FOOL CONFERENCE CALL SYNOPSIS*
By Debora Tidwell (TMF Debit)

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

ALEXANDRIA, VA (September 23, 1997)/FOOLWIRE/ --- Micron Technology reported fourth quarter and year end results yesterday. In an extremely challenging pricing environment, the company was pleased with its results. For the fiscal year, net sales reached $3.5 billion, gross margin was 27.8% and net income was $332.2 million. That translates to fully diluted earnings per share of $1.53. For the fourth quarter, net sales were $946.2, gross margin was 30.4%, and net income was $72.1 million or $0.33 per share, quite a bit lower than the mean analyst consensus estimate of $0.46 per share.

STRONG CASH POSITION. Their financial condition is strong with cash and liquid investments of $988 million, inventories at $454 million, total assets of $4.85 billion, and total debt of $889 million. Micron is reported to be the industry low-cost producer for 16-meg DRAM.

EXPENSES. R&D ran $209 million in 1997 and they see that getting up to the $250 million level in 1998. R&D fluctuates depending on what next generation devices they are working on at any point in time. SG&A they were just over $100 million in the fourth quarter and it looks like a $10 million per quarter increase is a reasonable reference point for the next year. That increase is largely a function of the growth in the personal computer business which depends on advertising and a little bit on the diversification on the memory side. They expect capital expenditures to exceed $1 billion in FY 1998. They expect depreciation and amortization for fiscal 1998 to be around the $600 million level.

DRAM. Their emphasis on ongoing cost reductions is critical, as was evidenced again this year. Average selling prices for 16-meg DRAM fell from about $12 at the end of the fourth quarter last year to about $6.50 at the end of the fourth quarter this year. After experiencing rather stable pricing in their third quarter, 16-meg DRAM prices fell 20% in the fourth quarter. In spite of these declines, which would be catastrophic in most industries and have caused losses for many of their competitors, Micron's gross margin on semiconductor operations only declined 5% in the fourth quarter from 49% to 44%. About 85% of their sales were contract versus spot market this quarter. The spot market today is in the $5.20-$5.30 range and the contract pricing is 5-10% above that. The contract lengths typically range anywhere from a week to a month depending on the customer, which is pretty much the same as last quarter. Around 4-5% of their output goes to Micron computers. The average memory configuration per PC they have seen is moving toward 64 megs per box.

BIT GROWTH. Their megabits of production shipped into finished goods increased 12% in the fourth quarter. There was a little better than 30% increase in production through the fabs. They will need the test capacity at the Utah fab as soon as they can get it, but they have not yet planned to put equipment in. The building shells are finished but they don't have plans right now for equipment installation. They are still indicating low double-digit bit growth for the first quarter.

INVENTORY. Overall inventory levels increased about $78 million from the third quarter. Their PC component inventories comprised about one third of the increase as these operations geared up for the typically heavy direct channel buying season. Another third of the increase is semiconductor work in progress, principally in assembly and test where capacity is not yet in place to accommodate the faster-than-expected ramp of synchronous DRAM and TFFP packaging. Finished goods levels increased over third quarter relatively proportional to the growth in output. Fourth quarter is historically a difficult one from a unit demand standpoint and this quarter was no exception. Although they saw inventories increase slightly over Q3's numbers, given the market dynamics and increased bit production, the ending inventory was in line with previous quarters, remaining at less than 3 weeks of output on hand.

16-MEG SYNCH DRAM. Their ramp in conversion to the 16-meg synchronous DRAM continues to go very well and they are positioning that product as their largest unit volume device by the October/November timeframe. In fiscal Q4, they produced approximately 8 million synchronous 16-meg DRAM. They were at just over a million units in Q3, and their current projections for Q1 are in excess of 40% of their 16-meg output in synchronous DRAM.

64-MEG DRAM. Their 64-meg ramp continues to move forward with 64-meg wafers now ramped to approximately half a million units output per month going to 1 million units per month by the end of this calendar year. They now have their first 64-meg synch DRAM silicon out of the fab in recent days. That part looks solid on initial results and they feel comfortable the output will match up nicely to where they think the market demand for that part will be in 1998. With the addition of the 64-meg synch device, their ability to move aggressively to all 64-meg DRAM flavors appears to be on solid ground should market conditions warrant they do so. They are going to be able to do 64-meg DRAM at 0.25 micron without DPUV steppers; in other words, without requiring a lithography equipment upgrade. They are one of the few companies who will be able to do that and they consider it a competitive advantage.

GRAPHICS. On the graphics front, they continue to gain design wins for their synchronous graphics RAM product and are ramping from a current level of approximately half a million units per month of that device to approximately 1 million units per month by calendar year end.

FLASH. The flash lineup added the 8-meg boot block device to the product offering this quarter and they are now producing 2, 4, and 8-meg devices in volume. A key focus for the flash group this quarter will be to transfer their 0.3 micron flash technology process from R&D to production. They will be at 100% 0.3 micron by the end of the year. They expect to start converting to 0.25 micron some time around the beginning to middle of this fiscal year. They have been very successful with the flash offering at their traditional customer base and their goal is to expand that heavily into the telecom and cellular markets during fiscal 1998. The flash market was pretty flat from last quarter for them. They have had a lot of success with the PC and motherboard accounts and those are accounts where they have historically been strong with their memory offerings. The difficulty for them on the flash side now is penetrating those accounts where Micron hasn't had a really strong presence in the past. They don't see Intel's announced flash product impacting them significantly as it is still 2 years out.

SRAM. In the SRAM arena, Micron just finalized an agreement with IDT and Motorola to offer the zero bus turnaround synchronous SRAM. These devices are particularly attractive for communications and other applications that have random reads and writes. The device's advantage is that it eliminates the wait state normally necessary to turn the bus around from a read to a write or vice versa, thereby dramatically increasing the bandwidth without dramatically increasing the cost. They plan to sample that device in the fourth calendar quarter. In general, SRAM pricing and production levels have remained fairly constant. SRAM currently represents a little less than 1% of Micron's revenue.

IBM'S COPPER WIRE ANNOUNCEMENT. With regard to IBM's announcement that they have found a way to use copper for the circuits in chips, in the short term it is not going to have an impact on Micron. Micron is working on copper as well, as are many other manufacturers. They are also completely cross-licensed with IBM on semiconductors, so if it is cost effective to use copper, they will do it.

MICRON ELECTRONICS. They recently reduced their position in Micron Electronics to 2/3. Their strategic position on Micron Electronics is to maintain their ownership and try to leverage the work they do in semiconductors and displays there. With regard to the numbers reported, in the fourth quarter they reported the $0.33 fully diluted consolidated earnings per share. That is actually the same number that really results from their semiconductor operations. Their interest in Micron Electronics would equate to roughly $0.04 fully diluted earnings per share and they have an offsetting $0.04 of R&D in other operations such that the consolidated numbers match the semiconductor numbers and if they didn't have the offsetting R&D, Micron Electronics would be additive to earnings.

* 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.