Good afternoon. My name is Latif and I will be your conference facilitator today. At this time, I would like to welcome everyone to Micron Technology’s Fourth Quarter 2018 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-answer period. [Operator Instructions] It is now my pleasure to turn the floor over to your host, Farhan Ahmad, Head of Investor Relations. You may begin your conference.

Thank you. Welcome to Micron Technology’s fourth fiscal quarter 2018 financial conference call. On the call with me today are Sanjay Mehrotra, President and CEO; and Dave Zinsner, Chief Financial Officer. Today’s call will be approximately 60 minutes in length. This call, including audio and slides, is also being webcast from our Investor Relations website at investors.micron.com. In addition, our website contains the earnings press release filed a short while ago. Today’s discussion of financial results will be presented on a non-GAAP financial basis unless otherwise specified. A reconciliation of GAAP to non-GAAP financial measures may be found on our website, along with the convertible debt and capped call dilution table. As a reminder, the prepared remarks from this call and webcast replay will be available on our website later today. 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 on Twitter @MicronTech. As a reminder, the matters we will be discussing today include forward-looking statements. 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 we file with the SEC, specifically our most recent Form 10-K and Form 10-Q, for a discussion of risks that may affect our future results. Although we believe 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’ll now turn the call over to Sanjay.

Thank you, Farhan. Good afternoon, everyone. Our fourth quarter results contributed to a year of unprecedented success for the Company. With record profitability and revenue over $30 billion, Micron ended fiscal 2018 as the second largest semiconductor company in the U.S. The new Micron is undergoing a fundamental transformation, driven by our 34,000-plus employees around the world whom I would like to thank for their intense focus on our key priorities. Our markets are propelled by diversified, secular growth trends, our industry is more rational and the Micron team is executing well against the Company’s strategy. Over the last 12 months, we have sharpened our focus on improving our cost structure and on increasing the mix of high-value solutions in our portfolio, all of which position as well for the future. Our technology roadmap and manufacturing execution is driving strong cost reductions for the Company. Over the last year, we have increased production DRAM bits per wafer at a higher rate than the industry, reducing the cost gap with competitors. We are on track to achieve total bit output crossover on 1X nanometer DRAM in the first quarter of fiscal 2019 and have already achieved bit shipment crossover for 1X nanometer in the client and graphics markets in the fourth quarter. We expect 1Y nanometer sales to commence before the end of calendar 2019 with meaningful production increases beginning in the fiscal third quarter as previously announced new cleanroom space comes on line at our Hiroshima facility. We’re also making good progress on our 1Z nanometer technology development. In NAND, cost reductions and mix improvements have helped us deliver sequential gross margin expansion even as pricing declined in the industry. At this time last year, our bit output share was meaningfully below our wafer market share. Over the last 12…

Thank you, Sanjay, and good afternoon, everyone. Micron continues to perform exceptionally well and delivered strong financial results in the fourth quarter. We set new records for revenue, gross margin, free cash flow, and earnings per share. In addition, we continued to strengthen our financial foundation, achieving our highest ever net cash position. Total fiscal fourth quarter revenue was $8.4 billion, up 8% from fiscal third quarter and 38% from the prior year. For fiscal 2018, total revenue was $30.4 billion, up 50% from fiscal 2017. Gross margins for the quarter expanded to a record 61%, up approximately 50 basis points from the prior quarter and up from 51% in the prior year. In the fiscal fourth quarter, we saw the benefit of strong execution on technology transitions for both DRAM and NAND. This strong execution resulted in a significant sequential cost decline, which drove expanded gross margins in both DRAM and NAND. For fiscal 2018, gross margins were 59%, up from 43% in fiscal 2017. Operating expenses came in at $740 million, approximately flat from fiscal third quarter 2018, as previously communicated. Moving forward, we expect to increase our investments in R&D for fiscal 2019 as we add resources to expand our portfolio of new, high-value solutions and phase out partner contributions for technology development. Our record revenue and gross margin performance drove strong profitability in the fiscal fourth quarter, and operating income grew to $4.4 billion, representing 53% of revenue. This compares with operating margins of 52% in fiscal third quarter and 41% in the year-ago period. Now, turning to our revenue trends by business unit. We achieved record revenue for the compute and networking business unit, up $4.4 billion in the fiscal fourth quarter, up 9% from the prior quarter and 53% year-over-year. Growth trends were strong…

Thank you, Dave. I am proud of the Micron team’s execution in fiscal 2018. In October, we will celebrate the 40th anniversary of Micron’s founding. Our proven track record in delivering technology and design innovation, and building close partnerships with a broad range of customers, has laid a solid foundation. We are now driving a culture of agility, efficiency, and speed, and executing on product-level innovations in high-value solutions. This transformation to the new Micron continues to build strong momentum. I am really excited about our future, and the best is yet to come. We’ll now open for questions.

