Good afternoon. My name is Jason and I will be yourconference facilitator today. At this time, I would like to welcome everyone tothe Micron Technology first quarter 2008 financial release conference call.(Operator Instructions) It is now my pleasure to turn the floor over to yourhost, Kipp Bedard. Sir, you may begin your conference.

Thank you very much. I would like to also add my welcome toeveryone joining Micron Technology’s first quarter 2008 financial releaseconference call. On the call with me today is Mr. Steve Appleton, Chairman andCEO; and of course, Mike Sadler, Vice President of Worldwide Sales. Thisconference call, including audio and slides, is also available on Micron'swebsite at micron.com. If you have not had an opportunity to review the firstquarter 2008 financial press release, it is also available on our website atmicron.com. Our call will be approximately 60 minutes in length. There will bea taped audio replay of this call available later this evening at 5:30 p.m.Mountain Time. You can reach that by dialing 706-645-9291, with a confirmationcode of 27073959. This replay will run through Thursday, December 27, 2007 at5:30 p.m. Mountain Time. A webcast replay will be available on the company’swebsite until December 20, 2008. We encourage you to monitor our website at micron.comthroughout the quarter for the most current information on the company,including information on the various financial conferences that we will beattending. And with that, we’d please like you to note the followingsafe harbor statement: during the course of this meeting, we may makeprojections or other forward-looking statements regarding future events or thefuture financial performance of the company and the industry. We wish tocaution you that such statements are predictions and that actual events orresults may differ materially. We refer you to the documents the company fileson a consolidated basis from time to time with the Securities and ExchangeCommission, specifically the company’s most recent Form 10-K and Form 10-Q.These documents contain and identify important factors that could cause theactual results for the company on a consolidated basis to differ materiallyfrom those contained in our projections or forward-looking statements. Thesecertain factors can be found in the investor relations section of Micron'swebsite. Although we believe that the expectations reflected in theforward-looking statements are reasonable, we cannot guarantee future results,levels of activity, performance, or achievement. We are under no duty to updateany of the forward-looking statements after the date of the presentation toconform these statements to actual results. I’d like to now turn the call over to Mr. Steve Appleton.Steve.

Thanks, Kipp. Let me just give a quick update on the CFOscenario. I think most people know that months ago, we announced that BillStover would be leaving the company and in fact, he did leave at the end oflast month, which coincided with the end of our quarter and I am interim CFO atthis time. However, I fully expect that this will be the onlyconference call that I am the interim CFO and that we have been in the processof reviewing both internal and external candidates and believe that we’ll getthat wrapped up this quarter. So in the interim, I’ll cover some of the financialmaterial. For those that did not see the release, we ended up with revenues ofabout $1.53 billion and I’ll note that that was about 7% growth over lastquarter. Mike will cover it later but of course both DRAM and NAND were undersignificant price pressure for the quarter and we did report a loss of $262million. I’ll also note that there was a $62 million in our re-charge to COGSfor finished goods that was in that number. On the manufacturing cost side, we did have good news. The300-millimeter ramps at Lehigh and Singapore continued to make really strongprogress --

Sir, are you still looking for Lithium Motors, correct?

I think we have somebody on the call that’s talking on someother lines. Not hear with us in the room but on a different line, so let mejust continue. So on the manufacturing cost side, as I said, the 300-millimeterramps at Lehigh and Singapore made pretty good progress and just to note thatthe DRAM costs were down about 10% and the NAND costs were down really kind ofmid-double-digits quarter over quarter and we think that we’ll be able tocontinue that trend as we’ve stated before. Also good news, on the operating expense side, we have notedthat we’ve been working on that pretty diligently and in fact, if you look atthe data, in 2007 we averaged about 25% for operating expenses as a percent ofrevenue. In fact, in Q1, we got that down just below 18%, 17.9%. And if youbreak that out between SG&A and R&D, our Q1 dropped to $120 millionfrom $143 million and our R&D dropped in Q1 to $163 million from $184million. Now, a couple of notes on this; the SG&A, just becauseof some litigation costs and so forth we think will probably be in the mid-120sfor this quarter coming up and on the R&D, you should expect for it to beabout the same as it was this quarter, as we move through the holidays andobviously we’ve got a few other activities that are going on in the quarter. So we think net net, pretty good. Obviously the market hasbeen under a lot of pressure from pricing but in terms of the objectives thatwe set out to accomplish on the operating expense line and the cost line, wefeel pretty good about it. Switching over to really the CapEx and the balance sheet,our capital expenditures are still consistent with what we have said before. Weexpect it to be about $2.5 billion for fiscal ’08. It’s also probably worthnoting that that capital is pretty front-end loaded. We had about $900 millionthat we spent in this first quarter. Obviously the vast majority of our CapExcontinues to go to 300-millimeter. I’ll also note that we have, we still haveover $2 billion in cash and just to help people understand the cash position ofthe company, as I said we have over $2 billion in cash. We’ve spent about $900million of the $2.5 billion that we expect to spend already in this quarter,and it looks like cash flow from operations for fiscal ’08 will be between $1.5billion and $2 billion as well, so I think that can give you a pretty good ideaof where we sit on cash and we think we’re in good shape. So with that, I am going to turn it over to Mike Sadler tomake some commentary on sales and the market.

