Kipp A. Bedard - Vice President of Investor Relations D. Mark Durcan - Interim Chief Executive Officer and Director Ronald C. Foster - Chief Financial Officer, Principal Accounting Officer and Vice President of Finance Mark W. Adams - President Unknown Executive -

David M. Wong - Wells Fargo Securities, LLC, Research Division Bobby Gujavarty - Deutsche Bank AG, Research Division Monika Garg - Pacific Crest Securities, Inc., Research Division Daniel L. Amir - Lazard Capital Markets LLC, Research Division James Schneider - Goldman Sachs Group Inc., Research Division Shawn R. Webster - Macquarie Research Glen Yeung - Citigroup Inc, Research Division Vijay R. Rakesh - Sterne Agee & Leach Inc., Research Division Steven Chin - UBS Investment Bank, Research Division Harlan Sur - JP Morgan Chase & Co, Research Division Kevin Cassidy - Stifel, Nicolaus & Co., Inc., Research Division Ryan Goodman - CLSA Asia-Pacific Markets, Research Division Ada Menaker Doug Freedman - RBC Capital Markets, LLC, Research Division John Pitzer - Crédit Suisse AG, Research Division Mark C. Newman - Sanford C. Bernstein & Co., LLC., Research Division Christopher J. Muse - Barclays Capital, Research Division

Good afternoon. My name is Devon, and I'll be your conference facilitator today. At this time, I would welcome everyone to the Micron Technology Second Quarter 2012 Financial Release Conference Call. [Operator Instructions] Thank you. It is now my pleasure to turn the floor over to your host, Kipp Bedard. Sir, you may begin your conference.

Thank you, and welcome, all, to Micron Technology's Second Quarter 2012 Financial Release Conference Call. On the call today is Mark Durcan, CEO and Director; Mark Adams, President; and Ron Foster, Chief Financial Officer and Vice President of Finance. This conference call, including audio and slides, is also available on Micron's website at micron.com. If you have not had an opportunity to review the second quarter 2012 financial press release, again it is available on our website at micron.com. Our call will be approximately 60 minutes in length. There will be an audio replay of this call accessed by dialing (404) 537-3406 with a confirmation code of 62533629. This replay will run through Wednesday, March 29, 2012, at 5:30 p.m. Mountain Time. A webcast replay will be available on the company's website until March 2013. 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. Please note the following Safe Harbor statement. During the course of this meeting, we may make projections or other forward-looking statements regarding future events or the future financial performance of the company and the industry. We wish to caution you that such statements are predictions and that actual events or results may differ materially. We'll refer you to the documents the company files on a consolidated basis from time to time with the Securities and Exchange Commission, specifically the company’s most recent Form 10-K and Form 10-Q. These documents contain and identify important factors that could cause the actual results for the company on a consolidated basis to differ materially from those contained in our projections or forward-looking statements. These certain factors can be found in the Investor Relations section of Micron’s website. Although we believe that 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 the date of the presentation to conform these statements to actual results. With that, I'd now like to turn the call over to Mr. Mark Durcan. Mark?

Thanks, Kipp. I'd like to begin my comments today with a few thoughts on restructuring of our joint development relationship and joint manufacturing relationship with Intel before commenting briefly on market conditions, and then looping back to highlight some of the technology and business unit accomplishments during this quarter. So first of all, Micron's partnership with Intel on NAND Flash is, of course, a very important relationship for us as well as a significant piece of our business. As many of you are aware, we reached definitive agreements this quarter to restructure or rejuvenate that partnership. And as part of that process, we agreed to purchase Intel's share of the output from the jointly-owned NAND operations in both Manassas, Virginia, and IMFS Singapore. The purchase capacity was roughly 30,000 wafers per month, and Micron will sell a portion of those wafers back to Intel under a for-profit take-or-pay supply agreement. The incremental profit, along with -- the incremental profit capacity, along with the completion of the initial ramp of the new fab in Singapore, will lead to structural margin improvement going forward. The life of the remaining joint venture facility, which is in Lehigh, Utah, was extended to 2024. And the scope of our technology relationship was expanded to include certain memory technologies beyond the floating gate and NAND products we had historically been working on together. So I think in summary, both partners consider the relationship to date highly successful and were both very excited to be carrying this relationship on in the future. On the technology development front, we had a strong quarter. We were excited to complete the construction of the new addition to our R&D cleanroom in Boise, Idaho, and begin installing tools there to support our leading-edge NAND, DRAM, NOR and phase-change memory nodes as…