Thank you, sir. [Operator Instructions] Our first question comes from the line of John Pitzer of Credit Suisse. Your line is open.

Yes. Good afternoon, guys. Congratulations on the solid execution for the fiscal fourth quarter. Dave, I’m wondering, if you could just help us understand the magnitude of the impact in the fiscal first quarter to the CPU shortages and just sort of the modest inventory correction you’re seeing with some of your customers? And specifically, on the CPU shortages, do you feel like that something that’s limited to the fiscal first quarter or are you -- should we think about that persisting into the fiscal second quarter?

Okay. Yes, sure. So, let me take the first one to start with. So, on the magnitude side, we’re not going to go into necessarily the details, all the details in a granular fashion. Suffice it to say that they both had an impact in terms of the guidance of 7.9 and 8.3. They are a big driver of obviously, why we guided in that direction. I don’t know exactly how long the CPU shortage will last. I think on the inventory correction side, it will be a couple of quarters before inventory gets reduced.

And I would just add that the CPU shortages, we expect it to be short-term; it’s possible that it goes beyond Q1 as well.

Sanjay, maybe as a follow-up, in your prepared comments, you talked about 2019 being a year of transition for your SSD business as you bring out NVMe products. I’m wondering if you could help us understand what that means from a financial perspective for your SSD business. Do you still expect growth in that business in fiscal year ‘19 and kind of how do we think about profitability as you transition from SATA to NVMe?

As we said, we have gained substantial share in SSCDs, primarily based on SATA SSDs over the course of 2018, our fiscal 2018. And we’re very pleased with the progress we have made there. And of course, market is shifting towards NVMe SSDs, and that’s where the future growth opportunity lies. And we have been working on our NVMe SSD solutions. We plan to introduce our first NVMe solutions later this year. And then, we will be advancing as we said in the client and consumer space, bringing new products into the market in calendar year 2019, and bringing later on enterprise and cloud NVMe SSDs later in the year, in the 2019 year. So, our NVMe SSDs will be ramping up gradually over the course of 2019. Of course, we will continue to maintain a solid share position with SATA SSDs. Overall, I expect that our total shares in SSDs will continue to be flattish in 2019 timeframe. And we expect to resume share growth from 2020 as we complete our NVMe SSDs portfolio. And by completing NVMe SSD portfolio, I mean complete the development of SSDs or get them qualified with our customers and ramp them into production. So, we are very confident about the long-term opportunity for us in SSDs, leveraging our low-cost 64-layer NAND as well as our 96 layered NAND solutions over the course of next few quarters.

Our next question comes from Romit Shah of Nomura. Your line is open.

Just in your commentary, and certainly the CapEx paints a fairly positive view of the environment, and certainly more positive Sanjay than what we’ve heard from your largest competitor who appears to be reducing investment and preparing for protracted downturn. So, I guess my first question is, how confident are you that the adjustment you’re seeing is really just a one or two quarter issue?

I think, what’s important to understand is that end-market demand trends for DRAM as well as NAND continue to be strong. I mean, when you look at data center and cloud applications, AI is in the very, very early innings. And the whole cloud growth is in the very early innings as well. We see the DRAM requirements in enterprise and cloud data center application to be growing much faster than the total average DRAM industry demand growth, a CAGR over course of few years of about 30%. Similarly, in mobile applications, DRAM is growing nicely as well as machine learning kind of features, as facial recognition et cetera get implemented in these phones. We are already starting to see 6 to 8 gigabyte, even 10 gigabyte coming in high-end smartphones now. And days are not too far that you’ll even see 12 gigabyte in smartphones. And similarly, on the NAND front, when you look at average capacities increasing in smartphones, you’re seeing now 512 gigabyte smartphones being offered. And again, days of terabyte smartphones are not far away. And certainly with elasticity in NAND, average capacities in client computing applications as well as mobile devices will increase as well as attach rate of SSDs will increase. So, this is important. When you look at these demand trends, we feel very confident about the long-term trajectory. One or two quarters here or there, there can certainly be ebb and flow in terms of demand or supply in the industry. But, the long-term trend is positive. And specific to our CapEx, I’d just point out here that we are being very prudent, very disciplined in managing our CapEx, absolutely focused on profitability and ROI. We have mentioned that our CapEx on cleanroom construction and facility upgrades is increasing by $2 billion compared to last year. And Dave mentioned that it represents about 25% of our total CapEx guidance that we provided. And just as an example of our discipline on CapEx management in NAND. In terms of equipment, CapEx for 2019, our fiscal year 2019 versus 2018, we are actually reducing the CapEx fiscal year 2019 versus 2018. So, we are extremely focused on technology conversions, technology transitions because they are the best way for us to achieve cost competitiveness as well as ROI on our investments. We are not adding wafer starts [ph] where some other competitors may have talked about those in the industry.

