Good afternoon. My name is Saied, and I will be your conference facilitator today. At this time, I would like to welcome everyone to Micron Technology's First Quarter 2014 Financial Release Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. (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 very much and welcome to Micron Technology's first quarter 2014 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 our website at micron.com. In addition, our website has it filed containing the quarterly, operational and financial information guidance, non-GAAP information with reconciliation, the slides used during the conference call and a covert debt and Capped Call dilution table. If you have not had an opportunity to review the first quarter 2014 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 the call accessed by dialing 404-537-3406 with a confirmation code of 15929595. This replay will run through Thursday, January, 14, 2014 at 5.30 pm Mountain Time. A webcast replay will be available on the company's website until January 2015. 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 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. Now, I would like now turn the call over to Mr. Mark Durcan. Mark?

Thanks, Kipp. I would like to start today with an overview of the key developments during the quarter, followed by a few strategic and industry thoughts. I will then turn it over to Ron for financial summary. Before turning to Q&A, we will close our prepared comments with Mark Adams covering additional details of our operational performance and market conditions. Fiscal Q1 was our first full quarter with combined Micron and Elpida financials. Elpida's financial performance met or exceeded the high end of the range for the key estimates we provided in early August. The early execution of our combined teams has been impressive and in conjunction with favorable market trends, our financial results were outstanding. We achieved record quarterly revenue of over $4 billion, improved our gross margin to over 7 percentage points, and delivered very strong earnings performance. Operating cash flow was $1.5 billion and CapEx was $669 million, resulting in free cash flow of $838 million. We are focused on a capital allocation strategy to maximize long-term shareholder returns. With this in mind, we recently entered into a series of transactions to restructure our existing convertible debt and address the dilutions stemming from those converts which Ron will describe in more detail later. We will continue to focus on optimizing our capital structure. Although we had a head start on planning and technology development, we are still in the relatively early stages of the Elpida integration activities which are going very smoothly. In particular, we are very pleased with the 25-nanometer ramp execution of both Hiroshima and Rexchip fabs, this positions us at the leading edge in terms of industry technology. Our outlook for memory industry conditions remains very favorable. In terms of DRAM, the fire at Hynix Wuxi fab last fall coupled with what was a…

Thanks, Mark. Our first quarter of fiscal 2014 ended on November 28. To ensure you have easier access to the materials we are covering today, we’ve posted to our website a file containing these financial informations I will cover, including GAAP and non-GAAP results, certain key metrics for the first quarter, as well as guidance for the second quarter of fiscal 2014. For the first quarter, we reported net income of $358 million or $0.30 per diluted share on record net sales of $4,042 million. These results include the unanticipated costs of the Rambus settlement and debt restructuring. As a reminder, the results for the previous quarter included the $1.5 billion non-operating gain recognized as part of the purchase accounting for the Elpida acquisition. On a non-GAAP basis, net income for the quarter was $881 million or $0.77 per share. Non-GAAP adjustments totaled $523 million or $0.47 per share. Key adjustments included the following; a $233 million charge recognized on the Rambus settlement which was expensed entirely in the first quarter, $111 million non-cash flow through of Elpida inventory step up related to the acquisition, $92 million in accounting losses recognized on the convertible note transactions, a portion of which resulted from mark-to-market accounting and our improved share price in the last month of the quarter. Approximately $17 million of this amount was recorded as interest expense for the make whole premiums on the notes. Q1 adjustments also included $50 million in non-cash amortization of debt discounts and other costs. This primarily consists of the imputed interest on the convertible notes and Elpida installment debt, $73 million in non-cash taxes related to the Elpida operations in the quarter, and finally $54 million share anti-dilutive effect of capped calls based on the average stock price during the first quarter of $17.48.…