Thanks, Mark. The company's second quarter of fiscal 2012 ended on March 1. And as usual, we provided a schedule containing certain key results for the quarter as well as certain guidance for the next quarter. The materials presented on a few slides that follow is as well also on our website. The second quarter results posted a net loss of $224 million, or $0.23 per share, on net sales of $2,067,000,000. Total sales in the second quarter relatively flat compared to the prior quarter, reflecting slightly higher NAND and DRAM sales that were more than offset by the lower sales of NOR products, as Mark mentioned. Demand for wireless NOR products continue to be impacted by seasonal weakness, lower performance of certain customers where we have greater concentration and continued transition of certain applications to NAND devices. Consolidated gross margin for the second quarter declined from 14.6% to 13% compared to the first quarter. Before getting into specific results for the quarter, I want to expand a bit on Mark's comments regarding the IM Flash arrangement we announced recently with Intel. As a result of the contemplated transactions, Micron will purchase Intel's 18% ownership interest in the IM Flash operation in Singapore. In addition, Micron will purchase from the IM Flash entity its production assets in the Micron fab in Virginia, and the associated lease of a portion of that facility will be terminated. Total consideration for Micron's purchases is expected to be approximately $600 million. The exact amount may vary up to the time of closing, but approximates the book value of our net assets. In accordance with the terms of our new supply agreement, Intel has agreed to make a deposit with Micron of $300 million, which may be refunded or applied to Intel's future purchases under…

Thank you, Ron. We will now take questions from callers [Operator Instructions].

[Operator Instructions] And our first question comes from David Wong from Wells Fargo.

On your supply agreement with Intel, can you tell us how long the supply agreement lasts for? And is it for fixed wafer prices? Or do the prices move with market NAND prices?

This is Ron, David. The supply agreement with Intel is set up so that it's a fixed amount of volume. And we have a profit margin built into the agreement, and it's set up to extend for a number of years into the total agreement period.

Our next question comes from the line of Bob Gujavarty of Deutsche Banks.

I mean, I was actually pretty impressed you were able -- the inventories didn't go up. You were able to move a lot of bits in a somewhat muted demand environment. Can you talk about what helped you do that? Was it your branded products? Was it share gains? Was it perhaps the Alpeta bankruptcy? Just curious around that.

Bob, it's Mark Adams. I think the -- you've listed a couple of key contributors to that end result on inventory. Certainly, we saw a mild recovery in the PC business against expectations going into the post-holiday quarter as the hard drive industry started to recover and that’s helped us on some stronger DRAM pricing coming out of the quarter, like desktop notebook commodity. SSDs continue to be a positive bright spot for us in terms of bit shipments through the quarter. We had growth there. And we continue to find growth opportunities around server bits. Our server bit shipments were another record, the second consecutive quarter we had a record in bit shipments to servers. So combined, there's been some good application segment performance for us.

Great. And just a quick follow-up, I mean, if I could, on the server comment. Do you think there's an opportunity to up-sell your server DRAM product mix based on the Romley [ph] platform? My understanding is probably a little bit of a maybe perhaps a little bit more low power. Just curious if that'll help your server mix.

Yes, I think it will. I think that's in front of us, too. I don't think that's happening today. I think the Romley adaptation is probably -- if you went back into the back half of last year, they -- you would have thought there'd be more market penetration around it. But I think it will, and it's in front of us and they'll benefit us in the future quarters.

Our next question comes from the line of Monika Garg with Pacific Crest.

My question is on the quarter to date DRAM pricing. You are guiding to flat quarter to date, and you have seen recent upward movement in the contract pricing on the DRAM side. So could you help us understand that?

Sure. The phenomenon really occurs when the market does churn pricing. Some of the premium specialty markets we're in lagged that effect, so they may, in fact, have lower pricing while the commodity desktop-notebook actually trend back up. And that's where we are seeing improvement, in the desktop-notebook commodity segment. And our specialty markets are lagging in improvement and in turnaround. So that's where it comes out about flat, all kind of around the mix equation.

Sure, helpful. Another question, on the Embedded group. I -- there's a slide here that's showing that operating income from that group was lower compared to last quarter. Could you just help us understand that as well?

Could you repeat the question? I'm sorry, I...

Embedded profit was lower.

Embedded profits? Yes...

Yes, Embedded profit.

Yes, sure. I'm sorry, but that -- the -- Mark Durcan commented earlier on -- that the wireless NOR market is probably more accelerating in its decline in demand. I think that put more NOR inventory in the market and then hit some of the pricing that gave us a mild erosion on the Embedded profitability. And we had to react to that.

