M&A Announcement

Jul 2, 2012

Good morning. My name is Allie, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Micron Technology Announced agreement to acquire LPDA Conference Call. Thank you. It is now my pleasure to turn the floor over to your host, Micron, Investor Relations Director, Ivan Donaldson. Sir, you may begin your conference. Thanks, Ali, and welcome to Micron Technologies conference call to discuss the announced agreement to acquire LPDA. On the call today, CEO and Director, Mark Jerkin, President, Mark Adams and Chief Financial Officer And Vice President of Finance, Ron Foster. 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 today's press release, it is also 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 404537 3406 with a confirmation code of 96034829. This replay will be run through Monday, July 9, 2012 at 5:30 pm, Mountain Time. The webcast replay will be available on the company's site until July 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 we'll be attending. Please note the following safe harbor statement. This presentation contains forward looking statements regarding future events that involve numerous risks and uncertainties. Various factors could cause actual events or results to differ materially from those anticipated by the forward looking statements. These factors include the factors that are disclosed in our most recent Form 10K10Q, including in the risk factors section under the heading, debt obligations could adversely affect our financial condition and we may make future acquisitions and or alliances, which involve numerous risks. Although we believe the expectations reflected in the forward looking statements are reasonable, We cannot guarantee future results, levels of activity, performance or achievements. Statements after the date of the presentation to conform these statements to actual results. I'll now turn the call over to Mark Durkin. Thanks, Ivan, and thank you to everyone for joining us on the call and webcast today. Ron Foster and I are joining the call from Tokyo, and are very excited to announce that we've entered into a sponsor agreement for Micron to acquire 100 percent of the equity of LPDA. We've also agreed to purchase 24 percent of RecShip's outstanding shares from Power Chip. As you may know, Alpita owns 65 percent of Rec Chip So together with the Rexchip shares acquired from Powerchip, Micron will now own 89% of Rexchip at the close of these transactions. We're truly excited about this opportunity to create the industry leading pure play memory company. Our customers, employees, investors will all benefit from the added scale and cost synergies, improved product portfolio and manufacturing flexibility, as well as our enhanced technology development capabilities. Before I go any further, I'd like to acknowledge the great effort of the LP to Trustees and management team along with the Tokyo District Court. Their combined efforts enabled us to forge this alliance with the conclusion of intense process that was conducted over the last few months. We believe Micron's sponsorship agreement offers the most attractive alternative for Alpida's creditors, employees and other stakeholders in Japan. Moving to key terms. The agreement called for us to pay in the end approximately $750,000,000 in cash at the close. In addition, approximately one point $75,000,000,000 of investment payments, installment payments will be paid beginning in December 2014 and ending in December 2019, from the cash flow generated $5,000,000,000 will be used to satisfy In addition, we have agreed to support LP this 3rd party financing of CapEx to cover a predefined technology path The financing will only be utilized by LP that their operating cash flow does not cover the required CapEx. The LPDA trustee plan to submit a plan for reorganization in mid August. This should be followed by court and creditor approval in calendar Q4 of this year. We expect the transaction to close in the first half of twenty thirteen, depending on timing of required government approval in various countries. Next slide please. Technology platform, leading edge product portfolio, international manufacturing network, and impressive customer base around the world. We're excited about joining the teams together Moving to the strategic rationale for the deal. The memory business is perhaps the most competitive and rapidly evolving the world. It requires significant ongoing technology, product development and market development investments, and the resources and larger served market of the combined companies will bring cost synergies as well as scale advantages. These synergies in the following areas: Manufacturing scale, capital equipment optimization, backend and test alignment product mix and R and D scale and optimization. The way we have structured this transaction, we will have the flexibility needed to operate the company in a way that delivers on these opportunities. This deal will create a significant improvement in Micron's operating model From a manufacturing integration perspective, we see lots of opportunities for efficiency gains. We plan to move to a combined roadmap for wafer technology development, onto wafer fab manufacturing and packaging and test. This will drive operational synergies, which while not immediate, are very real and will be very significant over time. Additionally, there are numerous manufacturing efficiencies that come simply with scale. Also important will be our ability to tune capacity to meet the evolving needs of our customers. This can take a number of forms. One example would be the enhanced ability to serve as high value networking