SecProbe.io

CORRESP
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filename1.htm

April 1,
2005

Via
EDGAR (with hard copy by courier)

Securities
and Exchange Commission

Division
of Corporation Finance

450
Fifth Street, NW – MS-306

Washington
DC  20549-0306

Attn:       Mr. Daniel Gordon

Ms. Heather
Tress

Re:          Micron Technology, Inc.

Form 10-K for the fiscal year ended September 2, 2004

SEC File No. 1-10658

Ladies
and Gentlemen:

This letter responds to Mr. Gordon’s
letter dated February 18, 2005, which sets forth the comment of the Staff
of the Securities and Exchange Commission (the “Staff”) regarding the above
referenced report of Micron Technology, Inc. (“the Report”).  The text of the Staff’s comment is reproduced
below in its entirety followed by our response.

Form 10-K
for the fiscal-year ended September 2, 2004

Item 7
Management’s Discussion and Analysis of Financial Condition and Results of
Operations

Inventory
write-downs - page 16

1.             We have reviewed your response to
comment 1.  Both of your adjustments are
considered recurring items and are not appropriate reconciling items in
accordance with Item 10(e) of Regulation S-K unless you can meet the
requirements of Question 8 of the Frequently Asked Questions Regarding the Use
of Non-GAAP Financial Measures.  In a
supplemental response please provide us with your revised disclosure for future
filings as it relates to this non-GAAP measure.
In addition, please provide a clear definition of both of the
adjustments.  What periods does each of
the adjustments relate to and clearly discuss how they
are calculated.

Response:

Pursuant to our telephone
discussions with Ms. Tress and Mr. Gordon, we are providing herein a
comprehensive presentation to address the Staff comments on our disclosure of a
non-GAAP financial measure in the MD&A section in our most recent Form 10-K.  For ease of presentation we have broken down
our response into two parts:  I.
Frequently Asked Questions Regarding the Use of Non-GAAP Financial Measures and
II. Gross Margin Adjustments Defined.

I.  Frequently Asked Questions
Regarding the Use of Non-GAAP Financial Measures

We have set forth below the
paragraph from the Company’s Form 10-K that serves as a preamble to the financial
table containing the non-GAAP financial measure of “adjusted gross margin.”  We believe the language in this paragraph
addresses the concerns raised by the Commission in its Frequently Asked
Questions (“FAQ”) on the Use of Non-GAAP Financial Measures.

“The
following table sets forth adjusted gross margins absent the inventory
write-downs and the estimated effect of previous write-downs.  These write-downs may not be infrequent or
nonrecurring in nature but are a result of significant market-driven declines
in average selling prices.  The
presentation of these adjusted amounts vary from numbers presented in
accordance with U.S. GAAP and therefore may not be comparable to amounts
reported by other companies.  However,
the Company believes this information is significant to understanding the
Company’s gross margins and analyzing the Company’s gross margin trends.  This non-GAAP information is important to
analyzing the Company’s cost of goods sold since the effect of inventory
write-downs must be separated from the manufacturing cost component in order to
have a reasonable basis for understanding trends in cost of goods sold.  When evaluating performance and making
decisions on how to allocate Company resources, management uses this non-GAAP
data and believes investors should have access to similar data when making
their investment decisions.”

The FAQ states that, “Whether
a non-GAAP financial measure that eliminated a recurring item or items from the
most directly comparable GAAP financial measure is acceptable depends on all of
the facts and circumstances.  Such
measures more likely would be permissible if management reasonably believes it
is probable that the financial impact of the item will disappear or become
immaterial within a near-term finite period.”

The Company’s management, at
the time the relevant disclosures were made believed the financial statement impact
of the inventory write-downs and the estimated effects of future write-downs
would become immaterial in a near-term finite period.  This has been proven by actual events
following our previous disclosures leading to several quarters without
write-downs and diminishing effects of previous write-downs as we continued to
sell product that was subject to the previous write-downs.  In fact, the following disclosure was
included in the description of inventory write-downs in the MD&A in our
most recent Form 10-K:

“No
write-down was necessary for 2004 and, as of September 2, 2004, only a de
minimis amount of previous write-downs remains in ending inventory.  As a result, write-downs of inventories prior
to 2004 will not have a significant effect on operating results in future
periods.”