Our next question comes from the line of Daniel Amir with Lazard Capital Markets.

Can you comment? What type of consideration does the company take in terms of potentially looking at consolidation in the industry? What actions would you take? What things would you do financially? So just give a little more clarity what the decision making behind it if you decide to pursue that opportunity.

Well, I'm not sure I'm going to be able to give you a whole lot of clarity on this, but, obviously, there are a lot of things that go into the mix when you look at consolidation opportunities, and you have to look at all of them in aggregate in order to make a decision as to whether something is going to be beneficial to Micron or its shareholders or not. Some of the things that we look at, obviously, are: What's the potential price of the assets you're looking at? What do you get beyond just physical assets in terms of intellectual property or technology? What is the form of consideration you might be contemplating? How does it change the competitive landscape relative to product portfolio? Clearly, we always can get -- well, not always, but we typically consider that we'll have scale efficiencies not only at the manufacturing level but also at the operating expense, R&D, SG&A. So scale has virtue in our business. All of those things kind of go in the hopper as well as probably a number that I didn't think of off the top of my head, but we look at all of those.

Okay, and a follow-up on the SSD side. I mean, up 15% this quarter. I mean, should we expect similar growth rates in the next few quarters? I mean, how should we be looking at the SSD mix?

Yes, I think I probably ought to speak to dynamic here, that if you go back into our last quarter, we saw a fair amount of OEM pull and channel pull ahead of -- in the last quarter due to the lack of hard drive availability. And what we saw after that was that the sell-through of that pull-through wasn't as much as the OEMs and the channel anticipated. So I would characterize it as a slightly decelerating growth as they -- as we work through the inventory. I think this is a short-term phenomenon, and I think you'll see our SSDs continue to grow. And I think maybe another quarter of right around this level is reasonable. But I think it's just a work-through out of the, I guess, the overexcitement around the preholiday SSDs given the hard drive issue.

Our next question comes from the line of James Schneider with Goldman Sachs.

I was wondering if you could talk about the DRAM supply situation in the market right now. How many of your competitors do you think have latent DRAM capacity which still has yet to come online given the tough environment we're seeing out there? And maybe you can estimate that as a fraction of industry revenues and whether you see any of that supply coming back to the market.

Yes, well, I think there is some supply off-line. I'd put it in the 5% to 10% range currently. And with the recent uptick in pricing, I think you would normally see some of that coming back online, but you've got to balance that against, obviously, the situation that some of our competitors find themselves in of -- relative to cash availability. And so I think we're at a reasonably stable point currently with maybe a small amount of capacity coming back online in some of the Taiwanese manufacturers.

That's helpful. And then looking out into next year, there seems to be a little controversy in terms of the NAND market and what the expectations for NAND bits -- bit growth in the industry will be, some people calling for as high as 70%, others calling for more like 50%. I was wondering if you could maybe weigh in on where you see that bit growth coming in for next year and what factors are going to drive that either higher or lower.

Sure. Our internal modeling is in the sort of 65% to 70% range. But there's -- obviously, there’s some guardrails around that. We don't have complete accuracy or precision relative to our information. What can drive that up and down, obviously, is mix of 3-level cell versus 2-level cell versus single-level cell. So product mix going to the market can have a significant impact on bit growth without necessarily having a significant impact on profitability or cost per wafer. We have seen some level of new capacity come -- certainly planning to come into the market, and we've seen that be what I would characterize as relatively measured and, in some cases, muted relative to initial plans. And so I think what we anticipate is something in the 65% to 70% range. And if the market's stronger, maybe it'll be a little bit higher. And if the market's weaker, maybe it'll be a little bit lower.

That's helpful. And just to confirm that, it's a 2013 estimate, right?

This is 2012.

Oh, yes, I was asking about 2013, sorry.

Oh, I'm sorry. 2013, obviously, less visibility. And from a technology migration perspective, we would expect it to be slower as opposed to -- as compared to 2012. So less from technology migrations. However, there is capacity coming online, and I don't have that figure exactly in front of me. So I would say it's probably in a similar range, actually, when you bake it all together.

Our next question comes from the line of Shawn Webster with Macquarie.

I was wondering if you could share with us what your sequential production did in fiscal Q2?

We had a -- as Mark commented in his opening remarks, Shawn, the operations all executed quite well. So in all the categories that we gave guidance for last quarter, we beat them all.

But what did they do sequentially? I mean, your shipments were up 21%, for example, in DRAM. What -- there's -- is that how much production was also up?

