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Micron Technology Inc. Reports Operating Results (10-Q)

January 10, 2012 | About:
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10qk

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Micron Technology Inc. (MU) filed Quarterly Report for the period ended 2011-12-01.

Micron Technology Inc. has a market cap of $7.2 billion; its shares were traded at around $7.29 with and P/S ratio of 0.8.

Highlight of Business Operations:

Total net sales for the first quarter of 2012 decreased 2% as compared to the fourth quarter of 2011 primarily due to declines in WSG and DSG sales, partially offset by increases in NSG and ESG sales. WSG sales for the first quarter of 2012 decreased 16% as compared to the fourth quarter of 2011 primarily due to declines in sales of wireless NOR products. DSG sales for the first quarter of 2012 decreased 4% as compared to the fourth quarter of 2011 primarily due to declines in average selling prices for DRAM products mitigated by increases in gigabit sales. NSG sales for the first quarter of 2012 increased 7% as compared to the fourth quarter of 2011 primarily due to increases in NAND Flash gigabit sales partially offset by declines in average selling prices. ESG sales for the first quarter of 2012 increased 8% as compared to the fourth quarter of 2011 primarily due to increases in the volume of embedded DRAM sales.

Total net sales for the first quarter of 2012 decreased 7% as compared to the first quarter of 2011 primarily due to a 27% decrease in DSG sales as a result of declines in DRAM average selling prices and a 27% decrease in WSG sales as a result of declines in sales of wireless NOR products. NSG sales for the first quarter of 2012 increased 36% as compared to the first quarter of 2011 primarily due to higher sales volumes partially offset by declines in average selling prices.

NSG sales through IM Flash to Intel were $261 million for the first quarter of 2012, $255 million for the fourth quarter of 2011 and $209 million for the first quarter of 2011. The ramp of production at IM Flash's wafer fabrication facility in Singapore increased our NAND Flash production in the first quarter of 2012 and we expect it will increase our NAND Flash production for the second quarter of 2012 as compared to the first quarter of 2012. Our share of the operating costs and supply of NAND Flash from IMFS adjusts in proportion to changes in our ownership share either 12 months or 8 months (depending on the status of IMFS' production ramp) from the date of the applicable ownership change. Accordingly, we anticipate that our share of IMFS costs and supply will increase from 71% as of December 1, 2011 to our current ownership interest in IMFS during the course of 2012. The following table presents the contributions and ownership percentages of IMFS:

The 27% decrease in WSG sales for the first quarter of 2012 as compared to the first quarter of 2011 was primarily due to declines in sales of wireless NOR Flash. The decreases in sales of NOR Flash products also contributed to a decline in WSG operating margin for the first quarter of 2012 as compared to the first quarter of 2011. In addition, WSG operating income for for the first quarter of 2011 included a $68 million gain from a license agreement with Samsung.

We have rights and obligations to purchase 50% of Inotera's wafer production capacity under the Inotera Supply Agreement. DRAM products acquired from Inotera accounted for 43% of our DRAM gigabit production for the first quarter of 2012 as compared to 37% for the fourth quarter of 2011 and 25% for the first quarter of 2011. The higher level of production from Inotera was achieved through their continued transition to our process technology. Products obtained from Inotera in 2011 were primarily DDR3 for the PC market. Our cost of wafers purchased under the Inotera Supply Agreement is based on a margin-sharing formula among Nanya, Inotera, and us. Under such formula, all parties' manufacturing costs related to wafers supplied by Inotera, as well as our and Nanya's revenue for the resale of products from wafers supplied by Inotera, are considered in determining costs for wafers acquired from Inotera. In the first quarter of 2012, the cost of wafers purchased from Inotera was significantly higher than our cost of wafers manufactured in our facilities. Because of significant market declines in the selling price of DRAM, Inotera incurred net losses of $521 million for the nine-month period ended September 30, 2011. Also, Inotera's current liabilities exceeded its current assets by $2.2 billion as of September 30, 2011, which exposes Inotera to liquidity risk. Inotera's management has developed plans to improve its liquidity. There can be no assurance that Inotera's plans to improve its liquidity will be successful.

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