FOOL CONFERENCE CALL SYNOPSIS*
By Dale Wettlaufer (TMF Ralegh)

Micron Technology Inc.
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8000 S. Federal Way
Boise, ID 83707-0006
(208) 368-4000
http://www.micron.com

ALEXANDRIA, VA., (June 23, 1997) /FOOLWIRE/ -- Micron Technology Inc. reported third quarter 1997 earnings on June 16, 1997. On a conference call to discuss the quarter's results were Steve Appleton, Chair and CEO; Bill Stover, CFO; and Don Baldwin, Vice-president of sales.

BILL STOVER, CFO. For our third fiscal quarter of 1997, which ended May 29th, we had net sales of $965 million and net income of $97 million. That's $0.44 per fully diluted share and we reached just over $4 billion in total assets. The significant third quarter news for our shareholders was the improvement in gross margins of our semiconductor products. Our two most recent quarters have seen substantial improvement from 24% in the first quarter to 32% in the second and now 49% gross margin in the third quarter. As the press release stated, our production of semiconductor memory increased 31% over the second quarter. In the first two quarters, we achieved 48% and 55% sequential growth in bit output, respectively. These manufacturing efficiencies were made while we were making aggressive transitions to the 16 Meg DRAM as our principal product and as we've been migrating to shrink versions of that 16 Meg. While average price per Megabit increased 6% for the third quarter from last quarter, we did see pricing soften in the last month of the third quarter.

BALANCE SHEET. Our liquidity position has continued to improve as you would expect with the improving gross margins. Inventories increased approximately $45 million over the end of the second quarter. That now represents less than three weeks' production of finished goods.

CAPITAL EXPENDITURES. Capital spending for fiscal 1997 should come in somewhere between $600 and $625 million. We're currently estimating fiscal year 1998 capital spending at approximately $1 billion. Our capital programs continue to be focused on equipment upgrades in our Boise fabs and addition of test capacity necessary to handle the production increases we've previously mentioned.

BILL BALDWIN, SALES. Sales enjoyed a pretty good quarter despite the fact that spot business was very soft for most of the quarter. As we've indicated in previous conference calls, the spot market has accounted for as much as 40 to 50 percent of our quarterly sales, so we were scrambling to offset that business throughout the course of business in fiscal Q3. We do feel we were successful in that effort, evidenced by the fact that we raised the percentage of contract business to over 70% for the quarter. In fiscal Q4, our focus will be to increase the contract business even further in hopes that we can offset any continued softness that may persist in the spot market. Since we chose not to participate at normal levels in the spot market, we did see the 16 Meg finished goods inventory grow compared to the end of the second quarter. While those numbers are higher than Micron historically likes to maintain, our inventories are still in an acceptable range of less than three weeks. We feel that as long as we're able to quickly adapt and execute to the changing packages and configurations that the marketplace demands, we'll be in a good position to keep a reasonable inventory position.

16 MEG SDRAM. In May, we have had our first one million unit month output with the 16 Meg synchronous DRAM part. In the fiscal quarter, we shipped approximately 1.3 million units of synchronous DRAM. That should give you a good idea of the steep ramp that the product is on. For this fiscal quarter, we're anticipating somewhere around 10 million units of SDRAM, and of course, that number will be adjusted to whatever the market demands.

64 MEG DRAM. Units from the ramp of the 64 Meg DRAM are beginning to make their way through the line, so this will be the first quarter where we see significant shipments of that product. The current wafer starts on the 64 Meg part will result in approximately 300,000 units per month. We anticipate increasing the starts to approximately 700,000 units out per month by the end of the fiscal year if market conditions warrant.

FLASH. The flash products line is beginning to gain acceptance and recognition in the marketplace, and we are not offering 2, 4, and just recently began shipping our 8 Meg devices. Our backlog on flash continues to grow nicely, exceeding one million units for the first time in the history of that product.

SRAM. We have seen a nice uptick in activity over the past few months in both the 1 and 2 Meg devices. The ASPs on both devices have moved up significantly. Due to a good call by our marketing group early on in the quarter, we upped the starts to take advantage of that.

256 Mb DRAM. I am pleased to announced that Micron has recently sent its first 256 Mbit DRAM samples to two customers.

QUESTION AND ANSWER SESSION.

It's rare to get a three month contract for DRAM. Typically, contracts last between one week and one month.

Contract pricing is in the low $7 to mid to high $7 range. Spot business is at $7 or just below.

Wafer output increased on an average weekly basis. The goal will be to hold that as we continue though other shrinks and also as we increase synchronous DRAM and even some 64 Meg DRAM wafer output. We're going to shoot for 20% bit growth for the quarter and refine that guidance as we go forward though the quarter.

We should expect the majority of our production to get to 0.30 micron reference by the second half of 1998.

We'll see about the same time transition to 64 Mbit production that we've seen in previous generation transitions.

This will be the first quarter of any significant 64 Meg shipments, by that we mean a few hundred thousand units will go out the door in the quarter. The lag between the start of a wafer to out-the-door puts us in the 300,000 per month range. We are anticipating upping that to the 700,000 per month range by the end of the year.

We've got a couple of die transitions going on. We're moving away from a product that has a roughly 450 potential die per wafer. On the non-synchronous DRAM, that is transitioning to a part that's a little over 600 die per wafer. On the synchronous version, that gross die per wafer number is more like 650.