Thanks, Steve. We had another solid sequential growthquarter with megabit shipments of DRAM and NAND up approximately 25% and 60%respectively and imaging units up about 15% quarter over quarter. In fact,despite the unprecedented market price pressure, we managed to achieve fiscalQ1 revenue growth of about 7% on a sequential basis. We can look primarily to the diversified DRAM productportfolio for insulating us somewhat from the ASP declines observed in the purecommodity market. As an illustration, the DDR2 spot market price declined 45%from the midpoint of our fiscal Q4 to the midpoint of fiscal Q1, while theaggregate average selling price per megabit for our basket of DRAM productsdeclined by only 20% in that same period. This tough market environment is supply driven and primarilya result of capacity expansions occurring industry wide from 2005 through 2007.Demand for our products continues to be quite strong. In fact, the primarymarkets driving demand for our memory and imaging devices, the PC and mobilephone markets, are experiencing extraordinary growth. Each of these markets will grow units between 12% to 15% in2007 and most market researchers are pegging the compound annual growth ratesin the range of 12% to 15% for each of these markets over the next five years. Independent of the market environment, our technologydevelopment and deployment moves ahead and we recently rolled out some excitingnew technologies and products. We showed initial silicon of the one-gigabitDDR2 DRAM device on our advanced 68-nanometer process. This is an approximately25% die size reduction from our already industry-leading one-gigabit chip onthe 78-nanometer process. We anticipate this process moving to volumeproduction at our Singapore fabrication facility some time in mid-2008 and itwill serve as a platform for continued aggressive cost reduction on a varietyof other DRAM products. In the NAND space, rollout of our 50-nanometer process inthe Virginia and Utah fabs…

Thanks, Mike and as Mike alluded to, we’d like to now takequestions from callers. And just a reminder, if you are using a speaker phone,please pick up the handset when asking a question so we can hear you clearly.With that, we’d like to open up the line.

Our first question comes from the line of Jim Covello.

Good afternoon. Appreciate you taking the time today. Thequestion is really on the supply side -- how concerned are you that Samsungjust seems so intent on keeping this market in excess supply to try and hurtsome of the marginal players in Taiwan, let’s say, that it could be a long timebefore this thing gets a lot better when you have maybe somebody acting alittle irrationally like that?

It’s probably hard for us to comment on Samsung’smotivations and what they are trying to do, but if you look at the data inaggregate in terms of the investment going into the sector, in particularly inDRAM, I think you’d look at it as -- and we think that the output as well, it’sprobably peaking in this timeframe. And whether it’s plus or minus a quarter isalways hard for us to know, but the equipment guys will tell you the samething, that the CapEx is coming down in aggregate for the industry. And then infact, we’re feeling the effects of I think what everybody would acknowledge wasa pretty big expansion year in capacity in ’07. I think there will be weaker players that are probablyvulnerable to something happening in the industry but we’ll just have to seehow that plays out as we move through ’08.

Okay, and then in terms of what you guys could do, there’sthings you can control and things you can’t and some of the things that you hadroughly alluded to maybe a couple of calls ago was -- and again, you didn’t saythis so I don’t want to put words in your mouth, but partnerships or jointventure kind of arrangements that might help to combine some people’s bestdesigns with some other people’s capacities. Any update on thoughts aroundthat? Any luck making progress on that with your discussions with others in theindustry?

First of all, we did that in the NAND business, so I assumeyou are talking about the DRAM business?

Correct.

And the DRAM front, clearly Micron has been a company thathas taken advantage of opportunities when the market has been extremely weakand this is really the first collapse that you’ve seen in the industry reallyprobably since we took Toshiba out of the mainstream DRAM business. So we are continuing to look at what opportunities might beout there and if they surface, then of course we are interested. In addition tothat, I think you made reference to it, we are trying to look at our model. Ifyou back up five years ago, only one of the five primary developers of thetechnology actually partnered with anybody to have their product produced andnow there are really three out of the five doing it, primarily Samsung andMicron not doing it. So we’ve got to look at that model and see if there issome benefit for us to extract out of that, but really we don’t have anythingto announce today. We’re just continuing to look at it and see if it makessense for us.

Great. Thank you and good luck.

Our next question comes from the line of John Pitzer.

Thanks. This is Amit Saraf calling in for John. First, I wasjust wondering if you could clarify our CapEx. I think I read in the pressrelease, it said $2.5 billion to $3 billion, and I recall earlier you talkingmore about just $2.5 billion. Has there been any change to your CapEx guidancefor the next fiscal year and how would it break down between NAND and DRAM?

Well, we haven’t really changed any guidance. If youremember, if you go back up a quarter or two ago, I really said we thought itwould be between $2 billion and $3 billion. I think in the press release, we’rejust trying to narrow the range for you, if you will. But let me just say a caveat, that we look at this market aswe go throughout the year and our best guess right now is in this $2.5 billionrange and realistically, it could move around a few hundred million on eitherside, depending on what we decided to do as we moved towards the end of ’08.

And can you just break that down between NAND and DRAM? Howdo you see that split and how does that compare to fiscal year ’08?

Well, fiscal year --

Or fiscal year ’07, sorry.

Yeah, fiscal year ’07 I think you will -- I don’t have thenumbers right in front of me and maybe Kipp can get them -- clearly ’07 wasdominated by NAND because we had the 300-millimeter equipment install in Utah.I think you will see that mitigated somewhat in ’08, although just keep in mindwe are finishing out the ramp, if you will, of Utah, and so there is somecarryover from there. And then the new fab is IMFS, which is really underconstruction for shellnow, so as we -- and we have been optimizing the output at a couple of thefacilities, particularly look at Virginia and I think we’ve been looking atCapEx there for additional DRAM to come out of that facility. Soyou might see a trend back a little bit towards DRAM but frankly, I think stillthe most of it that is showing up right now will be the finish out of Utah andsome of the shell construction in Singapore.