Pretty close, yes. We're -- we beat that. We guided mid to high teens. Last quarter, we beat that by a little bit.

Okay. Same thing on the NAND side?

Correct.

Okay. And then in terms of the production outlook going into fiscal Q3, can you walk us through why exactly it's going to be flat again? And maybe, can you share with us what you expect the trajectory to be in some of the later quarters?

Yes, one of the things you're seeing a lot of now how the mix -- your -- you hear us talk a lot about mix in terms of ASP and cost. And it also impacts our guidance on a quarterly basis for production bit growth. And here's an example where, as Mark Adams previously noted, we see a growing opportunity in servers. The bits for those wafers tend to be lower. And so as a result, when you're moving production more in that direction, then you can -- you'll slow some of the just quarter-to-quarter comparisons on production bit growth. So we do see opportunities in the specialty area. We're moving wafers there to respond to the market. And now there's -- those aren't always your most efficient bit wafers in markets like that. Anything to that?

No, I think that's a good characterization of what's going on, Kipp, is mix more and more drives what the bit growth is going to be on -- in any given quarter. In terms of just an overall "What are we looking at for the next couple of quarters for DRAM," as we noted, next quarter flattish and in that same range, probably more later in the year. On NAND, I think I'd say 15%, plus or minus, and lumpy going forward.

Okay. And then if I could really quickly on -- one more on the NAND. The NAND pricing, at least when I compare it to some of the contract and spot calculations we make here, is -- your pricing seems to be a little bit worse, both in the reported quarter and for your guidance going to fiscal Q3. Is that also a mix effect? Or is there something else happening there?

Yes, that's right. I think that it's a mix effect going to less value-add segments during the quarter.

I'm sorry, less value-added segments?

Yes. Our pricing -- your comment was our pricing declines looked larger than other data points you were looking at?

Yes.

So as we commented on the SSD situation, we're working our way out of that. You'll see our -- put our bits into more of the -- a retail-oriented commodity card USB business, those types.

Oh, I see. And how much was Intel for you in the quarter for NAND?

$255 million.

Same level as last quarter. So let me just add on this, this mix issue. To the extent you see significant ASP declines that are toggled [ph] by mix, I mean, you also are seeing some pretty significant cost declines in those same products.

Our next question comes from the line of Glen Yeung with Citi.

Could you give us an update just on where we stand in terms of memory inventories that are out there? And should we expect anything unusual as we approach the launch of Windows 8?

You know what? Except for what we identified in SSDs, I think overall, things are in pretty good balance. On the DRAM front, based on some of the dynamics going on with competition, it seems that DRAM is in a pretty healthy place, pretty moderate inventory. Our OEMs have come back with pretty strong upside demand signals for us in the -- in Q3. The dynamic in the spot market's a little bit different because we expect some of the smaller players liquidating for cash flow purposes. But in general, the market inventory situation is pretty good on DRAM. And in NAND, as I described in an earlier comment, I think the inventory situations needed just to work through this quarter on selling through SSD inventory that we have carried forward, and I think that is a short-term phenomenon. And I think overall, when we look at tablet growth and smartphones and SSDs combined, I think we're bullish out in the midterm and the longer term.

Maybe just to follow up on your comment that you're seeing upside demand from the -- I guess from the PC side of the house. As -- and should we be therefore -- I mean, normally, Q2 is a seasonally down quarter for PC. But obviously, we've got hard drive issues that are still at play here. Is it predominantly the hard drive situation continuing to ease that's driving that upside demand? Or do you -- is there something else going on in PC side so you need to get [indiscernible]?

I think that's part of it. I think the other part of it is just as we're talking about maybe some negative impact on the SSD side, we think that because the -- primarily the corporate sector held off on PC procurements given the higher price SSD systems in the fall, we think there's some strength in the PC market out towards the next quarter or so.

Our next question comes from the line of Vijay Rakesh with Stern Agee. Vijay R. Rakesh - Sterne Agee & Leach Inc., Research Division: On the DRAM side, I know you guided ASP is flat. What kind of cost structures do you see getting to the May quarter from shrinks, et cetera?

It's down a couple of percent. Vijay R. Rakesh - Sterne Agee & Leach Inc., Research Division: And in terms of shrinks, well, from what are you going -- what node are you going to, 30-nanometer or 21-nanometer, on the DRAM side?