In addition, the Staff has
asked us to address how our disclosures address the five bullet points
identified in the answer to Question 8 in the Staff’s FAQ Regarding the Use of
Non-GAAP Financial Measures.  We have
addressed each of the five bullet points as follows:

2

•                  The manner in which management uses the
non-GAAP measures to conduct or evaluate its business

In
analyzing the Company’s cost of goods sold, management separates the effect of
inventory write downs to identify manufacturing costs in order to have a
reasonable basis for understanding trends in cost of goods sold, for evaluating
performance and for making decisions on how to allocate Company resources.  This information is included in the last three
sentences of the Form 10-K paragraph set forth above.

•                  The economic substance behind management’s
decision to use such a measure

Adjusted
gross margin reflects the actual costs of manufacturing our products without
the effects of inventory write-downs which accelerate the recognition of costs
based on the market prices for our products.
Therefore, “adjusted gross margin” is more useful in assessing our
performance in controlling and reducing costs in any particular period.  This information is disclosed in the fourth
and fifth sentences of the Form 10-K paragraph set forth above.

•                  The material limitations associated with use
of the non-GAAP financial measure as compared to the use of the most directly
comparable GAAP financial measure

The
primary limitation associated with “adjusted gross margin” is that the non-GAAP
financial measure is that it may not be comparable in method to amounts
reported by other companies.  This
limitation is disclosed in the third sentence of the Form 10-K paragraph
set forth above.  Additionally, the
disclosure and discussion of the non-GAAP financial measure is less prominent than
those related to GAAP measures in the Company’s press releases and MD&A.

•                  The manner in which management compensates
for these limitations when using the non-GAAP financial measure

When
evaluating and conducting our business, the Company’s management is not
burdened with the limitations of the non-GAAP financial measure since the
limitations pertain primarily to comparisons outside the Company.  For external users, the non-GAAP financial
measure provides additional information to the Company’s GAAP disclosures and
users can assess which information best suits their needs.

•                  The substantive reasons why management
believes the non-GAAP financial measure provides useful information to
investors

We
initially included information relating to the Company’s “adjusted gross margin”
in our filings with the Commission in response to specific requests from the
investment community for this information.
Without this information, the investment community has difficulty
analyzing the Company’s gross margin and cost of goods sold.  We believe the information provided in our “adjusted
gross margin” is critical for investors to obtain a transparent understanding
of our trends in cost of goods sold, and that investors should have access to the
same information used by the Company’s management when making their investment
decisions.  This information is provided
for all relevant periods regardless of whether it decreases or increases the
GAAP gross

3

margin.  The
effect of inventory write-downs must be separated from the manufacturing cost
component to have a reasonable basis for understanding trends in cost of goods
sold.  Because “adjusted gross margin”
reflects the actual costs of manufacturing our products without the effects of
inventory write-downs, which accelerate the recognition of costs based on the
market prices for our products, it is useful in evaluating our performance in
controlling and reducing costs.  Further,
“adjusted gross margin” is useful in assessing our cash flows and forecasting
our future results of operations.  This
information is disclosed in the last three sentence of the Form 10-K paragraph
set forth above.

II.  Gross
Margin Adjustments Defined

The Company’s non-GAAP
financial measure includes two adjustments to gross margin as follows:

Inventory write-downs:  The
amount presented as “Inventory write-downs” represents the amount of
write-downs recognized by the Company during the indicated period to reduce the
carrying value of work in process and finished goods inventories to their
estimated market values.  The Company
performs a lower of cost or market value analysis on a quarterly basis.  In the case of a quarterly disclosure in our Form 10-Q,
the amount of Inventory write-downs is the write-down recognized at the end of
the quarter.  In the case of an annual
disclosure in our Form 10-K, this amount represents the sum of all
quarterly write-downs recognized during the indicated fiscal year.  The amount of Inventory write-downs agrees to
the adjustment to reconcile net income (loss) to net cash provided by operating
activities on the Company’s Statement of Cash Flows.

Estimated effect of previous
write-downs:  The Estimated effect of previous write-downs
represents the effect on gross margin for the indicated period from the sale of
goods that were subject to inventory write-downs in prior periods.  To determine this amount, the Company
performs a “with and without analysis” comparing the reported inventory values
determined in accordance with GAAP to the inventory values that would have been
reported if no write-downs to estimated market values had been recognized by
the Company.

The following disclosure was
presented in MD&A in our most recent Form 10-K which we feel
accurately and adequately describes the two adjustments:

“Inventory
write-downs” are calculated based on estimates of future market pricing
relative to the Company’s costs of production and inventory carrying values and
the projected timing of product sales.
The reduction in cost of goods sold resulting from sales of written-down
inventory is reflected as the “Estimated effect of previous write-downs” in the
table above.  The estimated effect of
previous write-downs is calculated by computing cost of goods sold for each
applicable period as if no write-downs had been recorded and comparing it to
cost of goods sold as calculated in accordance with generally accepted
accounting principles.  In calculating
the estimated effect of previous write-downs, the Company uses the same
judgments and estimates that are used to calculate cost of goods sold.