Okay, and then just on the demand side for DRAM, you mentionedstrength in the PC and mobile market. Can you talk about the PC marketspecifically going in 1Q and then also comment a little on the Vista uptake --where are we in that cycle and do you see that accelerating in the near-term?

Before Mike answers that, I did want to make one other notehere -- our tech facility, Tech Semi in Singapore is in the middle of a300-millimeter conversion, so that’s one of the reasons that you’ll see itshift back, is because they are in their 300-millimeter ramp as we speak rightnow and obviously installing CapEx and ramping. Go ahead, Mike.

Sure. On our views on the PC market through dialoging withour customers are, as you are fully aware, notebook market continues to be onfire in terms of growth and our customers are projecting a similar type ofscenario unfolding as we roll through the holiday period and into the new year.And that’s going to be the primary growth driver from a unit standpoint. In terms of the down stream demand that’s creating for DRAM,a sampling of some of our larger customers, which are representative of thelargest DRAM consumers in the world, indicating calendar Q1 DRAM demand upabout 4% relative to calendar Q4 and that would be a range from 0% to about 8%or 9%, depending on the particular customer. So a pretty healthy calendar Q1 iswhat is being projected from a DRAM consumption standpoint. You asked a question about Vista. To date, our view of Vistaand again, getting this from our customers, is that it’s primarily been aconsumer product. There is going to be a rollout of a service pack for Vista inthe first quarter, which should make the product more attractive tocorporations. And this is really beyond our area of expertise, so I’d be hesitantto comment, to editorialize too much on it but we should expect to see somekind of demand kicker in the corporate area for Vista as we roll throughcalendar Q1. Generally speaking on the content side, somewhatsurprisingly, if you just follow the statistics, the memory content per box onthe PC side has expanded but not extraordinarily and there has been not atremendous amount of demand elasticity based on the pricing environment. Some of our customers have experienced some concern aboutthe direction of DRAM pricing going forward and the predictability of it and Iwould share those same kinds of concerns, concerns and questions. And that’swhy I think they’ve been a little bit gun-shy in terms of cranking up DRAMcontent significantly. So I think as soon as they get a feeling that pricing isgoing to be relatively predictable, if they get that feeling, I think they’llfeel a little bit more bullish about cranking up the content. But as it istoday, we are hanging around 1.5 gigabytes per system and haven’t seen anythingextraordinary in terms of big content moves up that you would naturally expect,given the price degradation that we’ve seen.

Sounds good. Thank you.

Our next question comes from the line of David Wong.

Thank you very much. Can you give us some idea with yourcurrent CapEx plans what sort of bit production growth you expect fiscal ’08over fiscal ’07 for NAND and for DRAM?

Well, first of all, our bit production growth, we have beenessentially on the DRAM side, I think we’ve been saying that it’s going to bein the mid/low double-digits, somewhere in that neighborhood. And then on theNAND side, we think it’s kind of quarter over quarter running in this 40%range. But I need to make the caveat that both tech and the300-millimeter conversion and Utah and their ramp, they are always slightlyunpredictable in the exact timing. So sometimes they move higher through theyields in the ramps than others. But in general, I think you could expect thatquarter over quarter through fiscal ’08.

Thank you.

Our next question comes from the line of Kevin Vassily.

Thanks for taking my call. Two quick questions; one, did youhave to write down any of your NAND inventory? And then a second question onNAND; you grew bits about 60% in the quarter and I think that was about 20percentage points higher than what you alluded to on your last call. Can youcomment on what drove that delta?

On the first question about the NRV, we had NRV on both NANDand DRAM. We did not have one on imaging. And in terms of the bit growth, it’s just gone -- I think ingeneral, we’ve been pleasantly surprised and we’ve said that for severalquarters now that both the ramp schedule on the 300-millimeter and the yieldimprovements have been ahead of plan, and that’s primarily driving the greaterbit growth.

Did yield or the ramp drive the greater proportion of thebit growth?

I would say it’s been the yield that’s driven the greaterproportion to this point.

Great. Thank you.

Our next question comes from the line of Bob [Cohaverti].

Just a question -- your Lexar business, I know you don’tgive specific guidance, but I know you can take advantage of non-captivecapacity. Did it grow more than 60% or less than 60% of the overall NANDbusiness?

I’m not sure I understand the question, Bob, but let me saythat -- let me just first give a response and then you can tell me if we didn’tget to it or not. The percentage of supply that is coming internally as opposedto externally into Lexar, first of all, has been growing pretty steadily. So Ithink that first of all, ask it in that context, we’ve been supply more andmore internally than we have externally into that business for obvious reasons.I mean, we’re a bigger producer of it today and their business is actually,from our perspective, doing pretty well. You know, it’s probably worth sayingthat again, as I said on the last call, we’ve been pretty pleased with Lexar andit’s meeting the objectives that we had. Go ahead, to break down your question if there’s somethingfurther.

No, just curious. You are obviously supplying more and moreinternally, you get internal production, but I am pretty sure you have somesupply arrangement for Lexar as well, so you can --

Oh, yeah, absolutely.