enterprise and embedded market segments with a combined business. Additionally, Micron has a broad memory technology offering ranging from NAND to DRAM to NOR to face change memory. Memory capacity is fungible over time and we will now be in a position to better meet our customers' needs. I believe they are quite excited about our enhanced ability to serve them. While there are opportunities for savings where the existing technology development and product development activities overlap, The joining of the 2 companies also presents exciting new opportunities. These include the creation of new products based on combining existing products at the MCP or system level, the improvement of existing products through technology sharing and resources for support of advanced emerging memory technologies and products as well as for the support of more customer specific memory development and interaction. By way of example, for use in mobile platforms. Stand alone DRAM products at LP that can benefit from advanced design and manufacturing techniques and use at Micron. Redundant DRAM development teams can be freed up to work on exciting new hybrid memory cube and 2.5D logic and memory integration. Time to market on new products can be enhanced with advanced manufacturing capacity to drive introduction and yield ramps. As a management team, we've approached this opportunity with a focus on aligning the deal within the framework of our long term strategic objectives. The Alpida team manufacturing assets and technology will bring us impressive new capabilities. The new capacity at acquisition cost of less than a third of what it would take to put in place on a greenfield basis will improve our cost competitiveness within the 1st year and for years to come. In short, this transaction at the attractive terms I laid out earlier will strengthen Micron's financial position In particular, its long term free cash flow and ROI to the benefit of Micron's shareholders. Moving to the industry landscape. Over recent years, we've seen an evolution in the industry's competitive landscape where single technology suppliers in particular those lacked lacking scale have faced an uphill battle to be competitive over the long term. We believe that those memory competitors with the scale and technology breadth to enable both cost efficiency and flexibility to address the most profitable market segments are emerging as the winners in this evolution. The purchase of LPIDA strengthens our capability in these key areas and positions us to succeed in a memory market, which has seen accelerating levels of consolidation over recent years. Next slide. Following the close of this transaction, we will solidify our place as the number 2 memory supplier in the world and enhance our ability to deliver memory and system level solutions for a growing list of customers and end markets. Looking at looking at customers, LPDA brings an attractive set of customers Through hard work and great service and quality, we expect to become the memory supplier of choice for this growing strategic list of customers. Next slide. Micron has an expansive global presence in both manufacturing and research and development and has significant experience integrating and managing operations in both Japan and Taiwan. LPTA Hiroshima Fab will bring about 120,000 wafers per and rec chips fab in Taiwan about 85,000 additional wafers per month. In combination with Micron's front and back end technology and operational know how, cost efficiency of these operations will be improved. It's worth noting that our total costs for this new capacity versus a greenfield replacement is only $0.30 on the dollar. Looking at Micron's market exposure on the next slide, Over the years, Micron has successfully diversified our exposure across segments, including mobile, consumer, personal systems, networking and storage, servers, SSDs, and auto industrial and medical segments. The addition of LPIDA would initially increase our exposure to the Peace personal systems and mobile. However, following the close, we would expect to begin taking staff steps to rebalance our product portfolio to optimize profitability. A few market trends were particularly focused on include the growth of cloud, big data mobility, Our combined product portfolio of high performance specialty DRAM and NAND as well as emerging memory and system level solutions, including solid state drives and hybrid memory cube, will position us to capitalize on these markets. Next slide. Following the close of the deal, we will utilize our increased manufacturing flexibility to manage our product mix based on where we with nor continuing as a smaller but stable revenue contributor. Turning to R&D. From an R and D and technology perspective, LPDA and Micron have unique areas of focus and success, which in combination will improve our innovation capabilities. Some examples include Micron's industry leading man design and process technology, and our next generation product development as well as strong positioning and alternative memory segments. LPDA brings formal formidable capabilities as well, including mobile DRAM technology focused on reduced power consumption and enhanced data throughput to fuel enhanced performance in next generation smartphones and tablets. We have plans in place to start converging our technology roadmaps immediately after close, expect to see significant benefits in relatively short period of time thereafter. In summary, on the last slide, we are very excited about this opportunity and believe it further positions Micron as a leader in the memory market Our customers, employees and investors will all