AGM 2014

Jan 22, 2015

Slides

During the course of this meeting we may make projections 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 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. Good morning, and welcome to the Micron Technology 2014 shareholder meeting. I think before we get started with the formal business, I'd like to take a brief opportunity to introduce the directors of the company who are with us here today. First, if you just stand, when I call your name, Bob Bailey, Rich Beyer, Pat Byrne, Mark Durkin, Warren East, Mercedes Johnson, and Larry Mondry. Thank you all. So now we'll move quickly to the formal business of today's meeting. I've received an affidavit stating that the notice of this meeting and a proxy statement have been given to all shareholders of record as of November 21st 2014. The Inspector of Election, John Seaman, he's in the audience. Maybe he could just stand. Thank you, John. Has, of D. F. King has signed the oath of Inspector of Election. Has reported to me that we have of the outstanding shares entitled to vote at this meeting, which does constitute a quorum I therefore declare this meeting duly convened. We will vote by ballot today If you've turned in a valid proxy and do not intend to change your vote today, it is not necessary for you to vote again. We will vote your proxy. And we will distribute a ballot to you, for your vote. The first item of business is the election of directors. Bob Bailey, rich buyer, petburn, Mark Durkin, Warren East, Mercedes Johnson, Larry Mondrey and I have been nominated to serve until the next annual meeting or until our successors are duly elected and qualified. Is there any discussion? Okay. Seeing no discussion, please mark your ballots. The second item of business is the approval of the amended and restated 2007 equity plan discussion. Or excuse me, plan, is there any discussion on this item, okay? Seeing none, please mark your ballots. The third item of business is the ratification of the appointment of Price Waterhouse Coopers as the independent registered public accounting firm of the company for fiscal 2015. And we have a representative of PwC here today, I believe, Larry Westall. Okay. Thank you, Larry. Is there any discussion on this item? Okay? Seeing none, please mark your ballots. The 4th item of business is the approval of an amendment to our restated certificate of incorporation to eliminate cumulative voting. Is there any discussion on this issue? Okay. Seeing none again, please mark your ballots. The 5th item of business is to approve the material terms of the performance goals under our Executive Officer performance incentive plan. Is there any discussion on this item? Okay. Seeing none, once again, please mark your ballots. The 6th item of business is to approve a non binding resolution to approve the compensation of our named executive office as described in our proxy statement, if there any discussion on this item. Okay? Seeing none, please mark your ballots. The company has not received notice of any other matter to be presented and voted upon at this meeting. Therefore, this concludes the voting. To the aisles for pickup. And, there being no other formal business to be presented at this meeting. I now declare the meeting adjourned. And I will step down, and I'd like to welcome Mark Durkin the podium. Well, thank you, Bob, and thank you, everyone for coming to join us, here today. I have a a brief company update, and and Mark Adams will will also speak to you a little bit about what's going on in in operations and with our products and customers. But before I I jump into that, I'd like to recognize a few folks Larry Westall, can you, Sandy, and Larry, the, lead partner for PwC, on the Micron account? Thank you, Larry. And, some of the officers, here at Micron that are in attendance today, Scott DeBoer, vice president of research and development. Mike Sadler, vice president, corporate development Steve Thorson, vice president of sales. Darren Thomas, vice president of Storage Solutions. Brian Shirley, vice president, memory products, Joel Poppin, General Counsel, Kip Bedard, VP, Investor Relations. Sorry. I can't see back there in in the name. Oh, Steve Casper, vice vice president, nonvolatile engineering, John Shrek, vice president, DRAM, Rob Morgan, vice president procurement, John Waite, vice president of supply chain, and now coming back to the front row, Mark Adams, president, And and and finally, and I'd like, Ron, Foster, our CFO to stand up and and Ron, just stand for a minute while I try and embarrass the unembarrassable. Ron Foster has been a a a wonderful, CFO for Micron and team member, former board member, is retiring, in about a month. And, I just want to take the opportunity in front of our shareholders here to to thank Ron, for the really phenomenal job he's done for the company as CFO and part of that as a director of the company. We would not have had the progress we've had over the years be the company we are today, without Ron's leadership on the finance side, but also in terms of building, the executive team, the skills of the executive team, the collaborative culture, we have today. So Ron, thank you so much. Alright. 