most recent Form 10-K and Form 10-Q for a complete discussion of these important risk factors and other risks that may affect our future results. Though 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 today’s date to conform these statements to actual results. I will now turn the call over to Mark.

Thanks, Ivan. For fiscal Q3 2016, Micron posted total revenue of $2.9 billion with gross margin of 17%, a non-GAAP net loss of $79 million and a non-GAAP loss of $0.08 per share, all within our guided range. Operating cash flow was $389 million. Top line results were primarily impacted by continued weakness in the PC segment and the mobile qualifications we discussed last quarter. With recent data points indicating some improvement in channel pricing, an expectation of finalizing our mobile qualifications and continued progress on our technology and operational milestones, we remain confident about our opportunities. Today, I would like to provide a brief overview of our progress in each of the businesses and Ernie will cover other business unit performance details. In our Compute and Networking business unit, we returned to revenue growth despite pricing pressure in the client segment. This was driven by the ongoing ramp of our 20-nanometer products, which exceeded 25-nanometer shipments on a bit basis for the first time. We enjoyed continued 20-nanometer qualifications across all CMB market segments led by our 8-gigabit DDR4 product in enterprise, cloud and client. In May, NVIDIA launched the world’s fastest consumer graphics card designed with Micron’s GDDR5 X. We are excited about the prospects for this high-performance memory product. In enterprise and cloud, we saw initial customer announcements based on our NVDIMM product offering with high-performance persistent memory. Turning to our Mobile business unit, our results continue to be impacted by the timing of product qualifications as we transition customers to 20-nanometer versions of LPDDR4. We have successfully concluded some of the delayed qualifications that we discussed last quarter and we anticipate finalizing the remainder during fiscal Q4. We are ramping the output of these products throughout the quarter and into fiscal Q1 2017. We anticipate continued…

Thanks Mark. I will start off by sharing technology and business unit details and circle back to the overall company results for the quarter, followed by the guidance for the fiscal fourth quarter. DRAM represented 60% of our total revenue with the following segmentation. Mobile was in the mid 20% range. The PC segment represented about 25%. The server business was in the low 20% range. And specialty DRAM, which includes networking, graphics, auto and other embedded technologies, was in the high 20% range. In our nonvolatile memory business, trade revenue represented 31% of total revenue represented 31% of total revenue with the following segmentation; Consumer, which includes memory cards, USB and components, represented about 55%. Mobile and SSDs each represented approximately 13%. And as a reminder, eMCPs are accounted for in the Mobile segment. The automotive, industrial, multi market and other embedded applications were in the high-teens percent range. Moving on, I will share a brief operational summary of each of our business units. Micron’s compute and networking business unit posted fiscal Q3 revenue of $1.09 billion, up 4% from the previous quarter, primarily driven by our 20-nanometer shipment growth across all segments and partially offset by lower average selling prices. Our non-GAAP operating loss was $63 million or 6% of revenue. In the Enterprise segment, demand for our 20-nanometer 32 gigabit DDR4 RDAM was driven by the launch of Intel’s latest server platform. We also saw solid growth in the Cloud segment with continued transition to DDR4. In graphics, we saw strong growth driven by our GDDR5 and GDDR5X products and are approaching a seasonally strong period for graphics applications, including virtual reality and expect good performance from this segment for the next quarter. In networking our business was somewhat flat, however we made significant progress enabling our…

Thank you, Ernie. To summarize, we continue to navigate challenging market conditions, but remain confident in the long-term health of the industry and the company’s strategy to improve our relative competitive position. The decision to implement cost reduction initiatives is always difficult and is never made without thoughtful consideration about the short-term and the long-term impacts. However, to ensure that we can continue to place emphasis on our most important company priorities, we believe the steps Ernie outlined are prudent and will help deliver the best long-term results for the company. I would like to take a moment to thank our customers, partners, shareholders and team members for their continued support. Operator, we are now ready for Q&A.