Thanks, Ron. As this is our first quarter with the Elpida operations fully integrated into our results, I thought it might be helpful to discuss how we are structured within our manufacturing network before commenting on our Q1 performance and the current state of the memory market. We have communicated on past calls that over the last 18 months or so through M&A and redefining strategic joint venture partnerships, we have increased our overall capacity by greater than 90%, all of which was existing industry capacity. A key focus for us as part of this growth is to ensure operational efficiency and how we manage that capacity. After the sale of our Italy and Israeli fabs in our fiscal year '13 and with the close of our Elpida acquisition, Micron's volume manufacturing sites are based in three geographic areas, Japan, which is primarily focused on mobile and graphics DRAM, Taiwan, the location of Inotera and Rexchip operations which is focused on computing, server and networking DRAM and Singapore which is our primary location for our high volume, non-volatile technology with NOR and NAND manufactured there. Combined with our high-volume production sites, we are manufacturing some of our specialty embedded products at our Manassas, Virginia facility and leverage our Lehi, Utah plant for our strategic NAND and emerging non-volatile production. Our customers appreciate the geographic diversity as it creates a natural hedge against production disruption and they also value the flexibility from a product sourcing perspective. On the manufacturing front, our team has done a great job in improving productivity across our network. We saw some noteworthy cycle time reduction at the sites in Q1 that lead to strong bit growth production far exceeding our guidance. As our business increasingly diversifies across a growing number of end-market segments, we continue to…

Thanks, Mark. Before we take questions from callers, I would like to turn the call back over to Ron for just one quick clarification.

Thanks, Kipp. I had one correction I want to make sure we got out there before questions and that is in the DRAM Q2 guidance, as you can see from the schedule we filed on the website, our cost per bit is projected in the second quarter to be down high-single digits, DRAM cost per bit.

Thanks, Ron, and happy to follow up on that with any questions as well, but with that we would like to take questions from callers. 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.

Thank you. (Operator Instructions). Our first question comes from Glen Yeung from Citigroup. Your line is open. Please go ahead, sir. Mr. Glen Yeung, your line is open. Please go ahead.

Sorry about that. Can you hear me? My question is on the DRAM business. I am just trying to understand the shift to more wafer-based sales. I assume, one that the more you do obviously is going to have a negative impact on revenues. So if you could just clarify that revenues might be down in the quarter if you move more towards wafer-based sales. Then the ultimate question is, is it accretive to earnings, because as you mentioned gross margins are higher in that business?

Yes, I mean that's right on. The actual impact on ASPs is not necessarily favorable but overall impact on margin is favorable.

I am sorry. Just to clarify it, and ultimately you believe it's accretive to earnings, and combination of that will be better earnings?

That’s primarily, when you think about that, that's the decision on capacity we are trying to make.

Okay, thanks a lot.

The key Glen is both the ASP is down and costs are down, and the spread between the two is better than our average, hence a higher gross margin.

There you go. Okay, thanks. Second question is, your thoughts around the Wuxi fab, not in the sense of asking you when you think it will come up, but whenever it does, do you anticipate having to make any changes in the way you are looking at production, based on the idea that, that eventually comes back into full production?

We don't see any of that today, Glen. We certainly anticipate that that fab is eventually going to come back into full production. We see it happening maybe in a more measured way than some have prognosticated, but certainly with tight industry inventory today and some of the changes we are already making from DRAM towards NAND, we are not expecting any significant shock to the market or the system.

Thanks, and last one for me just on CapEx. You are on a run rate now which will put you at the low-end of your annual CapEx guidance. Is it your anticipation that CapEx on a quarterly basis will increase?

Yes. Our guidance for the year is still intact. As I mentioned, the same range $2.6 billion to $3.2 billion, so there will be quarterly differences.

I think there's one clarification on CapEx just in general. As we move into more systems and solutions, some of that CapEx is going to things that don't influence capacity necessarily. Some of it goes into things around packaging technology and assembly technology that's allowing us to build these systems and solution.

Thank you. Our next question comes from James Schneider from Goldman Sachs. Your line is open. Please go ahead, sir.