2014 was, you know, I think another, another very solid year, for Micron. We worked hard on on innovative products for our customers. And, you can see here, a lot of activity throughout the year delivering not only, leading edge storage solutions in terms of SSDs for the client, for the data center, and other storage solutions in the mobile space. But also innovative products for computing, whether it's in, in, more client oriented, activity or for high performance computing in, in Intel next generation processors or in package memory for for high performance products, out in the years beyond that. We introduced innovative new, non memory products like the automator processor, And we recognized, by by, many customers and industry, pundits for the of some of the technology we deployed as well, including our 16 nanometer and NAND technology and, and the underlying technology in our storage solutions. So I think really a very, very productive year for Micron in terms of getting new products into the marketplace to support our customers. And it shows up in the financial results. Really if you look at at Micron's performance for 2014 versus 2013 across every line item, but one here which was the the, the, contribution, from the LP to purchase in 2013, a dramatic improvement in revenue and operating income and net income. And it showed up in cash flow as well, much of which we put back to work in the business investing, in our capital equipment and people, but also, finding a lot of of of cash to return to the shareholders through repurchase of convertible debt. So, you know, I think, I think the team here at Micron executed well and, is is very, very focused on doing the same for you in 2015. We also spent time, positioning the company for the future And as you think about, some of the moves we made as we move through the year, investing in our people and organizing the company to deliver the products and the solutions we need to in the future, you can see that we weren't, standing still there either. In the March time frame, we reorganized the company into into 4 different VUs. And and added talent, for the storage BB promoted from within for the enterprise, for the embedded business unit, continue to invest in personnel, to drive advanced, technology solutions into the compute space. With Steve Lansky in the middle of the year and continue to invest in the infrastructure here, in the community and Boise around the world to make sure that that our employees continue to develop and get the training they need and have access to the education that'll, that'll help them, succeed and develop, into the future. Near the end of the year, we made a couple of announcements relative to infrastructure for the company to make sure we have the clean room space, to deliver next generation, technology products, to the marketplace in 2016 and beyond, as well as, in partnership in in back end manufacturing capacity to give us the flexibility and and efficiency we need as we continue to grow the business, around the world. Many of you, shareholders in the room know that we we we have significant investments in Singapore. In fact, we run our operations out of Singapore. We have, 3 existing fabrication facilities there, including 2 large 300 millimeter nonvolatile memory fabs. At the end of the year, we announced a a decision to, increase the size of that manufacturing facility there. To enable us to deploy 3 d NAND technology, which I will come back to, here in a, in a couple of minutes. The, the, the growth of of the, of the manufacturing, footprint in Singapore allows us to really effectively and efficiently And gradually, as market demands, increase the scope of our manufacturing there, while leveraging the existing equipment for greater efficiency, the existing, trained workforce, to to lower risk and to make sure that we we get the most effective deployment of this really, game changing, nonvolatile memory technology out in the future. It also allows us, to leverage all the engineering resources and infrastructure we have there as we think about other, future technologies like storage class memory, moving into the future. The memory market, conditions I think are, remain, very robust. I think generally speaking, when we think about the memory industry today, we think it is one of the best segments, if not the best segment, to think about investment in the semiconductor industry. And that's because when we look at, at, at what our, our, our customers are seeing and demanding. We see growth across a broad swath of applications that that Mark Adams will talk about here in a minute. And we see the the the rest of the pieces, that go to the puzzle in terms of, of enabling us to, to generate return for our shareholders as we as we invest in that we see good growth, but we also see a marketplace, that has, rational response to, demand, rational in the sense that we don't have to overinvest just to stay at the efficient operating frontier. As technology migration has slowed, we choose to invest when we see demand in the marketplace. We don't in Micron doesn't have to invest just to stay up in a, in a, in a rat race, relative to deployment of that technology. We see, really, robust, unit growth per application whether it's in in automobiles for infotainment and safety or in medical devices of the future or wearables technology. Advanced solid state storage for the data centers, servers of the future, very, very strong growth, across a broad swath of markets. And that allows us, as we think about, tuning our capacity and delivering it to the marketplace to make sure that we really are building, products