You can [inaudible] a little bit by taking some non-captivesupply into Lexar as well, so I was just kind of curious if Lexar is takingadvantage of both your internal organic bit growth plus some non-captivecontracts as well.

Well, in terms of -- yeah, I think the answer is yes, theyare. I don’t know the breakout between which one was greater they are trying totake advantage of. They clearly still have supply from the outside, which issubstantial. And I think they’ll continue to do that. I mean, that’s the modelthat we want to run with them, is that they have dual supply sources becauseobviously we have a customer base outside of Lexar as well that we have toservice and we don’t want that being too high a percentage of what we do.

Fair enough. I look at your DRAM ASP, pretty good job interms of avoiding some of the declines in the commodity space. Do you thinkthere is an opportunity to do that in NAND as well? I mean, if you look at SLC,spot pricing might not be 100% accurate but it’s held up reasonably wellcompared to MLC. Is there an opportunity to mix more specialized NAND in thereto keep your ASPs a little bit more stable?

Well, Mike can jump in here too. I think you have to look atour NAND business in two different ways. One is the component supply business,which I don’t think NAND today has differentiated enough to allow us to get apremium over the other producers. Remember, when you think about the NANDproducers and their capabilities and their product portfolio, we’re prettysimilar. I mean, these are the big guys as we think of in the memory businesslike us. They are not smaller companies that maybe don’t have the resources todo the portfolio that we have, and I think that’s in general pretty tough forus to differentiate today. Now having said that, by the way, the product mix itself,SLC versus MLC and there are differences in price and premiums along thoselines, the fact that we’re able to benefit from some of that I don’t think issubstantially different from the other players that we’re competing againstbeing able to benefit from that as well, because they both have thoseportfolios. The other part of our business though where I think we areseeing a benefit today and maybe over a couple of the others is, as you alreadynoted, Lexar for us. We’re in the retail channel. If you look at the reset pricingin the retail channel, it doesn’t really coincide with what happens in thecomponent business, and for a variety of reasons. The fact that we are able to move a lot of product throughthat channel I think has actually been a positive for us as opposed to maybeothers that didn’t have that channel directly. In fact, I think it’s -- we said this last quarter and we’llsay it again -- that the margin for Lexar has been positive for us and we likethe story that it’s playing for us right now.

Okay. Thanks, guys. Appreciate it.

Our next question comes from the line of Krishna Shankar.

What is your outlook for NAND demand going into the firstquarter of 2008? Can you talk about NAND bit demand trends going into Q1?

I don’t have nearly as good a read on the NAND demand,primarily because it’s just not nearly as mature a market, as I do on the DRAMdemand. But my expectations are that NAND demand in aggregate in calendar Q1 willbe down from calendar Q4 because of the strong consumer tie to the MP3 marketand the flash card market and the digital still camera market and so forth. SoI would expect that on an absolute basis, demand is going to be down incalendar Q1 relative to calendar Q4.

Okay, and the number that Steve referred to, low to midsingle digit DRAM, that’s bit production on a quarterly basis for DRAM and 40%or so for NAND. Is that right?

Very similar to what we’ve been posting, around 10% ongoingin quarterly formats for DRAM and yes, we are going to average around 40% overthe next several quarters in NAND.

And finally, can you give us an update on your restructuringand strategic efforts? You had mentioned that in previous conference calls interms of looking at options for the CMOS imaging business.

Yeah, we -- I’m sorry, I’ve already commented on theoperating expense line and some of the restructuring there. With respect toimaging, as I said the last time, we don’t have any plans to changemanufacturing the product. We’ve been looking at ways -- really, is there someother partnership that’s a better way to take that product to market after it’sbeen produced, so to speak, and we’re just still in the middle of trying towork through that and figure out what the best path is.

Thank you.

Our next question comes from the line of Atiq Malik.

Thanks for taking my question and nice job on the operatingexpense side. You comments on CapEx, you mentioned that your CapEx is going tobe front end loaded. If I hear the Korean guys, I think they are alsopostulating that their CapEx is going to be front end loaded and so it seemslike all guys are behaving the same way. They are trying to add capacity in thefirst half for a better second half. Wouldn’t that imply that the supply willget worse from here?

Well, it’s hard for us to know the supply number. And by theway, when I say front-end loaded, that means it’s a quarter that we alreadyended, so the $900 million that I referenced was in our Q1. The others, as theymove throughout ’08, I don’t know for sure although I’ve also heard a lot ofcommentary about push-outs and cut-backs, but -- so it’s hard for us to knowwhat they are doing. For us, our front-end loaded has already happened orhappening as we speak.

I understand. And then a question on your -- at yourshareholder meeting, you mentioned that you are getting close to announcing thelocation of a 300-millimeter DRAM fab. And going back to Jim Covello’s questionon partnerships and consolidation, wouldn’t that imply that you are not lookingat partnerships too seriously if you are thinking about your next DRAM fab?

No, not at all. In fact, if you think about the dynamicsthat we have before, I think that we could take advantage of both, actually,and have it work just fine for us. The internal decision is of course we haveinfrastructure in various places and we can look at greenfields and so forthbut in addition to that, you know, if we do it in partnership, that partnershipwill obviously have some capacity associated with it but it’s also drivenaround trying to see if there is a better cost model in the development side,which obviously is a direct benefit back to us if we are able to distributethose costs over not only more capacity but among a couple of us in terms ofthe true development of it. So they are both -- both of those are still in play and weare still looking at them pretty hard.