I think a lot of us certainly believe in the strong secular trends that are driving your business. What’s been a little surprising though is just the rate of change in pricing, both in NAND and it seems more recently DRAM. Can you talk a little bit about that? And you mentioned some customer inventory. I’m curious, which segments do you see that elevated? Thank you.

So, I think with respect to the inventory question that you asked, it’s very important to understand that we are not talking about that inventory adjustment in any particular segment. This is with few customers. It is a customer-specific inventory adjustment that we discuss here. And of course, we cannot call out those customers on this call. And with respect to pricing, of course, we do not forecast pricing, but you look at our FQ4 results, our DRAM pricing was flat and 71% gross margin, record gross margin, extremely healthy industry environment we see going forward as well for DRAM. As I talked about the demand drivers are vibrant for DRAM, they are diversified and they are secular in nature. And DRAM solutions are really bringing great value to the AI-driven kind of applications where they’re really central to that trend. And you have to keep in mind that the supply growth is slowing down as well, given the increased technology complexity than greater CapEx that is required to implement the technology transition. So, overall, we continue to see healthy DRAM industry fundamentals. On the NAND side, as I mentioned that this year, calendar 2018, we see NAND supply output growth at approximately 45%. And this, as you know, has been there because the industry over the course of last several months has gone through major transition from 2D NAND to 3D NAND with the 64-layer. And the industry at this point is already on 3D transition in terms of total bits, on a calendar year basis at about 75% level. So going forward on NAND as well, as you look at transition in the future to 96-layer, that will have the same kind of consideration that increased technology complexity and reduced bit gain per wafer from 64 to 96-layer transition. So, we see moderation in the industry supply aspect in the first half of 2019.

Thank you. Our next question comes from Amit Daryanani of RBC Capital Markets. Your line is open.

Thanks a lot, and thanks for taking my question, guys. I guess, two things as well. First, could you just maybe help me understand, when I think about the gross margin guide for fiscal Q1 is down 300 basis points, I think sequentially. How much of that is due to the tariff issue versus what’s going on in memory broadly? And then, as you go through fiscal ‘19, do you think these margins that you can improve throughout the year, especially the results of the tariff issue challenges?

Yes. So, first of all, the gross margin guidance was 57 to 60. So, of course, if we hit the higher end of that range, it would be 140 basis points down. Clearly, tariffs are impacting us, probably to the tune of 50 to 100 basis points. And as we talked about, we’re working on steps to mitigate that. That obviously takes some time. We have to do some things operationally to get ourselves in a place where it isn’t as impactful. And so, it’ll be a quarter or two probably before we start to see some benefit from the improvement there. So, that was certainly a factor on the gross margin side. I would say, in general, the market for DRAM is healthy. The market for NAND is well-supplied. So, here, we’ve built in various expectations, depending on kind of how things play out from a revenue perspective. And that certainly drives some of the gross margin adjustments as well. But suffice it to say, if we look at this from a year-over-year comparison, gross margins, I think, in the first quarter of 2018 were 55.4%, if I’m not mistaken. So, will be above on a year-over-year basis, if we hit within the range of what we expect, anywhere from 160 to 460 basis points.

That’s really helpful, Dave. And I guess, if I could just follow up on NAND side, very specifically pricing has degraded for a couple of months in your data. Obviously, report shows that it has declined as well in the quarter. I think, I am somewhat surprised that you haven’t seen demand elasticity kick-in with output or demand, I guess, improving much more dramatically. So, I’m curious, what do you attribute perhaps to the fact that demand hasn’t stepped up more attractively as pricing has come down? And do you think there’s just a time lag for it to get there? Is it somewhat the reason why we aren’t seeing it?