Thank you. [Operator Instructions] Our first question comes from the line of Vijay Rakesh from Mizuho.

Yes, hi guys. Just a couple of questions here on the DRAM side, obviously, good bit growth there. But how do you – what’s the mix of 20-nanometer that you are shipping now and how do you see that as you progress through the August quarter? Do you see further cost reductions there? Thanks. I have one follow-up.

Yes. 20-nanometer is the majority of the bits that we are shipping now. And when we talked in our prepared remarks about the strong bit growth above Q3 levels, you saw what the relative growth was in Q3 and you can assume it will be a little bit north of that as we look at fiscal Q4.

Got it. And on the 3D NAND side, obviously, it looks like bit growth was a little light obviously because of the transition. What’s your mix of 3D NAND that you are shipping now? And when do you see the transition and the bit growth start to open up for you on the NAND side?

Yes. I would say low double-digits today. As we commented – as we get into the back half of the calendar year, we expect a crossover. So, that’s coming pretty soon. So, it’s a pretty significant ramp from here over the next couple of quarters.

Got it. And obviously, you guys are giving a blind estimate on the gross margin now, which is great. As you look at your mix with 20-nanometer costs coming down and 3D NAND PNC starting to ship, any thoughts on where do you see those margins start to bottom out? Thanks.

We typically don’t comment on margins, because it’s a function of our pricing environment just moving around on us everyday. And so really what we have said is that the cost curves that we articulated in our Analyst Day are still legitimate. As you can imagine, when we do 3D crossover and NAND in the fall, that’s when you expect to see the accelerated cost reductions begin to occur there. And on the DRAM side, with the kind of bit growth that we delivered in fiscal Q3 as well as what we are forecasting for fiscal Q4, you can get some idea of what the cost reductions would be there.

Great. Thanks a lot.

Thank you. And our next question comes from the line of John Pitzer from Credit Suisse.

Yes, good afternoon guys. Thanks for letting me ask the question. Ernie, maybe just a follow-on to that margin question and I appreciate that margins are a function of pricing, which is hard to predict. But you have got a lot of elements moving in the right direction. Revenue is growing sequentially into the fiscal fourth quarter. You have got 20-nanometer mix. You have got more mobile. NAND has started to turn your way and yet you have got gross margins that are likely going to be down sequentially. Can you help me understand just kind of some of the factors around mix that are in play and kind of the narrative that we were hoping for is that this quarter, the May quarter and the August quarter would start to show some tangible evidence of you kind of closing the relative cost gap to some of your peers? And just given the gross margin guidance, it looks like that’s not happening and I am trying to figure out why?

Maybe, John, maybe I can take that one instead of Ernie. Again, on the pricing environment as you noted, we are seeing there is obviously encouraging things going on in the channel. Before we start making that into any sort of guidance we would give, we want to actually see that as it moves through other end market segments and out in the contract pricing etcetera, etcetera. So, really this was a question about the tailwinds we have and I think you did a nice job articulating for us. We have got – I think we have done a good job on the 20-nanometer ramp and we will continue to see some improvement for that as we move through the next quarter. We articulated pretty strong bit growth moving forward in both DRAM and in particular maybe a couple of quarters out in NAND as we really see that transition kick in and the 3D TLC part of that transition kick in. So, we have got a lot of good tailwinds. We also articulated we are making lot of good progress on qualifying and re-segmenting those more advanced technology nodes in the right market segments. And we do believe that you will see progress relative to our competition in terms of how our margins move. We never know exactly what they are going to do and it’s tough for us to predict what their results are going to look like given the pricing environment.

That’s helpful, Mark. I appreciate it. And then Ernie, maybe if I follow on just on the OpEx guidance for the fiscal fourth quarter, a little bit higher than we thought. Can you help us understand are there some period expenses that are coming in? And then as you talk about the restructuring and the cost savings given that you kind of have that cost gap and you had a lot of initiatives on your plate for investing, how do we get comfortable that you are kind of taking cost out of the right areas and yet still investing in areas you need to invest?