Yes, we're seeing a nice shrink road map there, and again, taking into consideration the comments we just made about a lot of times the specialty cost per bit is slightly higher than the commodity cost per bit. So as you're transitioning to more of those bits on a Q-to-Q comparison, you may not get what you expect to see in the old days when 90% of the output was all PC commodity and you could go through a shrink and measure a pretty -- put a pretty linear methodology. So keep this mix shift in mind. Vijay R. Rakesh - Sterne Agee & Leach Inc., Research Division: Got it. And on the NAND side, you mentioned ASP is -- it looks like it was down a little bit more, but it was impaired by some legacy Numonyx product. What does -- how much of that was impacting the ASP? And do you see some of that dragging into the third quarter, fiscal third quarter also?

We won't break out the contribution, if you will, to that sell-through. But generally speaking, we have about a couple more quarters to work through that inventory. Vijay R. Rakesh - Sterne Agee & Leach Inc., Research Division: Got it. So some of that is the activity that is that has to be tied -- basically the Numonyx stuff that's going broke?

That's correct.

Our next question comes from Uche Orji with UBS.

This is Steven calling on behalf of Uche. First question I had on the DRAM side, could you talk about what your capacity mix you're starting to have on 30 nanometers for DRAM by the end of the fiscal year?

Yes, Steve, end of the calendar year, we'll be roughly 50%.

Okay, great. And also, in terms of your DRAM sales, what's the mix between competing versus noncompeting application?

The overall computing personal systems piece of our business was about just slightly below 20%. Well, that's a little higher than that, was that?

Of the?

Yes.

On personal systems? Okay, about 1/3 of it -- I guess that's right. About 1/3 of it in personal systems relative to the other markets.

Okay. So that does not include server, correct?

Right.

Okay, perfect. And then I guess the other major question I had on the DRAM business was for the specialty products. Just generally speaking, I know there's probably a range of process technologies that the different product lines are on. But just probably speaking for the higher-volume, like server packs, for example, will that be also within, say, 30 nanometers, for example, just due to the growing bit demand that you see in that market?

Yes, we're actually very encouraged with the progress on our 30-nanometer, not only in terms of yields and the way the ramps are going generally but also the quality level and the power performance it's delivering for the server market. So we anticipate that we will be able to accelerate that 30-nanometer ramp above and beyond what we would normally do. And we're still in the early process of qualifying all those products, but we're very encouraged by the way that's going. So generally speaking, we believe that we'll be able to ramp that node more aggressively than maybe we would typically do while maintaining a good mix of servers.

Perfect. Just one last quick one, if I could, on trade NAND bit sales. I know you guys mentioned it's up 36% in fiscal Q2. I'm just wondering. How much of that is also captured by any SSD products that you guys built during the quarter? Or is that 36% number purely, of course, that you guys sold through in the market of that type? Are those cards or other embedded applications?

If I understood your question right, it was a little bit confusing, but I think the answer you're looking for is about 30%.

For the non -- When excluding your SSD product sales, correct?

Well, I think what we're trying to say is about 30% of the trade NAND is SSDs in one way, shape or form. So either internal SSDs or NAND that we sell into somebody else's SSD products.

Our next question comes from the line of Harlan Sur with JPMorgan. Harlan Sur - JP Morgan Chase & Co, Research Division: Wondering if you could talk about the timing of the 20-nanometer NAND ramp? And sort of where you expect to be capacity-wise in the second half of this year for that technology node?

Yes, that's going to be -- again, it's going to be driven by product mix and the applications we're serving. I commented at the beginning of the call that we're actually ramping 20-nanometer in all 3 fabs and are now making plans to position additional capacity given the way technology node is going as well. So we're quite happy with the 20-nanometer performance and its acceptance in the marketplace. And that'll probably drive us to accelerate conversion as opposed to what we originally had planned. Harlan Sur - JP Morgan Chase & Co, Research Division: Got it. And them as a follow-up, maybe you can just provide us with an update on the timing of your 20-nanometer DRAM ramp. And then for Ron, do you expect idle capacity charges for your NOR fabs in Q3? And if so, can you just give us a rough sense on how much those charges will be?

So this is Mark. Let me take the 20-nanometer DRAM node. That'll be early production in the summer next year.

Yes. And Harlan, in terms of the idle capacity, we've had some improvement, as I mentioned, with a little bit less idle capacity in our 200-millimeter activities. But we will continue to have some effect of that in the following quarter or 2, that's for sure. And then we expect it to pick up some later in the year.

Our next question comes from the line of Kevin Cassidy with Stifel, Nicolaus. Kevin Cassidy - Stifel, Nicolaus & Co., Inc., Research Division: Just to expand on Harlan's question on the 20-nanometer NAND Flash, will most of those products be 128-gigabit? Is that part of the mix?