4

We
have prepared the following example for the Commission that may be helpful in
understanding the flow through effect of prior period inventory
write-downs.  Our inventory is carried at
the lower of average cost or market value.
Section A of the following table sets forth the assumptions for the
inventory valuation used in this example.
Section B of the following table provides an illustration of how we
determine the estimated net effect of previous Period 1 inventory
write-downs.  Please note that there is
no assumed inventory write-down prior to Period 1 and no inventory write-down
in Period 2 in the following example.
The estimated net effect of previous inventory write-downs is calculated
through the use of a financial model that computes inventory values for each
applicable period as if no write-down had been recorded.  In calculating, the estimated effect of
previous write-downs, the Company uses the same judgments and estimates that
are used to calculate costs of goods sold.

  Period 1

  Period 2

  Qty

  Per unit

  Value

  Qty

  Per unit

  Value

  Section A

  Assumptions

  Beginning
  inventory

  2

  $

  10.00

  $

  20.00

  4

  $

  8.00

  $

  32.00

  Production

  4

  10.00

  40.00

  4

  9.50

  38.00

  Available

  6

  10.00

  60.00

  8

  8.75

  70.00

  Cost of sales

  (2)

  10.00

  (20.00

  )

  (6)

  8.75

  (52.50

  )

  Ending inventory

  4

  10.00

  40.00

  2

  8.75

  17.50

  Write-down to
  market

  (2.00

  )

  (8.00

  )

  —

  Ending inventory

  4

  $

  8.00

  $

  32.00

  2

  $

  8.75

  $

  17.50

  Estimated
  average selling price

  $

  8.00

  $

  8.75

  Section B

  Inventory Value
  Absent Write-Downs

  Beginning
  inventory

  2

  $

  10.00

  $

  20.00

  4

  $

  10.00

  $

  40.00

  Production

  4

  10.00

  40.00

  4

  9.50

  38.00

  Available

  6

  10.00

  60.00

  8

  9.75

  78.00

  Cost of sales

  (2)

  10.00

  (20.00

  )

  (6)

  9.75

  (58.50

  )

  Ending inventory

  4

  $

  10.00

  $

  40.00

  2

  $

  9.75

  $

  19.50

  Inventory as
  reported

  $

  17.50

  Inventory absent
  the effect of write-downs

  19.50

  Estimated effect
  of previous write-downs on ending inventory value

  $

  (2.00

  )

  Period 2 cost of
  sales absent the effects of write-downs

  $

  (58.50

  )

  Period 2 cost of
  sales as reported

  (52.50

  )

  Effect of Period
  1 write-down on Period 2 cost of sales

  $

  (6.00

  )

5

As
illustrated in our example, we calculate the “Estimated effect of previous
write-downs” by comparing the actual cost of sales as reported to the estimated
cost of sales assuming there had been no write-downs.  The difference between those amounts, after
adjusting out the prior period write-down, is the impact on cost of goods sold
from sales of previously written-down inventory.  As a result, in the foregoing example, the
reported gross margin in Period 2 was $6 higher than it would have been absent
the effects of write-downs.

Other Considerations

We recognize and support the
Commission’s initiatives on transparency of disclosures to enable the reader to
obtain an accurate understanding of the true economic substance of transactions
or the Company’s operations.  We have
carefully considered guidance from the Staff and adapted the form and content
of our disclosures in line with the Staff’s guidance on transparency.  For example, in the Staff’s Interpretation “Commission
Guidance Regarding Management’s Discussion and Analysis of Financial Condition
and Results of Operations” dated December 29, 2003, the Commission stated,
“Companies should consider whether a tabular presentation of relevant financial
or other information may help a reader’s understanding of MD&A.” The
Company’s management believes the tabular reconciliation of gross margin as
reported to “adjusted gross margin” identifying the inventory write-downs and
the effect of previous write-downs is the most effective form to ensure the
reader’s accurate understanding.

Finally, as previously noted,
we began disclosing “adjusted gross margin” in our filings with the Commission
in response to recurring inquiries from the investment community concerning (i) the
effect of our write-downs on periods’ reported gross margins and (ii) the
relationship of actual historical cost to current and future average selling
prices for our products.  Being mindful
of the provisions of Regulation FD, we concluded that the best mechanism fo