benefit from the added scale and cost synergies, improved product portfolio and manufacturing flexibility as well as enhanced technology development capabilities. We expect the deal to be EPS and cash flow accretive within the 1st 12 months of closing and expect significant improvement of our long term revenue, gross margin and free cash flow profile. Thank you for your time today. I'll turn it back over to Ivan for questions. Thanks Mark. We will now take questions from callers. A question so that we can hear you clearly. And Ali, let's go ahead and take the first question. Our first question comes from Doug Friedman of RBC. Please go ahead. Great. Thanks for taking my question guys and congratulations on getting terms of the deal squared away. If you could, I think the biggest question investors are facing when looking at the combined risk in the past. Can you address what actions in this deal allow you to avoid the future risk of that? Hey, Doug, this is Ron. If you look at the terms of the deal that that Mark summarized, I'll just quickly recap, it's a set of very attractive terms from Micron perspective. First of all, the cash consideration upfront is about $750,000,000 and the installment payments that are spread 7 years, $1,750,000,000, our interest free. On gets out of the deal, we get significantly inexpensive or less costly at sets in terms of PP and E that we can bring into our infrastructure. And as Mark mentioned, we can also make a lot of moves in terms of realigning that infrastructure and merging with ours. The, if you look at the other parts of the transaction, We are going to be able to retain all the current assets that come with the LPDA acquisition and that includes any remaining cash and other current assets. As is typically the case in a bankruptcies situation, all pre petition obligations are fully discharged and all the pre petition payables are part of the bankruptcy proceeding and so wouldn't be carried over. So if you look at LP's last reported current assets, they were about 1 in December $1,400,000,000, just as a reference point, that would all be retained in part of the transaction. So in summary, if you As Mark mentioned, if you look at the acquisition cost of the PP and E, just in terms of manufacturing infrastructure, it's about a third of the cost of greenfield capacity and you combine that with a cost to convert. It's a very economic solution for us vis a vis normal organic growth alternatives that Micron might have. Along with that, we get other things with the transaction such as IP. As I mentioned, we get all the current assets that come along with the transaction. So net net, that's a very good deal. And to specifically to your question, the capital structure is obviously significantly easier to handle than what LPDA was dealing with at $1,700,000,000 by $5,000,000,000 spread over 7 years. All right. If I could, for my follow-up, what that initial question was really aimed at is sort of financial flexibility going forward so if you could offer any more insights into that. And then my follow-up is really we've got a pretty long window here, at least 6 months before this deal is going to close Can you discuss how LPTA is going to operate and what type of CapEx LPTA is going to have during that? I don't know what to call this window. This period in time at which, what obligations do you have towards deals that LPDA has done? How, how is the entity going to be operated in this window? Doug, I'll let Ron reply to the financial flexibility question and then I'll come back and address operation in the company. So, if you look at the financial flexibility, obviously, we've got as I mentioned, spread out payment terms that make it much easier for the company to handle over a significant period of time. And part of your question, I think, is addressing sort of the stability of LPDA Obviously, they haven't reported results since December. But if you look at the performance of the company more recently, they've significantly improved, for example, well, let me back up one step They have, had a challenge in the more recent periods with volumes that were down reduced activity in the mobile segment and also challenges in terms of just the flow of business when you look at their revenue trajectories. The current trajectories of LPDA right now are are improving. They are improving their capacity output. They are moving from 42 nanometer to 30 nanometer in part of their operating plan, which is helping them significantly in their cost structure and they've acquired as they've communicated in some cases publicly additional mobile business and opportunities, which is significantly helping them. So the trajectory of LPDA going forward is improving. To your CapEx question, the CapEx is important to our business, as you know. It requires CapEx to keep costs moving down and technology migrating. And I just mentioned they're continuing to move from 42 to 30 nanometer. They're going to continue to access CapEx and fund that through their operating cash flow as the currently the certainly the expectation Micron, as Mark commented, is committed to, to support that in terms of getting access to capital lease lines if that's needed and that's typically part of their process and financing structure as it is with Micron. So, we expect that will continue as usual and Micron has, through the agreement agreed to support that in a backstop manner, the CapEx financing that they need to continue the trajectory of their business performance. And Margaret, an internal view for that? Yes. So, operations. So, relative to operations between signing and close, Doug, obviously, we are not