Sorry, can you repeat the question?

Moving... Kevin Cassidy - Stifel, Nicolaus & Co., Inc., Research Division: I -- you're expecting the -- you're moving all 3 fabs on NAND Flash to 20 nanometers. What is the product mix? Is that 128-gigabit compared to...

They'll be a mix of 64 to 128. Kevin Cassidy - Stifel, Nicolaus & Co., Inc., Research Division: Okay. So that will help drive down the overall ASPs so much?

Well, it'll -- yes, typically, the higher density's selling at a slight discount, although early in the life, you can actually get a premium. So it kind of depends when the other guys get caught up. So there'll also be -- by the way, it makes it 2-bit, 3-bit-per-cell. As I commented coming into the call, we're sampling our 3-bit, 20-nanometer, 120-gig as well. Kevin Cassidy - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And on ultrabooks now, it seems like the second generation of ultrabooks are being announced. How do you see the DRAM content? And then also, you have the C [ph] content for you?

I think both's favorable for us. I think the challenge for us in the marketplace is really around pricing and the acceptance of the platform and volume. We think it's more of a best-case, a holiday product of 2012, more a 2013 volume product. But we still think it's pretty favorable in the DRAM side and, obviously, very positive on the NAND and the SSD form factor.

Our next question comes from the line of Ryan Goodman with CLSA.

I had a question on the server side or in the specialty side of DRAM. You had mentioned record bit shipments during the quarter but also a mix out of specialty was having an impact on pricing trends. So maybe, could you just help me understand exactly what happened in the quarter and how we should be modeling that going forward for the year?

Sure. I think if you look it over -- the impact from the execution of the additional capacity we got out of Inotera, the overall output grew. And then our -- when I referred to the bit shipments, our bit shipments in servers grew as well, but not at the overall capacity.

Okay. And then on just one other area within DRAM. You had mentioned mobile DRAM. It sounds like you guys are getting a bit more traction there. Maybe just an update on how that's looking today and how are -- that's been kind of written as a 2013 story in the past. How is it looking for 2012? Could that pull in at all given what's going on with your competitor?

I think from an opportunity standpoint, there's an immense opportunity as we get more and more converted over to 30-series product, I think, if there are volumes in that category increased significantly.

Okay. So kind of second half of this year, possibly?

Yes.

Our next question comes from the line of Daniel Berenbaum with MKM Partners.

This is Ada in for Dan. I got a couple of questions for you. The first one is you talked about the potential asset purchase from Alpeta. What are some of the other likely scenarios and kind of, what would be negative scenarios, positive scenarios? And under what circumstances would you benefit the most?

I think that's going to be way too much speculation for us to comment on, Ada, sorry. [ :p id="A01" name="Ada Menaker" type="A" /> No problem. And in terms of NAND and the restructuring of the Intel JV, can you maybe talk about where you see NAND margins going as a result versus trade NAND?

Yes, again, we don't like to forecast either gross margins or net margins moving forward in time. There's just too much uncertainty relative to ASPs. What we can say is that the increased scale that we now have at our -- in our NAND business, not only by virtue of the asset acquisition from Intel but also by virtue of the successful ramp of IMFS, puts us in a much better position relative to our operating expenses relative to the overall scale of our business.

And in terms of OpEx as a result of the restructuring, any risks to that or...

Relative to the restructuring with Intel?

Yes.

No, I don't think so. We're anticipating that'll close very early in April. And again, we think it's a pretty beneficial agreement for both partners, actually. And Ron, by the way, is just reminding me that the other significant thing to keep in mind relative to the asset acquisition from Intel is that the -- when you think about Micron's margins in NAND overall, there's a significantly higher percentage now of that product that is trade NAND versus sold at Intel to cost. So that will also have an impact in the way you model margins.

Our next question comes from the line of Doug Freedman with RBC Capital Markets.

I guess to stick on that topic of how we model this transaction, when I think about your cost of revenues, Ron, it's been a really pretty stable number. As you add capacity, cost of revs rises a little bit, as we saw this quarter, about $15 million. Is there a change in that cost of revenues line that's associated with you now owning the equipment? Or have you already been capturing that cost in that cost of revenue line?

Yes, Doug, the -- we consolidate all these joint ventures. So all the structure on the balance sheet, P&L, et cetera, is in our financial statements. The CapEx is in our CapEx numbers, the depreciation is in our depreciation numbers. So what you'll see is when a higher ownership percentage, so there'll be less equity share growing out to minority shareholders on the P&L. And as Mark already mentioned, we'll have more trade revenue business. But the cost structure will be essentially the same cost structure. We'll have the chance to leverage up the revenue portion of that with a higher trade mix. The rest of the cost structure is essentially as it was.