Sure. So, to the first part of your question, there are some very significant pre-qual expenses that we expect to incur in Q4 that are influencing the guidance that we have provided for the quarter’s OpEx. And then relative to the cost reduction, the only comfort perhaps I would offer you, which I hope is very strong comfort is that we actually think very carefully about what we are doing here and the decisions that we made with respect to the cost savings program were deliberated, very thoughtfully debated. And at the end, we believe we are the right balance to both help improve the financial performance of the company while at the same time not jeopardizing any of the company’s potential in terms of revenue opportunities.

John, maybe I can add one point there, just so everyone on the call is clear, I know you are. The preproduction R&D class Ernie is referencing are really associated with a lot of new products in qual with these technology nodes that are now ramped. And some of those are sort of costs that flow through the R&D now as opposed to directly on the cost flow and inventory.

Perfect. Thanks, guys. I appreciate it.

Thank you. And our next question comes from the line of Romit Shah from Nomura Securities.

Yes. Thanks Mark. You mentioned that channel pricing has improved. At what point would you start to see that show up in contract and in some of your other businesses, because it looks like just based on the guidance for August that you are not expecting the overall pricing environment better relative to May?

Well, it’s a very dynamic environment. So, again, we want to make sure we are giving you what we believe is realistic guidance and guidance that is achievable. And we are going to have to see what plays out in the markets over time. When contract – when spot pricing starts moving, that’s a great indicator of where the markets might go, but what has to happen obviously is there has to be enough liquidity in the market that can carry through into larger volume quarters associated with contract market. And inventory has to burn off. And we are seeing good indications of those types of things, but we need to make sure the pudding is fully baked before we serve it.

Okay, that’s helpful. And then just on the pre-call expenses that are boosting OpEx this quarter, is that sort of more one-time in nature or do you expect expenses to sort of remain elevated through the course of the year as you ramp these new products?

Well, certainly, they will occur as there is a concentration of new products. So you shouldn’t expect that they are going to occur each quarter. And I would tell you then in Q4, they are particularly high relative to what we have seen over the recent history as a reflection of what Mark said. But it is likely that some time during the course of 2017, you are also going to see these occur as we release new products. But again, we see a particularly high concentration in FQ4 ‘16.

Okay. Thank you.

Thank you. And our next question comes from the line of Tim Arcuri from Cowen and Company.

Thanks a lot. I guess I had two questions, first of all, the NAND bits are really moving around a lot, obviously given the planar to the 3D move, so maybe you can hold our hand a little bit and on the 3D transition because it does sort of look like there has been some issues in the 3D transition looking at the bits and maybe also talk about what the bit outlook is for August in NAND to just sort give us some comfort that you are sort of getting through this transition?

So Tim relative to – I will take the second part of your question first and then we will circle back around to the first. The stake in the ground is we have said a few things, which were actually we reiterated today that would kind of be in the opposite direction of thinking there were problems with our 3D NAND transition, right. We are seeing mature yields occurring at rates that are slightly faster than we anticipated. We had originally probably six months ago talked about big crossover for 3D at the end of the year. Today, we reiterated again that that was going to occur in the fall. So a pull forward of a couple of months. And so we are not going to give you a bit guidance for the August quarter, but we do think that these data points will hopefully give you comfort that in fact, the transition really is occurring slightly more rapidly than we have expected it to occur.

The thing I would add to that Tim, is keep in mind we have also talked about the fact that we want to deliver more of our NAND bits in actual solutions to the customer. And as we do that, there is a natural tendency to stretch out the supply chain in aggregate and some lengthening of the total manufacturing cycle time as we move through that transition. So part of this I think is also reflective of the fact that we are making some fairly significant progress relative to like getting these bits into the types of end products that we want to deliver to the customer.

I think one final point that may be also contributing to the overall impression is we do see planar bits coming down fairly significantly as you move away from that planar SSD markets that we have sold into in the past. So there are many dynamics sort of at play here relative to what comes out as an aggregate bit number.

