8-KMaterial Agreements

MICRON TECHNOLOGY INC 8-K Report, Material Agreement (Dec 3, 2008)

Filed December 3, 2008For Securities:MU

Summary

Micron Technology Inc. (MU) filed an 8-K report on December 2, 2008, detailing the termination of the Boise Supply Agreement with IM Flash Technologies, LLC (IMFT), a joint venture with Intel Corporation. This termination, effective November 26, 2008, signifies a shift in their NAND flash memory production strategy. While the Boise facility's NAND wafer production will cease, Micron and Intel will jointly contribute approximately $48 million to IMFT, with Micron receiving a net termination fee of around $23.7 million after its contribution. This move comes amidst prevailing market conditions and follows an earlier announcement to discontinue 200mm NAND wafer production at the Boise site. The report also provides context on the existing 51%-49% ownership and operational agreements within IMFT and a similar joint venture in Singapore (IMFS), highlighting the significant financial and operational ties between Micron and Intel in the NAND flash memory space. In fiscal 2008, Intel accounted for 19% of Micron's net sales and provided substantial R&D cost-sharing reimbursements.

Key Highlights

  • 1Termination of the Boise Supply Agreement with IMFT, a joint venture with Intel, effective November 26, 2008.
  • 2Micron and Intel will contribute approximately $48 million in capital to IMFT as part of the termination.
  • 3Micron is expected to receive a net termination fee of approximately $23.7 million from IMFT.
  • 4This action is related to the earlier decision to discontinue 200mm NAND wafer production at the Boise facility due to market conditions.
  • 5The report reiterates the 51% ownership of IMFT by Micron and 49% by Intel, and the proportional sharing of output and R&D costs.
  • 6Micron's sales to Intel, primarily from joint ventures, represented 19% of net sales in fiscal 2008.
  • 7Intel's R&D reimbursements reduced Micron's R&D expenses by $148 million in fiscal 2008.

Frequently Asked Questions

Micron will contribute approximately $24 million (50% of $48 million) to IMFT as part of the termination and is expected to receive a net termination fee of approximately $23.7 million. This implies a relatively neutral to slightly positive short-term financial impact, though the strategic implications on future NAND production capacity and costs are more significant.

The termination is driven by prevailing market conditions and follows Micron's earlier decision to discontinue 200mm NAND wafer production at its Boise facility. This indicates a strategic shift away from this specific production line or a restructuring of their NAND flash memory operations with Intel.

While the Boise Supply Agreement is terminated, the underlying joint venture relationship with Intel in IMFT and IMFS remains. Both parties are continuing to invest in IMFT, and their significant collaboration in NAND flash memory development and production, including shared R&D costs and sales to Intel, is still a key aspect of Micron's business.

The capital contribution from both Micron and Intel suggests that IMFT requires ongoing funding, possibly for its operations or restructuring. The termination fee paid to Micron indicates that the cessation of the Boise supply agreement has a financial value attributed to it, recognizing Micron's role and potential losses or contributions in the terminated agreement.