involved in the running of the company in any way, shape, form. Beyond the close, we believe we're going to have a lot of say in appointing where we will appoint and close a Micron Business Trustee And we believe we've structured the terms of this agreement such that we will have, significant flexibility in running the company in order to drive synergies we need to make this a successful company moving forward. I would note that the trustees in this case and the court in this case are or have a significant interest in the long term success of the company, as well as just the return of the installment payments, which I would just add are very manageable under the current financial structure of this combined company. We do have, I guess, I should mention additionally, we do have an interim business plan that we've agreed to as we entered into this transaction, it lays out the terms and conditions under which elpida will plan to run the company between signing and close. And under which the operation of the company under that business plan will drive their decisions around which products they continue to develop in which CapEx they find associated with these products. But when we do get to close, we will have a plan that syncs with an ongoing operation of the company. Our next question comes Thank you very much. Can you give us some idea of the schedule of moving Elpitas facilities to Micron's explo. Will that take several years or is it a matter of quarters? And what will the output of LP to be as you're doing this transition? So the process, David, will begin, at close, in terms of the transition. We expect that to go relatively quickly. And, while we can't predict exactly when closes, We think we can get to a merged product portfolio relatively quickly post close. One of the interesting things is while there are differences obviously in the memory technologies of Micron and LP to that are actually more similar than those of some of the other competitors in the space. So we have that working for us In the short term, after close, we expect to see some significant synergies in the back end of the combined company by virtue of technology that we think we can deploy relatively quickly across the combined company. Okay, great. And I'm excusing if you've already said this earlier on the call, but will you be in the first instance being used using alpida for DRAM solely or will you plan to port in other types of memory into those facilities? So, yeah, I think I alluded in my, in my discussion here to open the call to significant flexibility and fungibility among memory technologies or product types with the CapEx. We are not wanting at this point for obvious reasons to disclose exactly what our strategy will be relative to, directing that capacity. And additionally, I think that strategy will continue to evolve as the market evolves, but we do have a plan and we're going to keep that to ourselves for now. Our next question comes from Nick Gadot of UBS. Yes. Hi there. Thanks for taking my question. Just a follow-up on the conversion question on the DRAM side. Should we expect this therefore to kick in at the 2x nanometer mode note for you? To one extent, can you actually incorporate anything out of EPDA's process technology in that timeframe? If at all? And if not, how should we think about how has we been doing basically on Volopo side could effectively benefit further technology migration and product road map for you into a verbose to explain. Thank you. So I'm not sure I caught the second part of the question, but relative to the first part of the question, we would expect, we would let me start with LPBA has existing 30 nanometer technology. As does Micron, we would expect to converge the 2 companies of the next node, which would be a 20 nanometer converged node. I believe the second part of the question is, are there things that LPDA that will be useful in a merge technology. And the answer to that is, that's absolutely true in the case. While, as I said, the technologies are similar. There are some significant differences and there are pieces of what they do that we find value in. And in particular, I would highlight again their success in the mobile low power area and some of the things they've done from a process technology and design perspective to help enable that piece of the market. Did I integrate the second part of the question properly? Yes, absolutely. I mean, so if just in terms of time frame, we're talking basically post nanometer essentially to bring over together as you expect on the process side and therefore design side in terms of products. Well, no, I think at the 20 nanometer node, we will be, we will be converged, not case 20 nanometer, so at the 20 nanometer Yes. Got you. And just now a follow-up on other parts of David's question actually on On the so on the LandFresh side, did we understand you correctly, but actually what you intend to do is convert everything to one DRAM process flow first and then subsequently probably 201450 onward you may use make use of more flexibility to convert some of your joint DRAM capacity to NAND flash if required. But essentially in 1st stage, we'll be converting everything on the electric ship side to a joint process for right, to invest for all capacity? No, actually, I didn't say that. And I'm going to be silent on the topic. Okay. All right. Thank you. Our next question comes from today Rakash is Stern AG. Please go ahead. Yes, hi guys. Just I know it's a little early now, but wondering what all you're looking at capacity of the combined Micron Lp now, the next 12 to 18 months. And also, if you could take a stab at debit CapEx