And one last one on the specialized memory pricingenvironment; most memory makers are planning to use their obsolete 200-millimeterfabs for specialized memory products. How would that impact the pricingenvironment in this market going forward?

An unnatural growth of supply would likely have the effectof putting some supply pressure in place in the marketplace, although franklywe’ve been hearing a lot of this rhetoric over the last couple of years aboutother DRAM suppliers trying to follow our model of having a more diversifiedproduct portfolio and pricing has been relatively stable in the low power DRAMarea and the legacy DRAM area. I think that’s primarily because the end products that theseDRAMs are going into are -- the DRAM bill of material cost is not tremendouslysignificant in terms of an overall cost driver and as a result, there is notnearly as much price pressure and there is quite a bit more sensitivity towardsreliability and quality of the devices as opposed to trying to save a nickelhere and there. And as a result, I feel like we are in a pretty secure positionthere.

Thank you.

Our next question comes from the line of Hans Mosesmann.

Thanks. A clarification on the growth for -- on the DRAMfront of 0% to 8%, is that for the overall PC DRAM market? And how does thatrelate for seasonality? Thanks.

That takes into account the seasonality and that is for the-- basically a sampling of our computing customers, so that would encompassnotebooks, desktops, workstations, and servers. And it does take into accountthe seasonality, so that’s calendar Q1 over calendar Q4.

So you’re saying it’s seasonal? That that is normalseasonality, more or less?

Normal seasonality in terms of demand, DRAM demand in the PCenvironment I believe would be flat to down about 5% and what I’m telling youis it’s slightly better than that, flat to up about 8%.

Okay, and a follow-up; if ASPs hold at current levels,whatever they may be today here on the 20th of December, what would they doquarter over quarter on the DRAM front?

If DRAM ASPs -- keep in mind we are three weeks into ourfiscal Q2 and if our average selling price for the balance of the quarterremains flat, our DRAM ASP quarter over quarter would be down about 10% to 15%.NAND, by the way -- you didn’t ask, but I’ll throw it out there anyway -- theNAND flash prices would be down -- this would be NAND on trade sales basisonly, so our sales directly to customers, they would be down about 40% quarterover quarter if they stayed flat from here.

Thank you.

Our next question comes from the line of John Lau. John Lau - Jefferies& Company: Thanks. I know -- I may have missed it but I was wonderingif you can give a quick breakdown on the revenues in the different productlines, and Steve, what do you think your long-term goal is for DRAM as apercentage of total sales? Thank you.

I can do a little bit of that for you, John, up front; coreDRAM ran in the 30 -- mid to high 30 range for part of revenues. Specialty DRAMwas up into -- let’s see, 20s. Imaging was around 11% and NAND for the firsttime cracked over 40%. John Lau - Jefferies& Company: And when you said 35% of revenues for the core DRAM, whatdid you -- what was the commentary that you made for the 28%, I’m sorry?

Mid-20s was specialty DRAM. John Lau - Jefferies& Company: Mid-20s was specialty -- and a long-term goal for DRAM?

Well, that’s going to be more dependent on marketconsiderations. I think Steve and the team has done a pretty good job ofgetting us in a situation where we can move capacity around to take advantageof certain market opportunities. Like for example, right now we are puttingmore wafers back into imaging and specialty DRAM so specifically in Q2, youmight see more of a flattish production bit number even though we are going toaverage more like 10. So we are going to give you some general ranges here andjust expect us to move capacity to where it’s most advantageous for us.

Let me just add some commentary to what Kipp said. I thinkthe reason we don’t have a specific number is because we are going to move itaround dependent upon what the market is doing, but in general by the time weget into probably late ’08, we’ll have the ability to dial back and forth. ButI think the way to think about it is we could probably go 60-40 either way. John Lau - Jefferies& Company: That’s a very interesting comment, Steve. I was wonderingjust as a follow-up to try to put a finer point on it, when you talk about yourflexibility and your swing capacity, how long would it take for you to makethose adjustments? Is that something that can occur within six months or wouldit take a year or short than that to kind of react to those market conditions?

At least our historical experience has been around fourmonths. Now, let me just add that on the flash side, of course, we have apartner and typically we are motivated in the same direction because one willbe stronger versus the other and when that happens, then we both tend to wantto move in the same direction. But you’ve got to go through that processbecause they are our partners and we have to work through it. It could maybetake slightly longer but in general, I think you’d see it all happen withinprobably that four month timeframe. John Lau - Jefferies& Company: Great. Thank you very much.

Our next question comes from the line of Bill [Naserlind].Please go ahead, sir. Your line is open.

My apologies. That was a mute faux pas. Relative to thesolid state drive business that you announced here recently, would you pleasediscuss what you view to be your opportunities in that market and the hurdlesthat are specific to Micron being successful in that market?

Sure. I’m going to generalize here, Bill, but we see twoprimary opportunities for us. One would be in the server space and the keyparameters there for our success are going to be performance and frankly justtime. It’s going to take some time for our end customers in that space to --servers and storage, basically, but it’s going to take time for our customersto understand the technology and ultimately integrate it into their systems tosupplement the hard disk drives and in some cases, even replace hard diskdrives. So it’s primarily time. And the big motivator there for solid state drivepenetration is primarily performance advantages relative to the currentsolution. The other end of the spectrum is going to be in the notebookcomputer area and of course, the primary advantage there, there are a varietyof advantages there but it’s performance, power consumption, weight,reliability and durability. And the primary inhibitor there, if you will, isgoing to be cost per gigabyte of storage. And as we move through 50-nanometerand 35-nanometer, we are addressing that challenge as well. Either of those markets realistically, we’re looking at theend of next year or 2009 before either of them become real significant in termsof revenue drivers for us.