Good afternoon. Thanks for taking my question. I was wondering now that Elpida is finally integrated, you could maybe give us a refresher on the amount of DRAM bits allocated to each of the PC, mobile, server, and other specialty areas if you would?

Yes. We can do that. Would you like it on revenue or bit basis?

Bits would be great.

Okay. On a DRAM gigabyte basis - I am just going to pick some of the bigger categories, personal systems Q1 was about 40%, mobile was in the mid-30% range, server was in the mid-teens, and then the rest would be captured in networking and AIMM.

Great. That's very helpful. Then maybe as a follow-up, I believe and I may have not heard this right that you talked about the Singapore fab reaching wafer capacity transition, in the transition from DRAM to NAND. Did I hear that correctly? Then can you talk about when that might be fully transitioned at this point?

That's right. We were over 50% in the quarter completed and the timing is still potentially variable, but I would look for that to complete out in first half of this calendar year.

Then just last one quickly for me.

Sorry. Assuming no changes and as you know we have always maintained the flexibility there to make changes depending on market conditions, but as sit today, we anticipate completing that out in an orderly fashion.

Understand. Then last one for me would be, just in terms of the OpEx profile from here. I think you came in maybe a little bit under some of your targets. Can you maybe talk about going forward where there is opportunities either on the SG&A line or the R&D line to bring those down a little bit?

I think there is some opportunity there over time. It came in a little under primarily, I think, in this current quarter we had some reduced legal expenses that were contributors to that, but on a go forward basis our focus on the R&D line right now is to make sure we make all the investments we need to support the business both from technology transition perspective as well as from a system-level solution enablement perspective, and so we are not looking to drive that down in a big hurry. On the SG&A front, I will let Ron comment.

Yes. In terms of overall and as Mark mentioned, we did some timing differences quarter-to-quarter in terms of trends. For example our legal costs vary. If you see our guidance, Q2 is a little bit up from Q1, and also we have wafer qual cost timings that shift around and varied a little bit in Q1, came in lower in Q2 is probably more on a trend line just in terms of the near term views . In term of forward-looking cost structure, I think if you look at it as a percent of revenue, the way we are currently performing, we’ve talked about OpEx being in a 15% range and I think we can structurally run well below that going forward given current market conditions in SG&A would be commensurately lower as well, so on an absolute dollar standpoint, I wouldn't expect to see significant changes, but I do think as a percent of revenue we can trend in the range we are running now.

That's helpful. Thanks so much.

Thank you. Our next question comes from Mehdi Hosseini from SIG. Your line is open. Please go ahead.

Yes. Thanks for taking my question. Two. Starting with NAND, would you be able to elaborate the percentage of the revenue of bits coming from the embedded segment of the market?

Yes. I can do that for you. In Q1, we don’t -- I am not going to be able to do that for you. Well, we just don't track them quite like that.

Sure. Well, because you said in Q2, you are going to see a mix moving more towards embedded. I am just trying to get a better assessment of how that is going to impact the mix and the margin profile?

Yes, let me maybe approach it like I did on the DRAM side, I will hit some big buckets for you, and again we don't necessarily include embedded, so that will be embedded applications within some of these different categories, but with that being said, Q1 SSDs would be around 50%. the consumer which includes channel and CPG for us is around 30%, mobile will be in the mid-teens. And then again, networking, storage, and AIM will make up the balance.

Got it. So when I look at your NAND ASP and cost guide, it seems like margins are going to come down. ASP declined more than the cost decline. Is this trend going to reverse into the Q2 because of the mix changing or is that more of the ASP decline going to change? How should we think about the mix versus ASP versus cost into Q2?

I think in general, we feel that we will improve our mix relative to the market after Q2. We are going, obviously, through a transition. I mentioned in my earlier comments about the output at our Fab 7 trying to align that to customer quality, and it is probably another three to six months dynamic ongoing. The other part that is worthy of note is that there is a natural ASP degradation, you are shifting SSDs to components. It might not be as much of a margin hit as much as ASP going down to the Bill of Materials lower and all that. So you have got the Fab 7 dynamic and just the mix dynamic that contribute to what assumes to be a decline in ASPs.