also? Thanks. So sorry, I don't think I understand the intent of the first part, how we're looking at CapEx. How we're looking at capacity. You're talking about capacity increase VJ? Yes, you have a capacity increase, but are you going to keep all the capacity running, or do you expect to, in a consolidation on the capacity and move stuff around? Well, again, as I said, we think some of the capacity is is potentially fungible, but we're not discussing what our plans are there. I actually believe that we can ring some increased output out of the existing facilities and tooling. And we plan to work on that as we bring the companies together. Got it. And these are some CapEx Oh, I'll let Ron address CapEx. Your question was, what's the requirements for CapEx Yeah, how do you see the overall CapEx or Micron LPA combined over the next 12 to 18 months or 12 24 months Well, if you're talking pre close as we As we discussed a little bit earlier, we would anticipate we're operating as 2 separate companies. We'd anticipate that LPDA would be funding their own CapEx through their operating cash flow, Micron has supported that in terms of the interim operating plan that referred to and can provide backstop support as required, but there'll be independent activities. As he commented, we've got support up to $500,000,000 of CapEx till June 2013 and then 300 in the timeframe beyond that. Let me add one comment on that Vijay, which is We had previously told you that the CapEx forecast from Micron for fiscal year 2013 was 1.6to1.9 $1,000,000,000. I think with the announcement of this deal, what you should expect is that we are continuing to scrub our our CapEx spending internal to Micron to make sure that the CapEx we do allocate over the next fiscal year will be directed at the highest opportunities from an ROI perspective for the converts company. So you might expect us to as we update that guidance in the future for that internal Micron CapEx number to move down or crunch down a little bit. Got it. Great. Thanks a lot. That's very good. I appreciate the color. Our next question comes from John Pitzer of Credit Suisse. Please go ahead. Yeah, good morning guys and congratulations. Mark, just given the inherent volatility of the business, and the timing on the close here. Can you just talk a little bit on this interim business plan, kind of what the broad metrics are that you guys have agreed to? Is it LPTA running for optimize cash flow, optimize profitability. Can you help me just understand some of the details in this interim business plan? Well, well, first of all, the the elements, John, would be, around their their operating expenditures the capital expenditures and the product roadmap and making sure that those all fit together in a way that we think makes sense over the timeframe between now and close. The I think the essence of your question is what can we expect from LPDA in terms of what can you expect in that the priorities are within that plan? And really the priorities were set out, with an eye to making sure that, that and what would be a reasonably expected close time, they have the right product and the right equipment on the floor to facilitate a rapid convergence to the most efficient technologies that we can imagine the two companies putting together. So as I mentioned, there's some short term things We can do from a test and assembly perspective that actually amounts to significant dollars. There are some some longer term things that involve bringing the 2 companies together. But I think what LPDA has done here is put together a plan that makes a lot of sense to us and that we were willing to sign up for and buy off on as one that'll put us in a good position when we get to close. Great. And then as my follow-up, maybe a couple of accounting for Ron. Ron, as I think about kind of building a single model for both companies, on the PP and E side for Alpida, do I just take present value for the price of the deal and kind of use that over an amortized period? And then secondly, how do I think about book value as you guys combine the 2 entities? Is there anything on the accounting side that might dramatically change book? Sure. Daniel, as you may or may not know about, accounting for acquisitions today, What will happen first is the, we'll do a fair value assessment of the, of all the assets acquired in the transaction. And, as you may recall, happened in our mnemonics acquisition, The situation was when we did the fair value assessment the, the fair values actually end up being greater than the purchase price and we had a gain that was recorded time of close. So, if the fair value assessment here with LPIDA of all the assets ends up being greater than our consideration, which is certainly possible, but we've got to go through that process, then there could be a gain at time of close. Of course, The cash consideration we put in for all those assets are, as I described, the total consideration of $2,500,000,000 and the ROI on that is quite high on a cash basis So what you end up with on a from accounting standpoint may be a little bit different as determining on how you value the fair value assessment and what goes in for PPNE assessment. The important thing though is the real economic cost of that PPNE is quite favorable. And even after the invested conversion costs, our estimate is that the economics will be quite favorable relative to organic alternatives that Micron would have. So we'll get a high ROI on that overall result. Did that Did that address your question? Yes. Good, Ron, just on book value, how do I think about that as we go from an accounting perspective as we try to combine the 2 