Got it. And then just as the follow-up to that. Ernie, you talked at the Analyst Day, I think you said that $800 million of the CapEx this year would be for fab shell spending. So that sort of net of the partner contribution you would be sort of in the 4 to 4.5 range. And so – I am sorry, net of the partner contribution and also net of the fab shell spend would be in the sort of 4 to 4.5 range and so I am just kind of wondering, as you look to next year and I don’t – and I am not asking for guidance, but I am just wondering how you think about the maintenance CapEx level of the company given some of these initiatives you have in DRAM and also in 3D NAND, how do you sort of think about how to balance that? Thanks.

Well, you really asked kind of two different questions, right, how do we balance and obviously, the balance has come in as we think about the aggregate business for the company and the cash flow that we are planning to generate and a number of other factors. As we look at maintenance CapEx, we sort of said that we were normalized in that low $4 billion range ex-Inotera and we wouldn’t move away from that in a very substantial way as we are thinking about things today, bearing in mind that we are still in the midst of a ramp of 3D in the Singapore fab. So it isn’t exactly a normalized environment for us. Even taking out the shell, we are still outfitting that shell with productive capacity.

Got it, okay. Thank you so much.

Thank you. And our next question comes from the line of David Wong from Wells Fargo.

Thank you very much. For the second generation 3D NAND, when you hit crossover in the fall for 3D NAND, will this all be on second generation technology or will it be first generation and what’s the difference in layer count between first and second generation, please?

So David, it will be primarily significant majority of that. In fact, almost all of it will still be Gen 1. Gen 2 we start to see significant output in the second calendar quarter into the summer of 2017. And we haven’t said what the layer count does, but we have indicated that it’s roughly a 30% cost reduction moving from Gen 1 to Gen 2 and it is roughly double the bit.

Great. Thanks.

Thank you. And our next question comes in the line of Chris Hemmelgarn from Barclays.

Thanks very much for taking the question. I guess first of all, building on David’s question, as you are seeing 3D ramp across the industry, how do you view your competitive position and at your Analyst Day, you laid out some beliefs that you are going to have cost leadership, is that holding as you are seeing the competition ramp?

This is Mark. Yes, absolutely. We are very happy with the way the ramp is going. We are very happy with the technology we are delivering and its ability to scale going forward. We think it’s the best solution in the industry for almost every end market application.

Okay. And I guess to the harder question, what needs to happen for you guys to get back to sustain profitability, I mean I applaud the restructuring efforts, but I look at the savings you have announced and that fall short of the wash as you put up for the last two quarters and what you guided to the next quarter, are you confident these changes are going to be enough to get you back to profitability next year?

Well, we think we are doing all the right things. And we think we were making a lot of good progress on a relative competitive position on technology. But the products are all coming along nicely now and the qualifications are progressing well. So there is always the wildcard around ASPs, but we think we are making very significant progress and we think we will see that every quarter as we move forward, you will be able measure us versus our competition. And hopefully confirm that we are doing all the right things and exactly when that results in profitability, we can’t tell you, but we think its coming.

Thanks so much.

Thank you. And our next question comes from the line of Kevin Cassidy from Stifel.

Thanks for taking my question. On the mobile side, as you start getting more qualification on the LPDDR3 and DDR4, are you expecting that – I guess what percentage of your revenue will be those products versus eMCP and what is it today?

Let me see it if I can find those numbers. I don’t have them right in front of me. For the mobile DRAM portfolio generally, eMCP probably represents...

Well, I will jump in real quick, Mark. So, the way we break it out Kevin, is mobile DRAM discrete is reported in our DRAM business. And that’s about mid-20% of our total DRAM. Our eMCPs are reported in our NAND reporting segment. And we said mobile was in the mid-teens percent of the NAND business, mid to low – low to mid teens.

Okay. Maybe as you ship more of the LPDDR3 and 4s, are you expecting that your average selling price would increase?