and shipping them into markets that that have the demand for them. We continue to position the company, with a strong balance sheet and a flexible, business model. I think we've done a good job over the last number of years, putting capacity in place in a in a capital efficient manner, either through partnerships, or through acquisition, at the right time so that the the micron, capacity has a relatively low fixed cost. Gives us the flexibility to to, dial our, capacity appropriately for market conditions and and generate a high return on on assets and a high return on uninvested, capital as we move forward. We also have, you know, I think a a a very flexible balance sheet. We've we've taken a lot of activity through the years, and through the last couple of years, to, restructure that as market conditions have changed. And as our our internal cash flow has become more robust, and we will continue to dial, the knobs on our balance sheet to access capital in all the markets around the world that we have access to and to, return capital to shareholders in in ways that make sense given our internal, growth profile and internal investment profile. So, yeah, I think the the table is is is well set as we move into 2015 from a a product, introduction perspective, from a, a technology positioning perspective, and from a market, a robustness and and financial balance sheet and engineering perspective. 2015 will be all about technology deployment for us. We have a lot of work to do in 2015. And these new technologies, whether it's 20 nanometer NAND that's going into manufacturing in our fab in Japan and in in in our joint venture, in in Taiwan. Or 3 d NAND going into, existing fab and then beyond that into the new fab in Singapore, these are are complicated difficult technologies, but we have experienced teams in place. And, and really we've, we've done, you know, I think a very, very good job with the integration of the new team members over the last couple of years. So we have a a strong engineering base in Japan to tackle the 20 nanometer technology deployment. We've got a strong engineering workforce in Singapore running across across 2, 300 millimeter fabs, to deploy this 3 d NAND. And, we're we're very, very bullish on the technology position of both of these technologies and the products that they will enable, I think, will will be the next leg up, for Micron as we think about the future of memory. I'm gonna, stop here, and hand it over to Mark Adams in a minute. But before I do, I wanna run a a quick video for you and just let some of our customers tell you a little bit about how they, are using the products Micron's building and how really they are, changing the world with innovative new memory products. So if we can roll that video. The end applications where memory now exists. You know, one simple way that Mark likes to refer to it, internally is if it's powered by a battery or you're plugging it in, micron memory is powering that application. That's a great example, those 4 examples, but there's many more. And it's a dramatic shift from where this business has come over the last 5 to 10 years. When you think about the memory business and the stereotype of the commodity memory business and the shift to where we see today and the promise of tomorrow. Number of different technology trends are leading us down this path, the capability to drive these applications. And the underlying foundation is memory, but the difference for us, the difference for us is that the memory is not one industry to find recipe on how memory gets applied. The difference for us, whether it be mobility or machine to machine enterprise big data applications. The difference for us is that the applications are defined specifically for that solution. And that's an exciting differentiation from today's business model from where we can. Now, in order to take advantage of that, as Mark mentioned, We have to set ourselves up for that success in a lot of different areas. 1st and foremost, we have to set the company up for success to understand that we're not just making chips for a big market that's going to be trading chips on pricing on a, on a daily basis. We're out, we're now engaging with customers 1 to 1, as you can see in that video, on what their needs are and how we can configure these applications and technologies from Micron to empower their systems and solutions. So the networks, of resources that we have from sales and engineering and marketing and what have you are all part of a new structure that put out, and implemented that last March into 4 business units. We say market facing business units because we really drive our product roadmaps towards where the customers want Micron's technology to support their business. CMBU is an acronym that stands for Computer Networking Business Unit. And that is a core operation that's solely focused on taking our DRAM technology and innovating around a high bandwidth, high performance, compute and, transmission of data across networks. Our storage business unit is primarily our NAND technology and how it applies to both consumer and enterprise storage applications. A big growth opportunity for us in storage is in this evolving phenomena of solid state drives. And that's the ability for us to use flash memory technology to, add value and enhance storage capabilities, not just in consumer applications, PCs, tablets and smartphones, but