With the decline in NAND pricing that we’ve experienced,what is the premium that’s still in place, relative to a traditional hard diskdrive?

I’m sorry, the selling price premium today?

Yes.

That’s a good question. If I’m not mistaken -- I’m not anexpert on hard disk drives, by the way, but I believe they are selling forabout $1 a gigabyte, ballpark. And I think solid state drives are probablytoday selling for about $5 to $6 per gigabyte. So it’s a pretty significant premiumtoday. And if that $1 per gigabyte is a magical figure, it’s goingto take us quite a while before we can get our costs down to be able toparticipate at that price level. But in any rate, there is still a hugedifferential in terms of the retail selling price of a solid state drive versusa traditional hard drive.

Thank you.

Our next question comes from the line of Glen Yeung.

Thanks. I understand that you have this strategy of movingproduction 200-millimeter for specialty and for image sensors, but to whatextent is decommissioning some of your 200-millimeter fabs part of your near tomedium term strategy?

Decommissioning is a relative term. Remember that there isalso a process that we go through where we might convert, so when we saydecommission, it could be a conversion or it could be a shut-down, depending onthe scenario. A good example would be in Singapore right now, we’re actuallyconverting from 200 to 300 and it’s going pretty well. The facilities that we have that are still running200-millimeter, which are primarily Japan and Italy, which Italy is dominatedby imaging and then some in Boise, right now we are using all that capacity. Sothe question is when do you think -- and we’re not using that capacity foranything significant on the core memory piece. All of our core memory in theNAND is all written on 300-millimeter and we think is good technology andpretty cost-effective. So for us, it might be a slightly different scenario. Wehave heard reports and we’ve read reports out there in the industry where thereare several companies who have been running core DRAM on 200-millimeter andthey are talking about shutting that down here in the next 30 to 90 days. And Iwould expect that to continue for those operations where they do run corememory on 200-millimeter. For us, it’s a little different scenario. I think the moreimportant issue for us is trying to understand the demand profile for thespecialty memory over a longer period of time, because obviously it has longlegs on it. And I don’t think, by the way, that you are talking about anythingin the next year for us. I think you are talking about something further out asto we either have to convert it or we will obviously take it offline. But rightnow, it’s all being consumed with non-core memory.

I don’t know if you can comment on this or not, but you didmention that you think some of your competitors may be taking 200-millimeteroffline. What’s your sense as to the impact of that on the supply/demandbalance in ’08? Can it meaningfully help us? Is there enough there that it canhelp us out?

That’s hard for me to know. My instincts tell me it’s notthat much. I think it’s worth noting that if you look at the waferdifferential, or if you look at how the wafers break out today in silicon, notin bits, but if you look at it in silicon, about 75% of the worldwide DRAMmarket is made on 300-millimeter today and about 25% is made on 200-millimeter,so it’s still a significant amount of capacity in silicon. But if you actually broke that down to bits, it wouldprobably be something more like 85-15, and when you look at what’s happeningaround the world on 300-millimeter and some of the expansion that’s alreadybeen mentioned, I think primarily the greatest impact will just be a pull backon 300-millimeter expansion as opposed to taking some of this more obsolete200-millimeter offline.

And then Mike, you made a point that you thought DRAM demandin the first quarter was going to be above seasonal and you also suggested thatthe content per box wouldn’t meaningfully improve until there was stabilizationin price, and suggesting that either you either believe PC demand is going tobe better or you think that content is going to higher, i.e. price willstabilize. Any thoughts as to which you are really pointing to?

Just to clarify, we’re still -- we’ve seen continued contentgrowth through 2007 and we’re expecting to see content growth grow through 2008as more applications come to the PC and we get more Vista uptake and so forth. My comment was that we didn’t get a big demand priceelasticity kicker that you would have expected with an 85% price decline overthe course of the year. I think that’s primarily because the customers areaware that the current market price for DRAM is probably not going to be atthat low a range for some time into the future, so they can’t really predictit. We would expect to see strong PC unit growth next year,again in the range of 12% to 15%, and continued content growth but I do believeonce prices become a little bit more predictable from the customer’sstandpoint, they are going to feel comfortable about really cranking up DRAMcontent more significantly than they have in the past year.

What is your sense as to where inventories are today, eitherat OEMs or the -- and the module makers? What’s your sense as to where westand?

Sure. On the OEM side, I don’t believe, at least with thecustomers we are working with, there’s virtually no inventory and there’d be nomotivation for them to take on any inventory because we do such a good job ofservicing their needs by storing product at their factory. From an OEM standpoint, of course I can only speak to ourown inventories. On the DRAM side, we’ve got about three to four weeks worth ofsales in our own warehouses and our own customer hub. And in terms of thechannel inventory, I really don’t have tremendous visibility there, although wecontinue to move bits and pieces of our output into the channel every day. So my perception would be there is probably not too muchinventory in the channel either.

Okay, last question then is we’ve now just this pastnegotiation seen the contract price get down to about the level where spotprices are and we’ve seen spot pricing the last couple of weeks not look asvolatile as it has been. What’s your sense here as to whether or not we may beat least seeing a stemming of the decline that we’ve seen over the course ofthe last really 12 months?