If I may just add one more question for the big picture. In the Analyst Day in August, you talked about being more aggressive on acquisition, especially as you focus more on a system level storage. Can you give us an idea or any kind of flavor as where you are and help us understand or elaborate what kind of acquisition targets you are looking at?

Well, I think there is, obviously, as we build out our organization, we are doing a lot of that organically. We will continue to look at inorganic opportunities but certainly we are not in a position to go forecasting what, when, where or how any of that might happen?

Is it more controller, is it more softer or is it more just offered acquiring talents, is what I am asking?

Well, we are acquiring talent across the spectrum to support those system level solutions. So you will note, in the last quarter we brought in some more senior leadership in the controller area with Brian Angell. We also brought in Tom Snodgrass in the system level storage solutions area and we will continue to bring in people up and down the organization whether they are software folks, firmware folks or hardware folks to support those efforts.

Thank you.

Thank you. Our next question comes from Vijay Rakesh from Sterne Agee.

When you look at your end markets between PC and smartphones, there is a lot of weakness. It looks like you guys had very good margins and there's good supply displayed. Do you expect to see that operating stability and discipline continue into 2014 even after Wuxi comes on?

You know, we do. We think that the overall PC market feels like it's stabilizing a bit. At least from our customers' perspectives. The demand is pretty robust, as I mentioned earlier, quarter-to-date and we think that the balancing between that, not just the smartphone segment, we have got pretty good inroads into, what I would say, is the utility smartphone business that our customer breadth there is allowing us to diversify away. So we are not so heavily concentrated in the smartphone segment itself. So we don't necessarily feel that we are overly exposed to that dynamic you are referring to, post Wuxi coming back on. We feel pretty comfortable where we are at on the customer engagement model and what the customers are asking from Micron from a capacity standpoint.

Got it, and then Elpida, can you talk about regarding the cost synergy opportunities, let's say in test and packaging? And I also wanted to get your thoughts on the Yen, how you are looking at that side from there and then hedging there?

On the packaging side, Elpida certainly has their own approach to packaging. So as we look at Micron going forward, we are drawing up our own strategy in terms of an internal and external approach, a hybrid approach to how we are assuming our product needs. A good way of thinking about this, or rather a simple way of thinking about it is, for some of the higher touch, higher value add products and applications more of that will be done in-house. And as we evaluate future opportunities, some of our more commoditized low-end business PC, mobile application, where they don't require a lot of touch and development will probably use some outside third-party to get that done.

Vijay, on the yen and hedging question, I also make a couple of comments, see if I hit your point and ask for clarification if you want to go somewhere else with it. We use natural hedges in our Japan and Taiwan largely to protect our balance sheet along with some yen based forward contracts to protect us on our yen and our largest exposure as you probably know relates to a ¥140 billion creditor payments scheduled out over the next few years in Japan, so we use those hedging approaches, largely natural hedges, but some forward contracts to cover that. Another data point I might just mention is on operating cost structure of one yen change in the yen-dollar rate will affect our operating cost quarterly in the neighborhood $5 million to $7 million just as a reference.

Got it. [Good number].

Thanks.

Thank you. Our next question comes from Mark Newman from Bernstein.

Hi. Thanks for taking my question. Good numbers today. My question is really on the NAND DRAM mix. Looking at the gross margins commonly I think both, NAND and DRAM are somewhere in the low-to-mid 30% gross margin, but currently with your ramp that you talked about in Singapore, the conversion of DRAM to NAND, is causing little bit of problem on the ASP side and gross margin for NAND looks like at least what you are saying for the ASP quarter-to-date seems to be down quite a bit. With that in mind, it looks like the NAND gross margin is going to be quite a bit below DRAM in the coming, quarter fiscal Q2 and perhaps beyond, so in that case I am wondering like how you think about that? You commented, I think, Mark Durcan, you commented that you may have some flexibility how you look at things and I am wondering if you could talk a little bit more about that considering the fact that the extra production that's coming out of the Singapore fab is causing pricing and margin to come down for your NAND segment and if you would consider to perhaps delay that conversion to ease that situation. Considering that DRAM is doing quite so well these days.