So, let me take that. In terms of demand elasticity, we are certainly seeing that. I think in smartphones you do see a move to higher capacities. I referred to that in my previous same comments [indiscernible] previous question. In SSDs particularly related to consumer and channels related to SSD with the benefit of lower priced NAND, certainly, you’re starting to see -- there is already some lag, average capacity increase in those channels as well. So, overall, NAND definitely continues to benefit from price elasticity.

Our next question comes from the line of Tim Arcuri of UBS. Your line is open.

Thank you. I had two. So, Sanjay, first, I wanted to see, if you can provide some color sort of in terms of your reduction in costs for DRAM in fiscal 2019, and whether you think it’d be similar to what you reduce cost in DRAM in fiscal 2018?

So, we’re not going to provide full year guidance on the cost side for fiscal year ‘19. But, I will tell you that we believe we are in very good position with respect to continuing to execute on our technology and manufacturing roadmap and realizing cost reduction. Of course, as we have said before, when you go from one technology node to the other technology node you achieve less bits per wafer gain, and that impacts of course the cost reduction capability from one node to the next node. And again, the laws of physics are same everywhere, and this is common across the industry, as we discussed at our Investor Day. So 1Y technology, in mature yields will provide less cost reduction than 1X technology provided over the 20-nanometer. Nonetheless, our position will be good in terms of cost reductions. Same things we discussed at Investor Day. We feel very good about our ongoing march towards strengthening our costs competitiveness. And of course, in NAND, we’re in very good position. In NAND, we are in very good position with the lowest cost technology in the industry.

Awesome. Thank you. And then, I had a question on the fiscal 2019 CapEx. So, Samsung is pretty significantly -- well, not just them but both of your peers are pretty significantly reducing DRAM CapEx next year. And it sounds like, if I strip out the infrastructure and the building portion that your equipment spending on DRAM is going to go up next year. So, I’m asking about the juxtaposition of you increasing your DRAM CapEx when your peers are pretty heavily cutting DRAM CapEx next year. So, I wanted you to talk about that dynamic. And specifically, what it would take for you to cut DRAM CapEx next year? Thank you.

So, let me just point out that in 2018, we were well below the industry in terms of overall CapEx. And overall, we definitely are absolutely focused on technology transitions with respect to our CapEx. And we believe we have really a prudent, disciplined focus, as I said before, in terms of adjusting our CapEx toward equipment, targeting it toward technology transitions and big growth coming from the technology transition. We have mentioned that calendar year ‘19, we see our supply and bit growth in line with the industry on DRAM side, which we expect to be approximately 20%. And in NAND, we have said that we expect our fiscal year 2019 supply output bit growth to be -- industry to be in the range of 35% to 40% and for us to be somewhat higher.

And I would say, as we’ve talked about in prepared remarks, we do react to changes in our view and we did reduce our CapEx plans for NAND in fiscal 2019. So, we are able to make adjustments, as we see changes.

Yes. And of course, we retain some flexibility in terms of managing this on an ongoing basis as well.

Thank you. Our next question comes from the line of Aaron Rakers of Wells Fargo. Your question, please?

Yes. Thank you for taking the questions. Two, if I can as well. Kind of building on that last question. As we think about what you said about 96-layer an less of an incremental capacity increase when compared to that of 64-layer. I’m wondering if you could provide us some framework of how we should think about the next phase of transitions in NAND in terms of bit output, increases on a per wafer perspective? And then, I have a quick follow-up.

So, at this point, we are not providing specifics on 96-layer that how much you gain per wafer. But, I think some of it can be obvious as well. You are going from 64-layer to 96 layers. Future generations beyond 96-layer will tend to have, again reduce bit gain per wafer. All of that is obviously along with the assumptions of industry ramp of 96-layer is baked into our overall guidance of fiscal year -- calendar year ‘19 NAND bit growth of 35% to 40%. It’s slowing down because again 64-layer to 96-layer will give you less gain. So, in 2018, you saw a onetime increase in NAND bit growth that the industry went from 2D to 3D transition with 64-layer. Going forward, it will revert back to the same curve of less and less bit gain, and of course, more CapEx requirements with each successful technology transition.

Okay, fair enough. As a quick follow-up, I’m curious, you talked a little bit earlier about your NVMe positioning and the portfolio expansion. You didn’t talk much about quad level cell or QLC. So, maybe if you can update us of where you see that positioned and when we should expect to see that kind of impacting the SSD business, as we look through 2019 or into 2020?