now evolving two applications in the enterprise. The idea that we develop solutions and technologies for leading financial institutions to store massive data to run their business is an exciting opportunity and its infancy. Our mobile business unit represents, leading, portable mobile applications such as smartphones and tablets, that leverage both NAND and DRAM, technology and future emerging technologies and how we can actually provide the capabilities to run these units that really now are configured like laptops of just a year or 2 ago. You look in your pocket, you're probably holding a smartphone that has 3 gigabytes of DRAM and maybe 64 gigabytes of NAND storage. We're holding laptops and smartphone configuration. The power of the technology is allowing us to do so much more in terms of end application consumer support. Our embedded business unit, or Ebu, is really a catalyst for how we think about the long term applications in memory. Embedded has been historically a business where we work with customers for specific applications, whether it be gaming, or their automotive customer or, machine to machine type applications where it's very specific one to one design. And as the memory business evolves, we're going to continue to grow that area of our business. And I think that will transcend in what our business looks like over the long term. So these businesses for us represent a new approach on how we engage our customers, and we listen to them and understand how they impact our product development in our overall technology direction. Mark mentioned 2015 is an exciting year for Micron in terms of technology. Technology evolution that allows us both in DRAM and NAND Flash to evolve and offer better performance, better power capabilities, more reliability. And so as we think about the technology that Micron has historically brought to market, we continue to push the envelope on not just that, but Cape abilities to take that technology and differentiate. If you think of, the example of hybrid memory cube where we're not just innovating with silicon, we're also in, maybe even how we actually package the silicon and offer a differentiated solution to a networking or high performance computing company. So this is kinda how we see this. This one slide would tell you what we see in terms of our business and how it evolves. We have to continue to be the best in the industry at innovation at the core silicon level. But the opportunity to differentiate long term Really revolves around our ability to take that core technology where we lead and add value, whether it be through packaging. Our controller development, firmware, our software, or even develop end systems. You think about storage opportunities where we can actually bundle all this into leading edge all flash array technology. That is the opportunity. That is the path for our company going forward. And that is what we're investing from the competency in our overall organization structure, our capabilities in our design and research and engineering. The ability to integrate all this and serve our customers. While we do that, we continue to maintain a, rigid focus on being the best in operating efficiency. And I would say that in 2014, our manufacturing, backend, test and assembly, our supply chain operations, They all contributed to, to world class performance, cycle time reduction, inventory management, on, customer delivery performance. These type of metrics that we run our business on day to day team did a fantastic job, but we have a lot of room to grow. Because as you might imagine, as we think about changing from a commodity business to end to end customer solutions 1 to 1, that puts a whole set of new demands on our supply chain and how we serve our customers. And that's what we're focused on every day of our lives and how we can take technology, provide differentiation, and then give the customer the reliability and confidence that Micron will deliver. The evolution, what's the output for us? How do we think about success? Well, in addition to customer feedback and customer service and our results with gaining, new wins with our relationships and our partners, we look internally to say, are we taking advantage of this wonderful opportunity at Micron has in terms of providing differentiated solutions to more attractive markets. As I said, what a difference 10 years makes and the capacity that we're using, our precious capacity that we've invested in. Now we're taking this and evolving this to new market applications that are both allowing us to differentiate and play a more important role with our customers, but also drive better performance and better return for our shareholders. And you can see that 2014, we made a lot of progress, but there's a lot of work that Mark said to be done, and we're committed to that as a team. So with that, I want to hand it back over for Mark for closing comments and Q And A. Thank you. Thanks Mark. So let let me just, wrap by saying, this team is very, very focused. We're focused on value added products and solutions for our customers. We're gonna continue, investing in advanced technology and advanced manufacturing capacity so we can deliver, those products and enable, not only the most differentiated and and and performance differentiated, solutions to the marketplace, but also do it in a cost effective and efficient manner. We're gonna keep driving internally on