Thanks, Mark. It's a good question and one which obviously we think a lot about. I think the key here is we want to be careful we don't optimize a short-term at the expense of a long-term and we will continue to look at what the exact right balance is, but we think in terms of some of our challenges right now relative to NAND as we bring this new capacity online are more short-term oriented relative to enabling the customer socket and getting the product placed in the right place as opposed to a long-term supply/demand phenomenon. When we look at the long-term dynamic for NAND, we still think that's going to be pretty robust, so we will obviously keep a close eye on it and we do have flexibility, but as I mentioned earlier, our trajectory today is to continue to move towards closing that out in an orderly fashion over the next year.

Just to add to that, Mark, as I think you numerically observed, but to be clear the current margins are pretty darn close to the same Q2. We might have a little bit of shift related to mix as Mark Adams commented about etcetera, but that's a short-term phenomenon so there's not a huge difference between the two right now.

Got it, so basically your goal is - would you believe that this mix issue is a short-term issue and you believe that within three to six months as you said you are going to be ought to transition this extra production in Singapore towards more higher margin solution products and therefore the margin should then catch-up back to the kind of more similar to DRAM back to the mid-30s or even higher gross margins, so you think this in other words is more of a short-term issue?

We do. When you think about coming online with a Fab 7 or anytime you bring on new capacity out of a fab, your customer qualification process is somewhat timely around their only products, so as we go through that our early output tends to go into more commodity homes in the short-term and as Ron just noted, it hasn't dramatically hit our margin in Q1. So we are in the process of qualifying major OEMs on this output and we think the timeframe is roughly three to six months that will get us back to a more stable margin profile that we can drive the right capacity into the right sockets.

All right. That's very helpful, and I just have one further follow-up. You mentioned 3-D NAND schedule samples in the late Q1 and Q2. Can you clarify, you are talking about 2014?

That's right. I am sorry about that. Yes, when I made the comment earlier, we are still on track and optimistic that a late Q1, early Q2 for production samples for 2014.

For 3-D and any more comment on how you think 3-D NAND, how that will shape-out in the future in terms of potential mix or when production may ramp-up? What product categories would be with more higher end enterprise versus lower end lower cost? Any kind of comments you can help us in how to think about that?

Well I can tell you little bit about how we see it. I think we think from 3-D volume perspective, we think it will be, for us, a broad spectrum of application usage. We are looking to, obviously, enable it in the high end and use it to our advantage to drive enterprise but the way we have architected our products is going to allow us to cover a full breadth. We think volume is probably back half of 2015 for 3-D and thus we think that where we are in our development, we are on track to do that.

I see. So you have a broad set of segments, not specifically high-end or not specifically low-end? Do you think it will affect --

Our design allow us to focus on a couple of key markets that we view as kind of high value for the sockets, but are limited into where we can take this over the long-term.

Great, and thanks very much. Congratulations.

Thank you, and our next question comes from David Wong from Wells Fargo.

Can you give us some idea what gross margin would have been if the inventory for Elpida had not been written-off in the November quarter?

Yes, there was a reconciliation page and basically the stepped up inventory was $111 million.

Okay, great. Thanks.

Thank you. Our next question comes from Monika Garg from Pacific Crest.

Thanks for taking my question. Just a follow-up question on the 3-D NAND. Could you maybe talk about when you target 3-D NAND, will you look at the cost structure? Is it below your planar NAND cost structure at that time? Or depending upon the applications maybe some applications need high end (inaudible), so you may ramp 3-D NAND just for that applications to begin with? Maybe just if could you talk about what is your strategy on the 3-D NAND side?