Again, it’s really challenging to give you a forecast of what’s going to happen with the pricing environment. But in terms of aggregate revenues, we would expect it, as we move through these qualifications, that you are going to see the mobile business maintain or slightly improve in terms of a percentage of its overall revenue to the business. And as we noted in our comments, right, as we see eMCP market moving to higher density, we think that, that will be sort of a starting point for an improvement in that aggregate market, which has been weak actually in the last couple of quarters and that’s a quarter or so off as we roll into calendar 2017.

Okay, great. Thank you.

Thank you. And our next question comes from the line of C.J. Muse from Evercore ISI.

Yes, good afternoon. Thank you for taking my question. I guess, first question on the mobility qualifications side, how much I guess is the uncertainty around timing there whether it’s the month of August or September, October impacting your gross margin guide? And then as part of that, how should we think about the incremental gross margins as you start selling down your inventory going forward once we do get to qualified?

So, C.J., it’s Ernie. We are pretty clear on the qualification timeline. There is more uncertainty around the timing of shipments, because at the end of the day that is going to be a function of each of those customers sort of current inventory dynamics with respect to the inventories they have on hand, their success in the marketplace and how they want to position their inventory. And in addition to that, we are going to have as we already talked about significant quarter-on-quarter growth in production, some of which is directed toward that mobile market, because we believe that it’s fairly strong. So, mobile in general has a better gross margin profile than the aggregate business. So, as that product flows through, although there will be some early pressure as a result of that inventory having been built at a time when costs weren’t fully baked as a result of the volume ramp eventually it will flow through into the margin profile of the company.

Okay, that’s helpful. And I guess as a follow-up when you think about your 3D NAND cost structure, curious how you would compare that today versus the price leader in planar NAND and when you think you will crossover? Is that Gen 1 when you are fully ramped at high volume or is that more Gen 2 in the summertime next year?

Yes, I think it’s probably most closely timed to an increase in our TLC mix, which is probably a couple of quarters out and then we will get a second surge sort of in calendar Q2 and Q3 of next year as the Gen 2 kicks in, in a significant way. But again, we think we will be the leader as we fully implement Gen 2 and TLC.

Great. Thanks Mark.

Thank you. And our next question comes from the line of Joe Moore from Morgan Stanley.

Yes, hi. Thank you. I wonder I just wanted to clarify when you talk about Q4 DRAM bit growth being better than Q3, that’s sequential bit growth north of 20%. And I guess that then implies when you look at revenue not growing very much that ASPs are down similarly. I know you don’t want to give a pricing forecast, but I just want to make sure I understand I am planning it hard to get to your revenue number with my pricing assumptions?

So, the first part of your assumption process, Joe, is correct. And again, we are not going to comment on ASPs.

Okay. And then separately, can you talk about how the Inotera, the new pricing agreement factors into this? Is that a positive or a negative at this point relative to the old pricing agreement? And maybe if you could compare that versus a wholly owned situation if that deal in fact moves through? Just as any context you can give us around that dynamic?

Sure. So, in the current pricing environment what we have contemplated as we look toward the Q4 is pretty much a wash to be honest with you, either way that the results to Micron would be roughly the same.

Alright. Okay, thank you.

Thank you. And our next question comes from the line of Harlan Sur from JPMorgan.

Hi, guys. Thanks for taking my question. I am still a little bit unclear as to the gross margin decline or the slight gross margin decline in the August quarter given that we have seen some stabilization in DRAM and NAND prices starting kind of in the month of June, your 20-nanometer mix and your 3D NAND mix is moving higher. So, I would assume that your blended costs are coming down nicely. You mentioned other parts of the market that may not be participating on the pricing stabilization that we are seeing in the PC market. But if I look at the end market demand parameters, data center, networking fundamentals seem to be improving into the second half. Embedded fundamentals seem to be seasonally up. Can you guys just articulate like what segments are still showing aggressive pricing declines?