Great, understood. If I could on another line, moving on to sort of a CapEx. You're holding your guidance at $2 billion for the year. Traditionally, we've sort of seen that to be more front half loaded. Again, it looks this year like that that's going to be the case, although given your spending in the first 2 quarters of the fiscal, it does look like we're going to sort of hold that line rather flat for the balance of the year. Is that sort of the way to think about it? Or are we not going to get a roll-off in the back half of the year?

Yes, as I mentioned, the -- 60% of our total CapEx budget was probably spent in the first quarter of this fiscal year, and it was related -- and into the second quarter, it was heavily related to the final payments -- build-out and payments on our IMFS capital. And as you heard the report on the ramp of that facility. So the remainder of the second half of the year is pretty low in the remaining balance, and it's going to be probably the $400 million range for the next couple of quarters.

Right. And I guess at that level, you'll have trouble getting to that $2 billion number, sort of, and it'll be underneath the $2 billion at that rate. That was what I was surprised by.

No, it'll be about $2 billion.

Okay. And then I guess one for you, Mark. When I look at the operational expenses, a new high hit here in this quarter. How do I think about OpEx being sort of controlled going forward? And what are the puts and takes you look at when looking to invest on R&D or SG&A cost lines?

Yes, well, I think going forward, you should think in terms of R&D being relatively flat moving forward. We are adding, as I mentioned, some cleaner space on equipment in the R&D operation. But overall, we're also getting some efficiencies there. And I think you should -- and some roll-off relative to previous existing equipment. So I think you should think of R&D as flattish moving forward. Relative to the SG&A, there were a number -- as Ron noted, there are a number of onetime events that hit our SG&A line this quarter. And I think those are really much more onetime-type events, and you would anticipate us going back to something more along the lines of what you've historically seen on that line. Ron, did you want to add anything?

No, it's right on. I just want to -- I gave you the -- our view, $155 million to $165 million, which is sort of the typical range of SG&A. They were just blips in the quarter that affected the total cost by about $20 million.

All right. And then the one market that you guys haven't given us an update on, or if I could get some more color on, I guess I'd ask, is on the wireless base. Clearly, the NOR side of the business struggling in that market. What's your outlook for sort of the build rate at your customers? Are we going to start to see sort of production levels on that side of the business pick up? How -- what's your demand outlook there?

I think the demand outlook, if I understand your question, is still fairly positive. I think what you're seeing a little bit is the continued shift in mix towards the -- a higher percentage of smartphones as the overall product category. And so that's rewarding those with a portfolio that have a broad breadth of MCPs and MMC-type offerings. So -- and also, the customer concentration is different because people who were successful in smartphones weren't necessarily the leaders in the feature phone. So there's a lot of dynamics shifting. But I think overall, we still are very optimistic about the continued growth in that category.

Our next question comes from the line of John Pitzer with Credit Suisse. John Pitzer - Crédit Suisse AG, Research Division: I guess my first question, Mark, is given the increasing importance of mix, I'm assuming there are some quarters where you guys will have the opportunity to move mix to higher-profit areas and then other quarters either because of demand or customer needs, you won't be able to do that. I guess if you look at the fiscal third quarter, is the assumption I should be making is that these mix shifts are all moving toward higher-margin products? Or could you help me understand the puts and takes there from a product perspective?

I think obviously, there's a lot of puts and takes that get you to the aggregated view. But I think generally speaking, we're looking at a richer mix as we move into fiscal Q3, especially in DRAM. John Pitzer - Crédit Suisse AG, Research Division: And then, guys, my second question. And I apologize. I know you had talked about mobile RAM. What percent of revenue is it today? What would you expect it to be 12 months from now? And I guess the reason why I ask the question, it's clear, as we're moving from single core to kind of multi-core processors in things like smartphones and tablets, that memory density, CBRAM [ph] density is going up. And so I'm just trying to get a better sense of how big of a business is it today for you? Where do you think it can go? And is it above sort of corporate average margins? [ :p id="29457912" name="Mark Adams" type="E" /> Let me -- admittedly, I think we're probably behind in our participation in that category today. As I commented on, we think we're positioned pretty well technology-wise with 30-series coming out in the back half of the year. And I think industry dynamics are favoring that our customers are coming and leaning on us hard to get there quick because there are some scaled opportunities there from a volume standpoint. So I want to be careful not to start to share volumes numbers out per se, but we think it's going to be pretty significant by the end of this year or early next year. John Pitzer - Crédit Suisse AG, Research Division: And I think as my last question, just any updates you can give us, some kind of industry DRAM bit growth assumptions for the calendar 2012? And I guess given all the potential scenarios around Alpeta, how do we bracket the highs and lows around that estimate?