So let me try and characterize. Obviously, early on, as with any new technology, we are going to pick a couple of applications first, as Mark Adams mentioned a moment ago. Our technology, I think, as you look at different suppliers in the marketplace, different suppliers are taking different approaches to 3-D NAND technology. Some of them, as I think you are implying Monika, have limited performance on certain planes or parameters. Micron's technology, we believe, is more generally applicable to the full swap of applications currently being serviced by planar NAND. So we expect over time we will roll our 3-D NAND across the spectrum. And yes, of course, we believe, over time it will be significantly more cost effective than planar NAND given the scale that goes on with 3-D NAND.

And then, if I heard it correctly, you said that volume ramp is in latter half of 2015.

Well, it's tough to pin that because we have to say what we mean by volume and all the details associated with that but yes, we believe it's a 2015 phenomenon for production ramp on 3-D NAND and significant in the marketplace, probably more or so in the second half than the first half.

Okay, just a last question on the current pricing trends in the NAND market. At least what we see on the channel is slightly weak. Maybe could you talk about pricing trends in different segments in the NAND market?

The way you have asked the question, the way we look at it, there are some parts of the NAND that have remained very strong and robust and there are some that have shown some of the weakness you are talking about. Some of that by the way is pretty natural out of the holidays, but it's not as severe as prior years necessarily. We also see some people who are exposed in the NAND business in the mobile market getting a little more aggressive with that capacity and the low-end client business, quite frankly, we are not going to play that game. In addition to moving the components to other application segments, we don't necessarily want to sell our business just to compete the market share perspective, where other people are trying to grab share on pricing, so independent of the Fab 7 dynamic I mentioned earlier, overall it's not bad NAND business, it's just there is pockets of weakness coming out of the holiday and with some softness where people are exposed.

Thank you so much. That's all for me.

Thank you. Our next question comes from John Pitzer, Credit Suisse. Your line is open. Please go ahead, sir.

Yes. Good afternoon, guys. Congratulations on the good results. Guys, just relative to the November quarter, I think you said there was $250 million benefit or prepay of DRAM from a customer, I am kind of curious one did that product ship? I guess given that we are all worried about Wuxi coming back online and DRAM pricing going lower, what's the motivation behind the customer actually coming into a contract at today's pricing?

Well, as we commented on earlier, the way we plan our business is basically with a full Wuxi fab capacity in the market. As Mark Durcan commented on earlier, we have got kind of bit of a shift in dynamic with certainly Wuxi coming on at some point. We don't know when that is, but some point in the future but offset partially by our continued Fab 7 conversion. If you put that altogether and balance with industry up at about mid-20% range of DRAM bit growth of the year, we think that's in line. We don't think that's going to drive a significant oversupply in the market and we think the customer see that too, so as customers look for 2014 sourcing, as they think about kind of when Wuxi may or may not come online, they are trying to lock up capacity and commitment and are going to make it through as - future calendar 2014.

Mark, that's helpful. When does the product ship?

We don't want to get into detail, but it's kind of over a longer period. The intent was to secure output over a long cycle, not in a specific quarter for example.

Great. That's helpful then guys in the prepared comments I think you mentioned that you shifted SSD enterprise drive this November quarter. Was that sample or was that actually true shipment of revenue? I am just kind of curious how do we think about the enterprise SSD as a percent of overall SSD mix? Any targets you can share with us for this fiscal year and how should we think about the gross margin differential between enterprise SSD and consumer SSD? Thank you.

Well, let me answer your first question. It was a sample on the M500 DC product. It was based on our 20 nanometer technology. As we look at it, as I mentioned in terms of the NAND behavior in terms of ASPs and market, on the higher density in the enterprise market obviously we would like to drive as much of our capacity to that segment. Where customers who have got exposure into the high end smartphone business have capacity, what we are seeing is some aggressive pricing in the client business and we are going to take a look at that versus our retail business which is doing pretty well, and versus our component business and versus other application segments, so we don't necessarily want to go head-to-head and try to compete truly on price in the client business. If you look at our client business, on its own merit, our average densities in client are much higher than the market and because we are trying to keep that above, what I would say, the trading client business, which again you have got a lot of capacity in the high end smartphone business that's exposed, you might be bit more aggressive in the [business].