Yes. So, let me try to characterize that a little bit for you. So, it is important to recognize that these data points are really happening in real time. And as we look at how we actually entered this quarter, we were actually starting the quarter below the average of the prior quarter and we are now seeing some upward trends that are causing everyone to have the enthusiasm that we are talking about, but it is important to understand that what we have been reading about in the last two weeks has a) not impacted the entirety of the quarter and b) hasn’t reflected itself yet as we look at forward pricing. And as Mark mentioned a couple of times, we really are wanting to provide prudent guidance in the context of an environment that’s moving around very, very significantly. The other point I would make is it is absolutely true that we are seeing strong bit growth and cost reductions on the DRAM side. Remember that we said the majority of the NAND cost reductions occur as we achieve that big crossover, which is later in the fall of this year. So, we are getting quarter-on-quarter cost productions in NAND, but I think you might be perhaps pulling towards that bit crossover comment into the full quarter that we are coming up on and that’s just not going to be the case.

Okay, appreciate the insights there. Maybe more of a product question for me next. I mean, if we include 2 in 1s, I think SSD and embedded NAND attach rates in notebook PCs are at or slightly above 50% now and continuing to climb. I think you guys had a target of having your 3D NAND base client SSD in the market in calendar Q3. Maybe if you can just give us an update there? And I think you guys also had a target to have your 3D NAND-based SATA solution, your high capacity drives for hyperscale drives starting in calendar Q4, if you could give us an update there as well? Thanks.

Well, they are both in the market. And we are going to just have to see what the demand looks like, but so far we like the reaction we are seeing.

Great, thank you.

Thank you. And our next question comes from the line of Rajvindra Gill from Needham & Company.

Yes, thanks for taking my question. On the whole 3D NAND conversion, I just wanted to get a better understanding of in your estimation what would be more cost effective that the 3D on 32-layer versus the 20-nanometer that’s currently on 2D NAND?

Definitely. The 3D 32-layer is cost advantaged relative to 20-nanometer, even 16-nanometer planar NAND. And we believe that as we move through time, the market is going to appreciate incremental value in 3D NAND bits as well.

But can you give us an idea in terms of if your 3D NAND is actually fitted for some of the applications as it will be available for applications such as mobile or embedded or cars?

Yes. We have a full product portfolio coming for 3D NAND that will address. And I think I mentioned this in my commentary we have 3D NAND products for consumer client datacenter and enterprise as well as evaluating mobile applications on a go forward basis.

Okay. And just last question on the mobile DRAM qualification issues, what specifically can you talk about it? Has there been quality issues with respect to your mobile DRAM, which is preventing you from getting qualified at certain customers and as a result losing market share to Samsung and….

You know I think we have gone through a very significant transition here, in some cases from 30-nanometer to 20-nanometer, in some cases from 25-nanometer to 20-nanometer. And from a timing perspective, in some cases, we were later with a particular either density or iode or interface that the customer is wanting. And so it’s just a matter of working through that process and qualifying both products in the various fabs that we are ramping. So I don’t think there is anything untoward or unusual in that process. It’s just a matter of a fairly significant ramp across two high volume fabs and taking the time to qualify a full suite of products across all those technologies.

And if I could just squeeze one more, in terms of kind of competitively as it relates to your other major competitors moving to a smaller process node and you guys perhaps perpetually plan to catch-up in terms of process node transition, kind of what are some of the lessons you think you guys have kind of understood from the 20-nanometer transition and trying to rectify that when you go to the other process node transition, just in general any comments there would be helpful? Thank you very much.

Yes. So certainly, we think 3D NAND has gone very, very well for that. For us, that has been really a model, where we take technology, we have developed in fab 4 and move it into a consistent equipment set in a historically Micron environment, where the equipment all matches and things go very, very well. What we had experienced in 20-nanometer is we are matching at this set of equipment, given the Elpida acquisition. So we have got one full set in Hiroshima, one full set in the MMT fab in Taichung and a separate tool set in the Inotera fab. And that’s just more complicated. And every time we make this transition, we get more and more of those tools aligned. And we feel like actually we are in pretty good shape now. And as we move to the 1X node beyond that, it’s going to be a lot more seamless and a lot easier to execute on a go forward basis. So we are – we think we are the leader in 3D and we think we are getting closer in DRAM and 1X is coming along now running at sort of pre-production levels in both Hiroshima and Taichung.