The industry is waiting for Intel to have the LX chipset out there and working well, which is when we'll see the big shift to synchronous DRAM when that happens.

We're all 8 inch wafer processing and substantially all of the processes are already on 0.35 microns and we've initiated progress on 0.30 microns.

For calendar 1997, the various market research firms are looking at 85% to 106% bit growth in DRAM.

Depreciation and amortization for the quarter was $122 million. We're looking at an increase of approximately $5 million per quarter for the next several quarters.

On SG&A, it's likely to increase about $10 million per quarter over the next few quarters.

About 70% of sales go out in the form of a module.

On the SRAM side, we are not currently on the PB2 program. That is a program that we're talking to them about and working toward.

We are just not getting on our first silicate through the line on the 60 cell process for SRAM.

We're shipping high volume on 2 and 4 Meg densities for flash. 2 Meg is where we've experienced the most success. We're very strong at the PC sales, particularly for BIOS. The two Meg ASP is just under $4 and the 4 Meg ASP is just under $6.

Average pricing for the 16 Meg during the quarter was about $8.25, blended across spot and contract.

Pricing for contracts is negotiated at the beginning of the month in almost all cases.

Inventory has not grown since the quarter's end. The 15 million unit estimate asked about by an analyst was "real close" in the words of Don Baldwin.

Relative to what we hear inventory-wise, there is probably 2-2.5 months worth of inventory out there. We know that Samsung was out on the west coast within the last week and they had talked about lower numbers. We can't verify that, we listen to the same people as the analysts and it's hard to know what the inventory levels are at some of the companies.

We traditionally have done 40-50% of our business in the spot market. We'd like to be able to count on that for business, but we're going to continue the trend of moving more to the contract OEM market. We do anticipate that the spot will rebound. It had been soft for an inordinate amount of time, but we're not going to count on it rebounding to help us out with the quarter.

STEVE APPLETON RESPONDS TO A QUESTION ON PRICING. We won't lower bit output just because spot prices are around $7. The increases that are showing up in bit output are reflective of an optimization of the manufacturing line, which is primarily directed at continuing to lower the cost. We aren't going out aggressively adding bit output in order to gain market share or in order to add square inches of silicon manufacturing other than optimizing manufacturing lines, which will get us to the lowest cost. I fact, we continue to see tremendous improvements in our cost of manufacturing. That's really the target that we have. It's not trying to get more capacity out, it's optimization of the line. By the way, I don't think the Japanese are adding that much capacity. The Koreans have obviously scaled back and aren't that aggressive. I think we've seen a big change in the aggressiveness. One thing we've made mention of before, was just because the price was a little bit better for one quarter versus another, most of these guys out there aren't making any money, even when the pricing environment was better, so they weren't incentivized to add that much capacity. I think Micron was an exception to the market in terms of our cost structure where we continue to have decent margins.

We're looking at 64 Meg prices probably in the $40 range. As far as gross margin goes, we've said publicly many times that we think the economies competing with the 16 Meg on a cost per bit basis to occur somewhere between the 0.25 and 0.30 micron range.

With the spot market price where it was at the end of the quarter, we didn't feel comfortable going into that market because it might have put pressure on the OEM contract pricing. We didn't feel the inventory pricing would degrade significantly. The inventory we currently have on hand is not overwhelming in terms of weeks' output. We're doing some things on the manufacturing side to get a better mix of configurations and package types. We're always cautious but we're optimistic that we'll have a good mix this quarter.

Very little of the inventory is the TSOP package. One of the things we'll be concentrating on with this quarter's bit growth is our TSOP capability.

The aftermarket, which is the memory modules upgrade companies, seems to be quite soft right now. I don't have an explanation for that -- historically we don't see that this time of year. Again, we're optimistic that that will rebound over the course of this quarter. On the big PC manufacturing side, at least the players that Micron is dealing with, their business is very strong and that's what resulted in our ability to increase the contract business as much as we did. We pulled a lot of extra business out of those customers over the quarter and we're anticipating some good increases yet again next quarter. I can't answer whether their business is that good or whether Micron's getting a bigger share of their business. It could be a combination of the two.

Wafer outs per week averaged approximately 15,500, all 8 inch. We've not yet pulled the trigger on Lehi. We've only announced the equipment and the necessary sight increases down there.

Q2 SG&A was much higher due to Micron Electronics advertising for the holiday season. That expense level is much more normal now.

Typically, the summer slows down a bit as our European counterparts go on vacation. Typically, you then see a fourth quarter rebound, particularly in September-October is when you see how activity is shaping up.

The shipment volume bit growth sequentially was lower than what we produced.

We have SRAM wafer starts for key customers, real specific business. The ASP on the 1 Meg has moved up from high $6 to the mid $7 range. On the 2 Meg, ASPs have moved up from mid $16 to the mid $18 range. It looks like we will see this trend continuing, which has moved a lot of people out of this business. Wafer starts have gone elsewhere and we're starting to see a little bit of a rebound.

* A Fool conference call synopsis represents an effort to highlight the salient points of a conference call and should not be taken as an authoritative accounting or transcription of the entire event. Note: Statements made by a company other than historical information may constitute forward-looking statements for which the company can claim protection under the Safe Harbor Act. Please consult the company's filings with the SEC for information on risk factors which might cause actual results to differ materially from the information contained in these forward-looking statements.