companies? Well, so in terms of our book entry, as I mentioned, we will do a fair value assessment. So it'll in at fair value and we may take a gain. And if we do, that would go into the equity section as additional value. The book value is going to generally relate to the consideration. So it should be pretty favorable in terms of the overall economics. Great. Thank you. On a book value level. Yes. Thanks, Ron. Our next question comes from Daniel Bernbaum of MKM Partners. Please go ahead. Hi, guys. This is Ada calling in for Dan. One question for you. It seems like Altice is going to be treated as a wholly owned subsidiary, but Micron is going to pay a bit of her foundry services. Can you get a little bit more into those details? Is there going to be some type of cross bust arrangement to keep the subsidiary breakeven? Ida, this is Ron. The construct that we have as a company is that we have a Singapore principle structure where Singapore is the global manufacturing entity and the risk taker for manufacturing around the globe and all of our subsidiaries then tie into that construct on a cost plus basis. We'd anticipate that LPDA would come in with the same kind of construct into that overall structure. And then the risk taker for manufacturing would be Singapore as it is today in that construct. Does that address your question? Yes. And so the payment of the additional $1,750,000,000, is that going to be is that going to add to the cost or is that going is that part of the cost there? So we anticipate that under the current assessment, that all of the, payments would be paid out of the funds generated at LPDA and paid by the LPDA entity as part of this construct. And is there going to be a similar arrangement like that with Rexchip or is that going to be something different? No, Rex Chip is, as Mark mentioned, we own 89% of Rex Chip, we would upon close be consolidating Rex Chip but there's a different today, a different economic relationship in terms of a transfer pricing construct similar in concept to what we have within Oterra today. So obviously that would For now, at least remain intact at that time of close and that transfer pricing mechanism that goes to LP today would transfer over to Micron. Okay, great. Thank you. In terms of funding the cost of wafers. Sure. Our next question comes from James Schneider of Goldman Sachs. Please go ahead. Good morning and congratulations on the transaction. Mark, I was wondering at a very, very high level post the close, you'll have less than 30% of your revenue exposure in NAND Flash. Do you think that's the right business mix for you going forward, or would you look to increase the NAND Flash percentage over time? No, I think over time, we would anticipate would be more evenly balanced than that. And I'm not sure that your numbers actually in in the in the question as posts are accurate. I believe we would be Nope, you're right, it'd be about 30%. Yes, no, we would look to rebalance over time, sure. We have a lot of flexibility around the various fabs around the globe today. Okay, great. Fair enough. And then just a detailed question. Regarding the CapEx support of $800,000,000 you outlined, can you tell us, through what technology node that'll take you on both the Hiroshima and RexIP fabs? Well, it'll depend on exactly how quickly we deploy nodes below 20 nanometers. So the line that is in place, runs is carved into two pieces through June of 2013 and then and then on beyond that to June of 2014. And we believe that will be well into the 20 nanometer node conversion, but not a complete conversion of all those wafers. But again, we're not we're not wanting to telegraph exactly what our strategy is relative to, which nodes we would be running in which fabs. So Yeah, we think of it as more of adequate capacity to assure LPDA's ability to continue to operate the company to the interim business plan over an extended period of time, and not necessarily reflective of what the longer plans are for that capacity. Understood. Thanks very much. Our next question comes from yashay Orji of UBS. Please go ahead. Sure. Thank you very much. Can I just set off by asking about the the statements here about maintaining a fee that's operational employees and how that factors into a of effective synergies over time? What is the flexibility regarding headcount reduction? And if I look at microns on headcount, of 27,000 employees against LPDAS 5008 whereas revenue is just a factor of twice that. It starts to look like there's small scope to Cobcock employee wise on the micron side. So is there any comments you can make at this stage about OpEx synergies coming from this deal? What areas, you have identified where headcount can be reduced might just be helpful for us to understand the value that still brings? Yeah. On the on the synergy front, as I mentioned, we believe that there's a lot of rebalancing that can be done within the existing LPTA operation, although we wouldn't expect to see any significant overall headcount reductions on that side of the company, at least over reasonable period of time. We do see, as you pointed out, a lot of opportunity to rebalance not only in the, in the, in the R and D area, but also in the sales and marketing areas, in a way that will produce until we get into a 2014 timeframe And at that point, we'll have to see how the company is growing. Sure. That entire address is, but I hope that we'll get more clarity on that over time. Let me ask you a different question. On the CapEx front, I know that people have asked you about CapEx in various ways, and I don't know that you have straight answers to give yet on how much over time