Boy, that’s really tough to predict. I think, as youmentioned, we’ve seen -- we did see prices decline, our contract prices declinemid-December slightly, so that the rate of decline has slowed but we aregetting so low here that you would naturally expect that anyway. It’s reallydifficult for me to predict what’s going to happen over the course of the nextcouple of months with respect to pricing but it does feel like things might beslowing down, at least in terms of the rate of decline.

Thanks.

Our next question comes from the line of Doug Freedman.

Steve, if you could temporarily put on your CFO hat for me,you made a comment in your preamble about operating cash flow for next year.Can you offer some guidance on what you are looking for for depreciation, anupdate there? And just trying to do some calculations on how you get to youroperating cash flow expectations. Is there --

Depreciation we expect to be around $2.2 billion.

And is there any -- you know, there’s been some talk aboutturning off some of your 200 tools or transitioning. Is there some cash thatyou are expecting to receive from 200-mil tools?

Actually, we have both -- because of some technology we cameup in the testing arena, and because we have ongoing equipment sale from200-millimeter that is or isn’t being used or had been pulled out. And everyquarter we have typically a gain from the sale of some of that equipment. Andlast quarter I think it was probably in the neighborhood of something like $15million. I think that’s just kind of a continuum. Now, the one caveat that I’ll say to that is in the eventthat we decide to take a facility and sell the 200-millimeter tools in it, it turnsout that the demand for 200-millimeter tools right now in the world is reallypretty strong, especially for the alignments that we have, which are consideredpretty advanced for 200-millimeter. So we could easily generate quite a bit of cash from selling200-millimeter tools if we chose to do that.

All right, great. Could you spend a little time talkingabout the early adoption of SSDs and what that’s going to do? I was at theevent where you launched the products and most of them I believe were SLC basedproducts. My understanding is your output of SLC right now is very low. Is thatsomething that with the adoption of these drives, we’re going to see that mixstart shifting again? And if you could offer a little commentary onprofitability between the difference of MLC and SLC.

Sure. I’ll try and address that. First of all, with respectto the high volume notebook market, we believe that ultimately it’s going to beMLC technology which really drives a significant penetration in the notebookmarket, primarily because of the pricing demands, or the cost sensitivity ofthat market. And we are planning to introduce, I don’t have the roadmap at myfingertips but we are planning to introduce MLC based drives fairly early inour ramp here as we move through next year and into 2009. With respect to the SLC mix in our product portfolio, ourearly penetration in solid state drives is going to be 100% SLC, so to theextent that we are able to drive some meaningful volumes heading out of nextyear into 2009, yes, it would be reasonable to expect that for that applicationalone, our mix of SLC products would increase somewhat. It’s probably also worth noting that there are a variety ofother applications. None of them as significant as solid state drives but thereare a variety of other applications that require SLC performance, which we arecurrently supporting right now from our existing output. In terms of margins, I don’t have the specifics at myfingertips but certainly our margins on SLC today are quite a bit higher thanthey are on MLC and again, that’s primarily because the applications aresomewhat niche in nature and require that increased performance from SLC.

All right, terrific. Just two more real quick ones; waferstarts, what are we running as far as equivalents right now and what’s theforecast going forward? How much of the bit growth is coming from new starts?

Doug, we’re running [inaudible] in terms of outs for us, ofcourse; in 200-millimeter equivalents, we were up this quarter pretty nicely.In Q4, we ran around mid 90,000 outs a week and we are running 108,000, 109,000outs a week for fiscal Q1. And that will grow a percent or so in fiscal Q2.

Okay, and then my last one for you guys, any idea what youare looking at -- I mean, we’ve seen some pretty rough road here as far aspricing is concerned. But some of it’s been driven by pretty good bit costreductions by the leaders in the industry. What are you looking at as far asnext year as far as what potential do we have with the roadmaps that you haveto reduce the costs going forward on both DDR and the MLC product lines?

Well, we actually think we probably have more runway aheadof us than some others, but we are coming from a position in particular on NANDwhere we’ve been ramping and gaining scale and getting yield to where we thinkthat it’s advantageous for us. So on that front, we’ve been doing pretty well. On the DRAM front, we’ve said I think for some time now wethink our technology has resulted in the smallest die in the industry by virtueof we really are in really high volume production on 78-nanometer today andwe’ve had [a success for a] long, long time. If you look at the data, it’spretty good for us. So we don’t see any reason we won’t continue to drivepretty strong cost reductions throughout ’08. Now, I think part of your question was also along boy, thisindustry looks pretty tough right now and what do you think people are doing. Ithink we can improve our results for the things that we can control movingforward and we are starting to demonstrate that on the operating expense lineas well. However, I do get this sense that the industry is difficultenough right now such that some of the players are starting to look at balancesheet preservation as opposed to any real expansion and we just have to see howthat plays out over the next quarter or two, because it’s -- you know, it is apretty difficult environment.

All right, great and good luck, guys. Thanks so much for thetime.

Our next question comes from the line of Betsy Van Hees. Betsy Van Hees -Cowen & Company: Thanks for taking my call. I had a couple of questions.First, going back to the image sensor business, if I heard correctly, youmentioned that you were not immune to pricing in 1.3 megapixel and VGA beingaggressive. I was wondering if you could give us an idea of what type of pricedeclines that you saw.