So, in my prepared remarks, I did mention about our QLC. And we have -- we are the first ones to introduce QLC SSDs in the industry, very proud of Micron’s ability and execution in that area and very proud of our team to be able to do that. And we have just begun with certain set of limited customers, taking that QLC SATA SSD product to the market. This will be growing revenue for us within SSD next year. Although it will remain relatively small, it will initially be of course, in the SATA QLC solutions. As in the past, when you went through MLC transitions in the NAND industry or you went through the TLC transitions in the NAND industry, those transitions occurred over a course of a few years. And we similarly expect that QLC transition to be happening gradually over the course of next few years, although we will start realizing revenue from QLC SSDs starting now, but, then continuing to increase it modestly in calendar 2019 as well.

Okay. Thank you.

And of course focusing on it in the SSD space.

Thank you. Our next question comes from Harlan Sur of JP Morgan. Your question, please?

Good afternoon, guys. Great job on the quarterly execution. On the inventory adjustments, is this primarily client side or data center side? And is this a statement more about just kind of higher cumulated inventories in the first half or is this a statement around the overall demand environment coming in less than expected or a combination of both?

So, as I said before, this is not limited to any particular segment. It is more specific customer consideration. And, given the kind of pricing that had existed in the DRAM market, certain customers had certain inventory levels that -- certain inventory strategies that they were pursuing, and those customers have decided to adjust their inventory levels. So, that’s what we refer to in our remarks. In terms of the end market demand for those customers and end market demand for DRAM applications, that continues to be solid. It’s just an inventory adjustment approach of some of our customers.

Great. Thanks for the insights there. And you guys have done a great job of improving the NAND mix. I mean, your margins actually went up in the quarter. Given the strong cloud spending trends, you obviously have a great mix of enterprise and cloud SATA products. The transition to NVMe is going to be slower than expected. So, I would anticipate your SATA products continue to do well. So, on a go forward basis and given your customer spending trends, do you guys anticipate continued mix base improvements in benefits in your NAND business from a gross margin perspective?

I mean, absolutely, we will continue to increase our high-value solutions mix, which means SSDs, as well as managed NAND solutions for mobile applications including discrete managed NAND solutions, as well as multichip packages where, of course, we have a significant benefit, because we have both, DRAM and NAND. So absolutely, this is part of our strategy. We will absolutely continue to increase our mix of SSD and managed NAND solutions, high-value solutions. Just want to remind you that we had shared at the Investor Day that in fiscal year ‘17 we had about 40% of NAND revenue coming from our high-value solutions; that means SSDs and managed NAND solutions. And in fiscal year ‘18, we increased that to little over 60%. In fact, in fiscal Q4, our managed NAND and SSD mix, the high-value solutions mix in NAND is over two-thirds. So, this just goes to show you that we are absolutely working towards our goals that we had shared with you at the Investor Day that by 2021 we will have 80% of our NAND revenue in terms of -- actually in terms of managed NAND solutions. So, this is going really well for us and it of course, provides us the benefits in terms of profitability as well.

Our next question comes from line of Mehdi Hosseini of SIG. Your line is open.

Yes. Thank you. Two quick questions. Sanjay, have been referencing visibility on to data center. And this is something that I think investment community would really appreciate. If you could give us the thought process that gives you the confidence, and what are the key metrics that gives you the visibility? Anything here there that could be specific would be really great. And I have a follow-up.

So, certainly, I think when you look at the data center, the total CapEx increases, particularly in the hyperscale application, a lot of that CapEx it does go toward server and memory and storage applications. So, that certainly is an indication of the continuing year-over-year growth in that area and certainly in integration of increasing opportunity. But, again, I’ll point out that we are in very early innings there. And this is going to be a multi-year growth opportunity for us. And we are extremely focused on working closely with the customers in this space. And through those discussions, we get good visibility from them in terms of our opportunity for the future. So, we feel very good about our growth opportunities in this part of the segment here.

Sure. I absolutely agree with you. And I think your Analyst Day provided a lot of detail and informative information and how the opportunities could be. I think, what we’re struggling with is, how to model this is, just not on a quarterly basis, maybe on a six-month basis. Because perhaps opportunities by 2020, 2021 are enormous, but what happens in 2019? And how should we think about cloud CapEx? In the past, we had PC units and we had content. We had the smartphone units and the content. But now the cloud, either an internet or a software company provide cloud services, it’s very difficult to model this. And we have to think about how ‘19 will look like before all of these opportunities would materialize. And I was just wondering if there is anything you can share with us to help us with the thought process.