it will cost to convert EBITDA's facilities to Micron and but let me ask you this. From a cash flow perspective. At the beginning of the during your earnings call, Mark, you said that you will not dilute equity and you're not looking to do a significant debt. As we go through the years and should we understand the CapEx commitments and spending you'll be making will come from cash flow generated from this deal and investors should not be worried about future significant dilution of equity or more debt being raised. So, 1st of all, the cost to convert, maybe I can just give you a reference on that. As Mark mentioned, the acquisition cost of the in place capacity is roughly a third of greenfield capacity. If you add in what are now roughly rough estimation costs for conversion, that we've got modeled will still have a very economic total cost in terms of cost per wafer and more economical than other alternatives we've had through organic choices. So I'm trying to convey without being able to give you precise numbers right now that the ROI on this in place capacity, including the cost of conversion is very economic. And to your question of financing, Yes, we believe that as we have done historically, we'll continue to finance a lot of our requirements through capital leases on some of that CapEx. We also anticipate that LPDA will continue to do that once integrated as subsidiary and the CapEx line is intended to give them some funding and support, I should say so they can continue those activities, even though we fully anticipate that they'll be able to continue to support that through their operating cash flows. So, the CapEx equation in terms of our overall economics relative to our volume of business and output, we don't expect to be materially different if that's what you're looking for from what we have typically run, but that's all very preliminary right now since we haven't built out full models for those activities. But if you're looking for the question, is there going to be a CapEx bump on conversion. Our belief is no and that also as Mark mentioned, we will be making choices in terms of shifting CapEx priorities around to the optimal applications as we go forward and we have a lot of choices and flexibility to do that. All right. And just one last question. In terms of in terms of the ownership of the regs chip. Just remind me. So, you have sorry, actually, let me just add a different question from that. Prior to this point, LPDA has reduced capacity. Obviously, as they try and get their operations within what their cash flow can handle. Since the deal was announced, DRAM prices have rallied to have improved significantly, SLP does operation now back up to 100%. In terms of, of where it's running today. And from and I don't know what you can disclose to us at this stage or not, but from a cash flow standpoint, if they'll get a cash profitable, at this stage, given where DRAM prices are? Let me handle the first piece. We're not going to comment on what LPDA is doing with their capacity. But I think, Ron probably has a few things to say about the cash flow Yes. So as I, as I, alluded to earlier in brief, We are we're not in a position to comment extensively on LPDA's capabilities for obvious reasons. But to your question, yes, they were underutilizing capacity for the last few months. And they are vectoring the positive direction in terms of more capacity loading. In addition to that, they're going much heavier to 30 nanometer and anticipate that In about 6 months, there'll be a peak 30 nanometer capacity, whereas previously, you're running much heavier to 42 nanometer. And that along with, as you mentioned, normal market conditions and the access to increased number of mobile customers improving their mobile mix all is a vectoring and a direction that's more similar to prior periods, when they were EBITDA positive. In fact, before the downturn of the DRAM pricing market, they were running around $300 plus 1,000,000 a quarter of positive EBITDA. I don't know if that helps you sort of structurally, but it's about all I can comment on in terms of their business trajectory. Our next question comes Hi, thanks a lot. Congratulations. We're getting a step closer here. Question for you, on the synergies. You commented the expect this to be accretive to EPS and cash flow, I think, within a year. I just wanted to talk through the synergies we've got here from the scale and capacity side, which you talked through a little bit. And then the process technology, which you talked about quite a bit in terms of the synergies there and the timing of that. But then also on the product and customer side, I think there's a lot of potential synergies you could potentially get there, from bundling out does mobile DRAM with what you've got on the NAND flash side, for example. And then finally on the on the timing for the operating expenses is the 4th synergy. I wonder if you could talk through the timing of of the the 3rd and 4th one, which we haven't really talked about the timing of synergies there on the product side and on the operational expenses? Mark Adams, why don't you pick that one up? Well, let me start with the first piece. I think the, the customer feedback overall has been fantastic and very supportive Clearly, they've asked Micron to step up in the past to take on more of the capacity, given our pure play memory approach And more specifically, in the wireless segment, LPDA's low power DRAM portfolio is very strong and has been very well received as a, as a combination with our portfolio. And it really puts us in a very unique position to be significantly scaled in the wireless segment. So, I