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Rating Action:

Moody's upgrades Micron's CFR to Ba2, rates sr unsec at Ba3; outlook stable

Global Credit Research - 04 Feb 2014

New York, February 04, 2014 -- Moody's Investors Service upgraded Micron Technology, Inc.'s ("Micron") corporate family ("CFR") and probability of default ratings to Ba2 and Ba2-PD, respectively, from Ba3 and Ba3-PD. Moody's rated Micron's proposed 8 year senior unsecured notes at Ba3, and lowered the liquidity rating to SGL-2 from SGL-1. Micron intends to use the proceeds of the new notes to pay a portion of costs of extinguishing its obligations under the outstanding 1.875% convertible senior notes due 2014. The outlook is stable.

RATINGS RATIONALE

The expectation of more stable conditions in the chip memory market, and improved scale and financial flexibility at Micron lead to the CFR upgrade to Ba2.

Moody's expects greater stability in the dynamic random access memory ("DRAM") chip market, following consolidation of the industry marked most recently by Micron's integration of Elpida Memory, Inc. ("Elpida"). Consolidation has resulted in improved pricing recently.

"Moody's expects supply discipline among the remaining large participants to reduce what had been dramatic volatility in revenue due to sharp pricing declines at times", noted Terry Dennehy, Senior Analyst at Moody's Investors Service.

With the integration of Elpida largely complete Micron holds a strong market position in DRAM after market leader Samsung Electronics Co., Ltd., now with a share in the upper 20s percent. "These added Elpida assets provide Micron with scale advantages in manufacturing and R&D", noted Dennehy. When combined with the technology acquired, this should enable Micron to maintain its EBITDA margin (Moody's adjusted) above the mid-twenties percent level. Moody's expects Micron's revenues will grow due to continued strong consumer demand for mobile computing devices and the improved industry structure, which Moody's expects will result in more disciplined capacity additions and pricing.

Financial leverage is low relative to other Ba2-rated issuers, with debt to EBITDA at 2.1x (Moody's adjusted) for the twelve months ending November 28, 2013. Moody's expects financial leverage to be low during the strong part of the cycle, since the industry will still be highly cyclical even without the dramatic supply shocks of the past. Moody's anticipates regular price deflation as individual memory companies advance production technologies in order to gain a production cost advantage relative to their competitors. This technology development rivalry requires large R&D spending, which constrains profits. Moreover, the capital intensity of memory manufacturing and resulting operating leverage causes large swings in gross margin over the course of an industry cycle, yielding depressed or even negative operating margins and pressure on the free cash flow.

Moody's lowered the liquidity rating to SGL-2 from SGL-1 to reflect the increasing demands on cash for capital expenditure as Micron funds a node transition in DRAM and development of stacked NAND production techniques in NAND. Cash is expected to remain above $2.5 billion.

The Ba3 senior unsecured rating, one-notch lower than the CFR, reflects the large amount of secured debts at Micron subsidiaries which are structurally senior to Micron's parent senior unsecured debt. The Elpida installment obligation remains under the direction of the Japanese courts, and has a priority claim on Elpida's assets and cash flow until satisfied.

Upgrades:

..Issuer: Micron Technology, Inc.

.... Probability of Default Rating, Upgraded to Ba2-PD from Ba3-PD

.... Corporate Family Rating, Upgraded to Ba2 from Ba3

Assignments:

..Issuer: Micron Technology, Inc.

....Senior Unsecured Regular Bond/Debenture, Assigned Ba3

....Senior Unsecured Regular Bond/Debenture, Assigned a range of LGD4, 64 %

Downgrades:

..Issuer: Micron Technology, Inc.

.... Speculative Grade Liquidity Rating, Downgraded to SGL-2 from SGL-1

Outlook Actions:

..Issuer: Micron Technology, Inc.

....Outlook, Remains Stable

Rating Outlook

The stable outlook reflects our expectation that Micron will continue maintain low financial leverage (below 1.5x after Moody's standard adjustments) and improve financial flexibility as revenue and EBITDA increase due to strong end-market demand, disciplined market pricing, and Micron's improved operating efficiencies.

What Could Change the Rating -- Up

The rating could be upgraded following expanding gross profit with evidence of steady operational efficiency, such that operating margins (Moody's adjusted) are sustained above the low double digit teens percent, as well as continued evidence of stable market pricing and core growth in demand for DRAM and NAND. Very strong intrinsic liquidity through access to cash, and for Micron to have a balanced financial policies with respect to shareholder returns would also be important considerations for any possible upgrade.

What Could Change the Rating -- Down

The ratings could be downgraded if Micron does not execute successfully on its node transitions in DRAM and NAND, or its development effort to mass produce stacked NAND. The ratings could also come under pressure if industry pricing volatility returns to historical patterns in spite of the recent consolidation. If Micron is not on-course to reduce leverage such that debt will remain below 2.0x EBITDA (Moody's adjusted) over the course of an industry cycle, the rating could be downgraded.

Micron Technology, Inc., based in Boise, Idaho, manufactures and markets semiconductor devices, principally DRAM, NAND Flash and NOR Flash memory, as well as other innovative memory technologies, packaging solutions and semiconductor systems. In addition, they manufacture semiconductor components for CMOS image sensors and other semiconductor products.

The principal methodology used in this rating was the Global Semiconductor Industry Methodology published in December 2012. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

John Terrence Dennehy
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Robert P Jankowitz
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's upgrades Micron's CFR to Ba2, rates sr unsec at Ba3; outlook stable
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