So, I think one of the things I will share with you is that if you look at the DRAM demand growth projections in the cloud and in enterprise datacenter space, you will see that that CAGR over few years is 30%. And that is higher than the expected DRAM overall industry supply bit growth of 20%. So, this is one of the fastest growth areas, where DRAM along with NAND, really bring lot of value to those customers. I think at our Investor Day we had taken you through the details of how AI driven applications are requiring 6 times more DRAM per servers and 2 times more SSDs per server. So, I think you have to look at all of these trends. There is no one particular trend that I can point to you in this regard. Of course, you have to look at the cloud CapEx, you have to look at the average capacity increases that are taking place on the DRAM side as well as for the NAND side in cloud applications, the server attach rates. The CPUs that are going into the servers have more memory channels that’s enabling more DRAM growth per server content in the data center application. So, there are many of these things that all absolutely are pointing to strong demand drivers. And just to end the comment here, I would point out that our end market applications are well-diversified in DRAM. Of course, cloud and data center is one strong growth area for us, but mobile, automotive, industrial, IoT, all of these are also growth applications. For example, in automotive and industrial, we have number one market share, and that’s a very stable kind of market opportunity. And we are doing very well. Graphics is another example, right. But we have very strong position in graphics as well, and another growth opportunity. So, multiple growth drivers and we are well-positioned. The message is, the industry is structurally different and Micron -- the New Micron is also structurally different. And we are well-positioned to drive the business going forward.

Okay. And if I may, just have quickly one for David. How should we think about your NAND and DRAM or aggregate inventory, either number of days or how it has changed sequentially?

Well, inventory in total is probably you’re breaking out, which inventory on a days’ basis right now is in kind of the high-90s; it’s been that way for some time now. I would say we’re comfortable with our inventory position. Having said that, if you remember, in the Analyst Day, Manish, runs operations, talked about some of the things he was doing to improve the efficiency of the manufacturing group, and on top of that, improve, in particular the back end and try them to make that more streamlined. And there is a whole bunch of things we’re doing in terms of system improvements and process improvement that I think will actually have a pretty good effect on inventory going forward. So, over time, I think you’ll see us carry lower days of inventory and improved working capital in the process.

Thank you. Our last question for the session comes from C.J. Muse of Evercore. Your line is open.

Yes. Good afternoon. Thank you for squeezing me in. If I could ask two. First one, on the call, you talked about moderating NAND supply in the first half of ‘19. Curious with the construct of inventory adjustment at a few of your customers, could you kind of walk through how you’re seeing DRAM supply-demand, particularly as you also layer in some of the cuts that we’ve seen from the your two other competitors in terms of equipment add over the last 6 to 9 months?

So, as we mentioned, we see DRAM to be healthy in Q1. And we definitely see healthy demand supply trend for DRAM beyond that as well, given the well diversified growth drivers for DRAM. So, overall, we see DRAM in balance. And regarding the inventory adjustment, I just want to be clear that that comment is related to DRAM.

Okay. Very helpful. And then, as my follow-up on the buybacks, you talked about $1.5 billion or roughly 3% of the Company. I’m curious, given you have the 10b5 program in place, September 1st, should that be front end loaded, thus more material benefit as we go through this quarter and next? And then also, considering you’re now, I think $2.5 billion plus or minus net cash position, at these prices, would you consider being even more aggressive? Thank you.

Good question, C.J. And I do want to thank investors for being patient with us a little bit. We announced this in May at the Analyst Day, and we needed a few more months to get the balance sheet to where we wanted. As you mentioned, now, we have a great net cash position, we have debt now below $5 billion that 0.3 times EBITDA. And we have great liquidity. We’re now over $9 billion of liquidity. And we said we wanted to be 30% of sales and liquidity. So, we’re in a very strong position in entering fiscal 2019, which I think is great. Our intention is to be fairly programmatic about the buyback. And so, that $1.5 billion does represent more of a programmatic type approach. Having said that, we did mention that we have layered on top of that some opportunistic repurchases, and so, that will be somewhat timing based -- based on when the opportunities arise to take advantage of buying back a little bit more. In both Sanjay and my prepared remarks, we did talk about acceleration. And if you look at the $1.5 billion and kind of make some estimations around our free cash flow for the first quarter, you’ll probably get a figure that is above 50% free cash number we said we are committed to. So, I think it is in the cards for us to be a little bit more aggressive over time. And we obviously think that this is a fantastic price to be buying the stock at.

Thank you. And ladies and gentlemen, this concludes today’s conference. Thank you for your participation, and have a wonderful day. You may disconnect at this time.