would say, across the board, we've been getting a very good feedback for us And when you think about the context of the scale opportunity for us, as we continue to add this capacity, we are left as a really low memory company not competing with its customers in each of the segments. And that's giving us a lot of support as we look at adding value around premium solutions going forward. Okay. So any guidance in terms of when okay, let me put it another way. You commented about the synergy you might when you might be EPS accretive. Which I think, so over the call, you said, within 1 year. Is that taking into account all of these things. And in which case, can you talk through what the timing is to get some benefit on the product side in terms of getting these kind of wireless MCP or products and getting the advantage of LPD as LPD WAM? Yes, let me try and help. As you as you pointed out, Mark, the, the ways in which the strengths of the Micron portfolio and the strengths of the LP to portfolio can be combined can be pretty short term benefit to the company. So when you talk about combining a leading edge NAND portfolio with a leading edge low power DRAM portfolio. That's that's where a lot of the hot products are heading and needing more and more, those types of MCPs and system solutions. So we think that that's a short term return. The other thing I'd point out is, in your list, and I thank you for point out the list, it was a good list of synergies. The one big one that's very short term that you left off the table was the back end methodology that I alluded to. And in that vein, I would say, you know, there's some significant short term returns there, post close associated with, with, very different models between the two companies, but the technology that can be shared very quickly. To your, to your OpEx question and timing, and your question about accretion, the accretion, view that we're sharing that within a year will be accretive on EPS and cash flow is not predicated on getting significant OpEx synergies in the short term. We certainly expect to get those, but we are anticipating we can get very positive results that Mark mentioned from the products, back end activity alignment technology integration, etcetera, in the near term. I see. Great. And just to confirm, the EPS accretion you're talking about, does that include some assumption for DRAM price rebound or is that true even without DRAM price rebound? No, we're not assuming significant changes in the market environment. Great. Thanks. And one further clarification on the short term back end methodology improvements. So I guess you're talking about benefits to your, how you're doing testing and packaging, testing, packaging and assembly for the DBAM modules, flash cards, the flash modules, etcetera. Is that correct? That's correct. Okay. Thanks very much. And good luck. Yes, and Ali, I think we're going to take just one more question and then wrap up the question and answer session. So one more question from the queue, please. Okay, great. Our final question comes from Hans Mosesman of Raymond James. Please go ahead. Hi. This is a prime Peterson in for Hans. Just an additional clarification on synergies, does that incorporate the full $2,500,000,000 payment or is that just the initial 1st year outlay? I'm not sure I understand the question. The synergies are independent of the purchase price. The, the, the $750,000,000 is payable at at close, the remaining $1,750,000,000 will be paid over the next 7 years. But we expect to get some significant benefit in the operating structure of the company relatively quickly and generate accretive cash flow and earnings per share within the 1st year. I'm just trying to get that. That's also why. Go ahead. Actually, what it assumes from the capital outlay, if it's based on the whole 2.5 or if it's just the initial payment to get accretion in the 1st year? Yes. So it's, the one of the things that I or Brian, excuse me, one of the reasons that I put the EPS number out there is because if you just level load all the activities including the fair value assessment I mentioned, we still get accretion within the 1st year When you look at the cash flow pieces, it's obviously that ties to cash flow profiles, which I think you're driving at, but I would focus on the EPS accretion, which means even on a net income basis, we're getting significant results early on. And that comes from significant synergies, etcetera, and what we can drive through the activities Mark mentioned. And before I turn it back over, to Ivan, let me, let me just, finish up here by reiterating We believe that this is a highly sorry, we got a little echo on the line. This is a highly attractive deal for Micron. We're going to get a great benefit manufacturing scale and R and D synergies. There's significant synergies up and down, the business from products from technology, from R&D SG And A, And at the end of the day, the attractive economics here are are hard to ignore. The combined company will put us in a stronger position in the memory landscape. And we can execute on this deal. We've got the experience. We've got the team. We know how to put these companies together and we think this combination gives us a very, very bright future. So, appreciate all your questions today. I'm going to turn back over to Ivan to wrap up Thanks, Mark. I'm just going to go ahead and read our Safe Harbor statement again we'd like again to thank everyone participating on the call. Our Safe Harbor language is as follows. 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 10 K. Thank you again. Thank you. This concludes today's Micron Technology