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Micron Technology, Inc. (MU)

Q4 2018 Results Earnings Conference Call

September 20, 2018 04:30 PM ET

Executives

Farhan Ahmad - Head, IR

Sanjay Mehrotra - President and CEO

Dave Zinsner - CFO

Analysts

John Pitzer - Credit Suisse

Romit Shah - Nomura

Amit Daryanani - RBC Capital Markets

Tim Arcuri - UBS

Aaron Rakers - Wells Fargo

Harlan Sur - JP Morgan

Mehdi Hosseini - SIG

C.J. Muse - Evercore

Presentation

Operator

Good afternoon. My name is Latif and I will be your conference facilitator today. At this time, I would like to welcome everyone to Micron Technology’s Fourth Quarter 2018 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-answer period. [Operator Instructions]

It is now my pleasure to turn the floor over to your host, Farhan Ahmad, Head of Investor Relations. You may begin your conference.

Farhan Ahmad

Thank you. Welcome to Micron Technology’s fourth fiscal quarter 2018 financial conference call.

On the call with me today are Sanjay Mehrotra, President and CEO; and Dave Zinsner, Chief Financial Officer. Today’s call will be approximately 60 minutes in length. This call, including audio and slides, is also being webcast from our Investor Relations website at investors.micron.com. In addition, our website contains the earnings press release filed a short while ago.

Today’s discussion of financial results will be presented on a non-GAAP financial basis unless otherwise specified. A reconciliation of GAAP to non-GAAP financial measures may be found on our website, along with the convertible debt and capped call dilution table. As a reminder, the prepared remarks from this call and webcast replay will be available on our website later today. 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. You can also follow us on Twitter @MicronTech.

As a reminder, the matters we will be discussing today include forward-looking statements. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from statements made today. We refer you to the documents we file with the SEC, specifically our most recent Form 10-K and Form 10-Q, for a discussion of risks that may affect our future results. Although we believe 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 today’s date to conform these statements to actual results.

I’ll now turn the call over to Sanjay.

Sanjay Mehrotra

Thank you, Farhan. Good afternoon, everyone.

Our fourth quarter results contributed to a year of unprecedented success for the Company. With record profitability and revenue over $30 billion, Micron ended fiscal 2018 as the second largest semiconductor company in the U.S. The new Micron is undergoing a fundamental transformation, driven by our 34,000-plus employees around the world whom I would like to thank for their intense focus on our key priorities.

Our markets are propelled by diversified, secular growth trends, our industry is more rational and the Micron team is executing well against the Company’s strategy. Over the last 12 months, we have sharpened our focus on improving our cost structure and on increasing the mix of high-value solutions in our portfolio, all of which position as well for the future.

Our technology roadmap and manufacturing execution is driving strong cost reductions for the Company. Over the last year, we have increased production DRAM bits per wafer at a higher rate than the industry, reducing the cost gap with competitors. We are on track to achieve total bit output crossover on 1X nanometer DRAM in the first quarter of fiscal 2019 and have already achieved bit shipment crossover for 1X nanometer in the client and graphics markets in the fourth quarter.

We expect 1Y nanometer sales to commence before the end of calendar 2019 with meaningful production increases beginning in the fiscal third quarter as previously announced new cleanroom space comes on line at our Hiroshima facility.

We’re also making good progress on our 1Z nanometer technology development.

In NAND, cost reductions and mix improvements have helped us deliver sequential gross margin expansion even as pricing declined in the industry.

At this time last year, our bit output share was meaningfully below our wafer market share. Over the last 12 months through the strong execution of our 64-layer ramp and a higher mix of TLC, we have reversed this trend and now have our bit share ahead of our wafer share.

We remain on track to move 96-layer NAND into production this calendar year and we’ll continue to ramp it next year, which should provide us with solid cost reductions in fiscal 2019.

We have already commercialized CMOS under the array, QLC and array stacking on 3D NAND while most competitors still have these challenges ahead of them. Our technology leadership positions us well for the year ahead and we’re pleased with the headway we are making on our fourth generation 3D NAND technology, which uses a replacement gate architecture.

We also made excellent progress increasing our mix of higher value added solutions, delivering record revenue in our SSD and multichip package products this quarter.

Our enterprise and cloud SSD quarterly revenues more than doubled year-over-year, as we strengthened our position in SATA SSDs.

A third-party research firm recently recognized Micron as the number one market share leader in enterprise SATA. We achieved well over $2 billion in annual SSD revenue in fiscal 2018.

Read the rest of this transcript on seekingalpha.com