Perfect. Thanks. Again, congratulations again.

Thank you. Our next question comes from Steven Fox from Cross Research. Your line is open. Please go ahead.

Thanks. Good afternoon. Just a couple of quick clarifications from me, on the yen part for the current quarter, can you just give us a sense of what you are assuming and how much of a benefit it is quarter-over-quarter to expenses? Secondly, in terms of just looking at the Elpida cash margins, I don't know, maybe I missed it, but are you being specific about where they exactly were in the quarter? And then lastly, can you just talk about, I think, you said it is still early on in getting Elpida integration integrated fully. Can you talk about what else is coming, maybe between now and the end of the calendar year?

Sure, Steven. With regard to the Yen, if you are talking about our forward view, Q1 to Q2, we don't typically assume any exchange rate changes in our outlooks as we give guidance going forward, if that's what you were looking for.

Yes, so it's a benefit, quarter-over-quarter. Is that correct? Like versus what you just reported?

Yes.

Okay.

In terms of your question on Elpida cash margins, we are not going to give any more detail on Elpida specifically other than as we mentioned we met or in general, exceeded our projections we gave in August and that was a pretty good outcome in terms of flowing that through our business and getting it combined with overall Micron.

Great, and then just on the roadmap for Elpida integration, please?

Sure. I don't think there is anything alarming to the process. I think what the comments on integration are that the teams is coming together, they are working pretty well. Of course, we have got the 25-nanometer ramp ongoing as well, as I talked about, second half of the year 20-nanometer product in the market. So as it relates to the focus of the team and just the timeliness of the integration efforts with engineering teams coming together, the marketing organizations coming together, looking at market segment optimization with that team as part of Micron has actually been very helpful for us because of the dynamic between the mobile and computing bit optimization we talked about from an ASP and wafer, our perspective. So a lot of normal stuff in integration that we feel pretty positive about and I think the customers see the breadth and the opportunity for flexibility in our portfolio whether it would be in the mobile portfolio or the pure computing portfolio.

Thanks, Mark. And I think we have time for one more caller.

Thank you. Our next question comes from Kevin Cassidy from Stifel Nicolaus. Your line is open. Please go ahead.

This is Dean Grumlose calling in for Kevin. Thanks very much for squeezing me in here. My question is, can you provide a little extra color on the relative performance and demand in the server segment. I think we often talk about PC and mobile, but how strong is that segment in terms of demand perspective and what do you see going forward?

Yes. I am sorry. This is Mark Adams. We continue to be very bullish on the server market, really primarily for two reasons. One, which is the applications driving at the data center, cloud computing dynamic, coupled with as much DRAM as they can put in the servers they are putting into the bit growth in servers last year continues to play into this year's numbers and we are seeing significant bit growth in the 50% to 60% range in the server market. So we feel pretty good about that business and it has been very stable and we have been capturing more share quarter-over-quarter for five to six quarters and starting to get in the and setting server market records.

Okay, and as a quick follow-up on the Inotera cost structure arrangement. Does it matter at all which segment the device is for or what else can you provide as insight to how that works?

So Dean, this is Ron. In terms of the Inotera structure, we don't get into a lot of details on it, but as I think we have commented, it's an averaging pricing mechanism looking at past three months on a moving average basis. So there is a lag defect as that flows through and then in general, we neutralize differences in mix so that we have the complete flexibility to move whatever products where we want in our system. So it doesn't have an difference fundamentally in our pricing or transfer pricing as a result of mix.

Okay, that's very helpful. Thank you so much.

Thanks, Dean. With that, we would like to thank everyone for participating on the call today. If you will 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 the 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-Ks. Thank you.

Thank you, sir. This concludes today's Micron Technology's first quarter financial release conference call. You may now all disconnect.