operational improvements, across a broad swath of of, areas and technologies. We really have as a as the world's only truly global memory manufacturer. You know, I think access to the best and brightest around the world, we're investing that team, developing that team, and, and and they're responding and driving operational excellence moving forward. We're gonna continue developing, really innovative leading edge technologies, whether it's things like 3 d NAND or other storage class memories. Or or whether it's, new ways of thinking about using memory technology to to bring processing and memory closer together. We're gonna keep working on a strong financial model that recognizes the growth opportunities the company can invest in as well as, returning value to our shareholders. And when you put it all together, we're gonna we're gonna optimize this business, for the long term, for the future. And, well, with shareholder, and and customers worldwide in mind. And so when you look at at this this little, drawing we've had on the right on all these slides and you, and you talk about what is Micron, innovative, trusted, collaborative driven. That's what we are. That's what we're gonna, do for you as shareholders and, and, move this company forward into the future. So with that, I wanna stop and, answer a few questions. And there's a microphone. If you just raise your hand, someone will bring you a mic. And that way, everyone in the room, and and all I can hear you. I don't know the answer to that question, but we can I I I don't know any reason why we couldn't make that available online? It probably already is on on micron.com. As one of the longest shareholders, in both time and perspective, I'm proud of our accomplishments in helping to bring computers to the world through memory excellence. And I think Micron is is demonstrated excellence throughout their history. But as we've seen, this commodity has been and probably will continue to be cyclical and has fostered both financial and personal success. Followed by, hardship. My recommendation to help Micron prosper is to diversify when we're strong into something that will inspire our customers, team members, partners, and, yes, all of us stockholders. I would propose that you and the board seriously consider partnering with other leading companies in the Consumer Medical Technology, field, we're at a unique point in time where small sensors, memory, and big data are poised to help solve many of MannKind's health issues, and memory is going to play a key role in that. This paradigm shift in health care is driven by personal computing products, data, and services not institutionalized medicine. Since Micron has a unique ability to respond to this market, With small, low cost technology, I believe we also have the responsibility to deliver. If we put our people, memory, and capital to a higher use, they will achieve higher returns. The key to any business is its people. My question is, what do you plan to do this year to retain, attract, and inspire our team members to produce products that improve the quality of life of our customers, partners and stockholders. Thanks. Well, there's a, well, there's a lot in there. You know, I think certainly relative to the, to the diverse vacation issue and and in particular medical, market segment. You know, we're very we're very engaged in all those things, but but Micron is our our business is about memory and memory solutions. And so we don't wanna be a medical device provider. We wanna make sure we've got the right memory solution, subsystem system, system, to power all those end applications. And we're very engaged, in all of those things. When you get to the question about what are we doing to inspire our team and to develop our team, to make sure we're ready for the future. We continue to invest heavily, in internal training. We have, boy, 100100 of of folks now through our our, technical and engineering internal program, where we take, incoming technicians and engineers and provide them with advanced training to help make sure they, they, continue to develop their technical skills and, and have the wherewithal to develop these advanced products. We continue to invest with our university partners, here in Idaho and around the world. We spend a lot of time talking to our our team members about these end applications how what they're doing really is changing the world. And, you know, they get it. This team, at Micron, whether it's here in Boise, Idaho, or in Singapore, in Taiwan, or or in Japan is highly energized, to make sure that we continue to innovate and think about end customer markets and, and the things that Micron can do to add value for our customers. So, you know, it's about communication. It's about training. It's about education. And, it's about, you know, hiring and retaining the best and brightest. And, and as a management team, we're very focused on all those things. Thanks for the question. Oh, we got one right here. Yeah. Prior to the meeting, I asked you a question about the, and you said that Mark Adams was gonna answer that one. But I don't see him on the stage. Well, you know what? Go ahead. Why don't you restate your your question for the room? And I'll I'll take a stab And if Mark wants to say something, we'll let him say that too. Well, my question is, the automata, chip, is just now coming out for early adapters. And, I was wondering, some