John, it looks like, if you look at the third-party data, it's probably anywhere between, on a production basis, 30% to 35% bit growth in 2012.

Our next question comes from Mark Newman with Sanford C. Bernstein. Mark C. Newman - Sanford C. Bernstein & Co., LLC., Research Division: A quick question first on the NAND pricing and demand side. How do you see that strengthening? Now obviously, we're still seeing some weakness right now. Just wondering when you'll see NAND pricing strengthen and then maybe looking forward, if you can make some comments on the supply side and how that's balancing with the demand in the second half of this year and into next year.

The best way to characterize our position on that is we think that this a kind of an adjustment in terms of what's happened out of the SSD build from the Thailand situation, which we've commented on in the call today. We think it's a short-term phenomenon. We're pretty optimistic in the back half the year that the demand and supply balance in NAND will continue. Mark C. Newman - Sanford C. Bernstein & Co., LLC., Research Division: Great, that's fantastic. And a follow-up question on NAND. Obviously, you've got the deal with Intel shaping out. To better model that, can I get some estimate for the NAND on a volume basis, the percentage of your NAND business that is trade and how that will change going forward based on the Intel agreement?

Mark, this is Ron. We've -- I'm not going to break it down to a specific percentage, but we gave you a view of the Intel volume. It's going to be about the same in this quarter we're in right now. I wouldn't expect a big change with the transaction occurring, as Mark mentioned, in early April. Then it'll trend down a little bit. We'll be reporting the supply agreement portion as -- which has a profit margin, in our trade numbers. And so it will go up in the mix. But we'll certainly update you on that as we go forward. And you got a rough view for me of the wafer mix that is coming out from Micron as well. Mark C. Newman - Sanford C. Bernstein & Co., LLC., Research Division: Okay. And then in terms of the trade gross margin that's coming from this Intel business, is it fair to assume that is obviously going to be more than the old Intel business, but less than the rest of your trade business? Is that a fair assumption?

We're not going to call out specific margin on an agreement like that.

And I think we have time up for one more question.

Yes, sir. our next question comes from C.J. Muse with Barclays.

I guess first question, in terms of your trend NAND guide, I'm curious whether that's pro forma for the closure of the JV. Or is that something that could drive upside?

Did you want the trade NAND trend?

Yes.

That is our prediction for trade production from Micron's trade business as I described it. As I just mentioned, we don't expect to see a big swing in the current quarter we're in right now, the third quarter.

Okay. And I guess as a follow-up, can you remind me in terms of what you're comfortable with in terms of leverage? You're a healthy $2.1 billion in cash, $2.2 billion in debt. How should we think about debt-to-kind of EBITDA and leverage go-forward? What you would be comfortable with at sort of the extreme?

Well, the communication that we've given fairly consistently is that we target over the long run to be in the 20% to 25% debt-to-capital range. Right now, we're running right at 20%. And that can, of course, vary with market cycles and with strategic decisions that we make in the business. But in general, the range we're comfortable with over the long run is in the -- the upper end will be the 25% kind of range over a long-term trend. But of course, that can vary in interim periods based upon market conditions and strategic decisions.

That's helpful. I could sneak one last -- one in for Ron. When you guys turn profitable, what kind of share count should we be thinking about?

Well, we got -- you can see from our converts that some of them kick in at profit levels. For example, at $60 million net income, one of our converts kicks into the measurement, et cetera, and then a couple of more at $200 million kind of profit range. So the dilution affects from the converts would come in at those kind of income levels.

And with that, we'd like to thank everyone for participating on the call today. If you'll please bear with me, I need to repeat the Safe Harbor protection language. During the course of this call, we may have made forward-looking statements regarding the company and the industry. These particular forward-looking statements and all other statements that may have been made on this call that are not historical facts are subject to a number of risks and uncertainties, and actual results may differ materially. For information on the important factors that may cause actual results to differ materially, please refer to our filings with the SEC, including the company's most recent 10-Q and 10-K. Thank you.

Thank you. This concludes today's Micron Technology Second Quarter 2012 Financial Release Conference Call. You may now disconnect.