Thank you very much.

Thank you. And our next question comes from the line of Mehdi Hosseini from SIG.

Yes. Thanks for taking my question. Mark I am just looking at your NAND gross margin, it’s been below corporate average since mid-2013 and you have all of these new product qualification coming up, I am just wondering is there a strategic alternative here to make more it dramatic or to take a more dramatic action because it has been more than 2 years that NAND has been underperforming compared to the corporate average and in case these product qualifications don’t go well is there alternative strategy here? And I have a follow-up.

We are always open to looking at lots of different ways to optimize the business for the shareholders. Having said that, we like our NAND position, we like the technology. The early feedback from the customers is they like what we are doing, they like not only the 3D technology, but the product portfolio. And we think we are making progress. So we are kind of encouraged with the progress we have been making. Yes, we completely – we have admitted for 18 months now that we completely missed the boat on planar TLC. We think we have taken significant steps to remedy that on a go forward basis. And we intend to do so. So we are going to play it out. And as we do that, we will look at lots of different strategic options for the DRAM business, just like we do for the – sorry, for the NAND business, just like we do for the DRAM business and 3D cost plans and all the other interesting new technologies we are developing.

Anyway you could share with us qualitatively or big picture what some of those options are?

Well, I think we will just keep those to ourselves, Mehdi. But I think the main point I would want to make to you is we think it’s important to have a diversified set of products or technologies to support memory system solutions for our customers. We think were in a strong position there. We like the growth profile associated with the non-volatile memory business generally and that includes not only NAND, not only 3D cross point business that we are currently developing, but also other advanced storage class memories we are working in. And we will look at lots of different ways of optimizing the value in all those different technologies. And we way may find different solutions in different segments, but we are always looking for those opportunities to create value added partnerships or new relationships.

Got it. And then quickly for Ernie, how should we think about working capital inventory and accounts receivable, it seems like at least on the inventory side, it may not come down significantly until February quarter, is that a fair assumption or not?

I think it’s reasonable to think about inventory being within a pretty narrow band for a couple of quarters. So I think that’s a reasonable thing to think about. And obviously, we pay a lot of attention to working capital and tend to do so on a going forward basis and my statement about inventories was on a dollar basis. So obviously bits are going to move around as costs move around.

Okay. Thank you.

And operator I think we have time for one more question.

Certainly. Our final question for today comes from the line of Tristan Gerra from Baird.

Hi, good afternoon. You have mentioned on the call today that the 3D NAND cost structure is laying to the TLC mix and you have mentioned a two quarter out timeframe for that mix ramp, is that in line with the Q4, fiscal Q4 target in terms of cost improvement in your NAND business that you provided last quarter or was there a little bit of a change in terms of where you expect an inflection point in your cost structure in NAND flash?

No, there is no change. We are – I think we are pretty consistent. The fiscal Q1 is our crossover, is aligned with our crossover in the fall, what we talked about today, which is a little earlier than we had originally talked about. The 3D crossover comes a little bit later. And that drives a surge in the cost improvement, but not necessarily to drive the improvements that we have kind of outlined relative to our guidance.

Okay. And then just as a quick follow-up, any steps that you can talk about that you are taking to accelerate the node migration notably at Eldida?

The migration of DRAM from 20-nanometer to 1X?

That’s right.

We are not completely done with 20-nanometer there yet. But as I mentioned a minute ago, we have 1X running there. It’s kind of where we have been doing our pilot line activity and we have transitioned, where we have transferred that technology into the Taichung fab and they are progressing with that. We wouldn’t expect to see volume starts in either Eldida or Taichung until later this year.

Great, thank you.

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