of the functions that we would see this, fulfilling in the memory market. You know, the timeline for it being, you know, a commodity, not commodity, but a, on production at a fairly high level. Yeah. So, let let me answer that. And then, actually, I think, you know, Brian Shirley, if you wanna add something, I think that would be appropriate. You know, the, the automata processor is a, is a highly disruptive way of thinking about, about, computing and dealing with data. And at it core, what it really is is a very, very fast and adaptable, customizable pattern recognition engine. And so that's going to be used over time as people learn how to use this technology and write the software code, and and understand how it can be used in their applications. It can be used for all sorts of different things. You know, I think an early, an early application will be virus detection in in, in networking. I think it can be used for for real time, medical applications, like we were talking about a while ago, for DNA sequencing and understanding very quick analysis of samples of biological material, whether it's blood or saliva or sweat or whatever. To to understand what's going on, in chemistry and chem and chemical environments and and, genetic environments. Beyond that. I think it can be used for facial recognition and speech recognition. Lots of different ways, to take this and use it really not as a probably as a system main processor, but as a, as a co processor to perform specific applications, that we can't even dream of doing today. When will it be significant? Well, we're just rolling out now, into the into the, development community, development boards where they can, they can take this, technology on a board that enables them to actually program it and and play with understand, what is achievable with this. And it's, it's, it's the type of, disruptive innovation that's going to take people a while to figure out and to stand. So we're not looking for a, a huge revenue, this year or next year or probably even the year after that. But over time, I'm a real believer. It's gonna have significant impact on the way people think about data and what's possible with big data sets and, and, and real time analytics. Brian, did you want to add anything to that? You know, Mark, I think that's, very well said. It's this is pretty revolutionary technology, incredibly powerful technology. And we're pretty excited about it. It this is it's it's revolutionary enough that it takes, some time to show the of how to use this and and for the world to figure out how to use it. But really in terms of the initial applications, be thinking on the infrastructure side, in particular, I think Mark said it well. The networking space, specifically, really what this technology is optimized for is very massive parallel real time data, pattern recognition. And the best example I can think of for that is analyzing traffic coming over a network, looking for viruses, specific patterns, potentially even what they a deduplication inside of storage systems, and and really, just revolutionizing how data analysis happens. So think of that as really the tip of the spear, application. The applications beyond that, frankly, are, infinite. And really, probably the most excited communities are actually, even on the academic side where they're looking into ways to truly, truly transform the way computing happens inside a big data. Alright. Maybe maybe one more if there's a quick one. Right there on the 3rd row. Yes, Mark. You are to be complimented on the way in the last few years. You've grown this company, but many investors are wondering why it's trading at a 8 to 1 PE ratio. And because the answer to that is is for everyone's, looking forward to the declaration of a of a dividend, which will push you up to the the proper valuation of your company Can you tell us anything that you have planned for the future in that regard? Yep. Thanks. So appreciate appreciate the sport. The the, the the way we've used our cash, our free cash flow over the last year, a lot of it has been used to return, value to the shareholders, through repurchase of, of convertible bonds that had the potential as the stock price continues to rise, to, to dilute future earnings. So we want to take care of, of some of that first. And I think over time, at some point in the future, I have no timeline for this at all, and and I I I I don't believe our board has a timeline for this today. We will, look at what what other ways to return value to the shareholders might be. But I think that the most important thing for us to do, today is to, continue to, to restructure the balance sheet relative to those convertible bonds and maybe move more of our debt over time into, high yield straight debt. And then as we think about the future and we have, you know, continued sustained high performance as we've, we believe we've done over the last couple of years. I think over time investors will look at this company and and begin to to value us more appropriately. If at some point in the future, we think the dividend is the best way to return capital to shareholders. We'll certainly consider that as well. That's that's not likely to happen, this year. Alright. I wanna thank everyone for coming. We're working hard on your behalf. We think we've got a bright future and a and a and a a great opportunity, and this team is very, very focused on delivering on So