In aggregate, our pricing quarter over quarter was flat. Imean, it might have been up or down maybe half a percent, or something likethat. So in aggregate, it was flat and that was primarily a result of uscontinuing to climb up the pixel density curve somewhat. I don’t have the specifics by chip in terms of what ouraverage selling price did, but in general it was flat quarter over quarter andreasonable to expect that would probably be the case for the current quarter aswell. Betsy Van Hees -Cowen & Company: Okay, great. Thank you. And then I had a question on yourmix for SLC versus MLC NAND for the quarter.

The vast majority is MLC. Kipp, have you got that?

I think we’re -- last time I looked, we run about 80-20.

So ballpark, 80-20, 80 MLC, 20 SLC. Betsy Van Hees -Cowen & Company: And do you have any plans of maybe increasing your SLC,given the better mix, margins that you are getting in that and your launch ofsolid state storage drives?

In the very near term, our mix of MLC versus SLC is going toshift even stronger in favor of MLC. As the solid state drive initiative getssome traction, as I mentioned earlier, it would be logical to assume that we’llbe ramping up SLC again but again, from a meaningful shipment standpoint, wedon't expect that 2008 is going to be very significant in terms of SSD uptake. Betsy Van Hees -Cowen & Company: Okay, great. Thank you very much.

Our next question comes from the line of Daniel Berenbaum. Daniel Berenbaum -Caris & Company: Hi, guys. Thanks for taking my question. If we can go backto the cash flow from operations guidance real quick, the $1.5 billion to $2billion for fiscal ’08, you talked about where depreciation and amortizationwould be going. Could you give us some insight into what other variables youput into that equation? I’m sure you have some -- you’ve made some fairly toughassumptions to come out with that number. Can you help us understand what someof your assumptions are to get to those numbers?

Well, maybe Kipp can comment on it more, if he knows whatyou are really trying to get at, which I suspect is probably just priceforecasting. Clearly -- Daniel Berenbaum -Caris & Company: Not just price forecasting, but just -- I mean, maybe giveus some insight into where you see your revenue trends and what goes into thatand then what trends you are seeing on the cost side as well? I mean, you werefairly specific about the guidance, so I am just trying to understand how youthink about those numbers.

Well, let me give you some of my thoughts and then Kipp canadd where he wants to. We are clearly in a growth phase for the company and ifyou look at the data, we -- most quarters, you know, we’ve had some flatperiods because of significant price declines but we have been ramping ourcapability and you saw the growth that we had this quarter and we had growthfrom the last quarter prior to that. We obviously are adding more output andwhether or not that results in greater revenues or less revenues, your guess isas good as mine on what the selling price is going to do. But having said that, we have in our forecast, of course,something that we can’t share but we obviously have a continuing trend of ASPdeclines in the market built into our model for obvious reasons. We are tryingto be conservative and making sure that we understand the financials as we movethroughout the year in an environment that’s not favorable for us, althoughfrankly we have no idea whether that is going to be the case or not. So we have that built in and even with that built in, thosewere the cash flow -- the cash flow range that I gave you is with thatconservancy built in. Kipp, do you have anything else you want to add to that?

Not much to add to that, Steve. Are there anymore questions?

Our next question comes from the line of Tristan Gerra. Tristan Gerra -Robert W. Baird & Company: You mentioned on the call that at 68-nanometer, you haveabout a 25% die size reduction versus 78-nanometer. We know Samsung at66-nanometers, a little bit behind; Hynix is doing well. How do you compare interms of die size at 68-nanometer relative to the competition currently?

Well, we compare pretty favorable. Obviously we have been at6F-squared and we’ve been able to optimize that for our process. I don’t knowif Kipp, you want to add anything to that.

More specifically, I think we have shown some slides, orMark Duran has, we’re looking at 20% to 25% die size advantage over competitorsright now, partly due to where we are in process migration and partly due tothe 6F-squared technology that we’ve had matured up now for several years. Tristan Gerra -Robert W. Baird & Company: Okay, and then just a quick follow-up in terms of mix inimaging. If you could give us some color on the mix of VGA versus 1.3-,2-megapixel.

Sure. In the quarter we are reporting on now, so in ourfiscal Q1, just over half of our unit shipments were 2-megapixel and above, soby definition just under half were at 1-megapixel and below. And I would expectthat’s going to -- we’re going to continue to increase the higher density, thehigher pixel density units as a percentage of the overall going forward, so itwill be up slightly from that in the current quarter. Tristan Gerra -Robert W. Baird & Company: Okay, so you wouldn’t expect VGA to pick up as a percentageof revenue some time next year or this year, this fiscal year?

I don’t want to look too far into the future, but in thecurrent quarter I think it’s a pretty safe assumption that that would not bethe case, so it will be a richer mix of 2-megapixel and above in the currentquarter as well. Tristan Gerra -Robert W. Baird & Company: Great. Thank you.

Thanks, Tristan and with that, we’d like to thank everyonefor participating on the call today. If you will please bear with me, I need torepeat the safe harbor protection language: during the course of this call, wemay have made forward-looking statements regarding the company and theindustry. These particular forward-looking statements and all other statementsthat may have been made on this call that are not historical facts are subjectto a number of risks and uncertainties and actual results may differ materially.For information on the important factors that may cause actual results todiffer materially, please refer to our filings with the SEC, including thecompany’s most recent 10-Q and 10-K.

Thank you. This concludes today’s Micron Technology’s firstquarter 2008 financial release conference call. You may now disconnect.