Moody's Investors Service ("Moody's") affirmed Micron Technology Inc.'s (Nasdaq: MU) ("Micron") ratings, including the Ba2 Corporate Family Rating ("CFR"), the Ba2-PD Probability of Default Rating ("PDR"), the Ba3 Senior Unsecured rating, and the SGL-2 Speculative Grade Liquidity ("SGL") rating. This follows Micron's announced plan to acquire the 67% of Inotera Memories, Inc. ("Inotera") that Micron does not currently own for about $4 billion, funded with about $2.5 billion of new debt, up to $1 billion of Micron shares, and about $500 million of balance sheet cash. The outlook is stable.

RATINGS RATIONALE

Micron's Ba2 corporate family rating (CFR) reflects Micron's strong market position in the memory business, Micron's low financial leverage, and large cash balance, which we expect to exceed $3 billion over time. While the acquisition will increase debt moderately, debt to EBITDA will remain less than 2x (Moody's adjusted, proforma for Inotera), which is low relative to other Ba rated issuers. Still, this level of leverage is appropriate for the rating, since leverage metrics can increase considerably during a cyclical downturn or a heavy capital program as is the case currently due to the weak PC-DRAM market and Micron's capital spending to convert NAND production to three dimensional structures ("3D-NAND"). Although the historically highly volatile DRAM segment now more closely resembles NAND following the segment's consolidation in 2013, the memory industry overall is characterized by regular price deflation following technological advances, and thus requires market participants to incur large investments in new production technologies to reduce unit costs. Still, we recognize the flexibility that Micron exhibited during the last industry downturn (2008-2009) to temporarily defer capital expenditures, limiting the negative FCF and thus preserving cash.

The Ba3 Senior Unsecured rating, which is one notch below the CFR, reflects the structural subordination to Micron's secured liabilities. The Speculative Grade Liquidity ("SGL") rating of SGL-2, reflects Micron's good liquidity, based mostly on its significant cash and marketable securities position, which provides Micron the ability to maintain capital expenditures during industry downturns when profitability is weak.

The stable outlook reflects our expectation that Micron will maintain financial leverage below 2x (Moody's adjusted, proforma for Inotera) and will manage the DRAM production node transitions and the technology transition to 3D NAND without material disruption to output levels.

The rating could be upgraded as Micron both increases gross profit margin, indicating greater market pricing power, and shows evidence of improved operational efficiency, such that we expect that operating margins (Moody's adjusted) will be sustained above the low digit teens percent through the cycle. We would expect these improvements to occur within a market environment of continued stable market pricing and core growth in demand for DRAM and NAND. Maintenance of very strong liquidity, through access to cash and generally positive free cash flow, and for Micron to maintain a financial policy balancing the interests of creditors and shareholders would also be important considerations for any possible upgrade.

The ratings could be downgraded if Micron does not execute successfully on its node transitions in DRAM and NAND, or in its transition to mass production of 3D NAND. The ratings could also come under pressure if industry pricing volatility returns to patterns experienced prior to the industry consolidation in 2013. If we expect leverage to be sustained above 2.0x EBITDA (Moody's adjusted), the rating could be downgraded.

Affirmations:

..Issuer: Micron Technology Inc.

.... Corporate Family Rating (Local Currency), Affirmed Ba2

.... Probability of Default Rating, Affirmed Ba2-PD

.... Speculative Grade Liquidity Rating, Affirmed SGL-2

.... Senior Unsecured Regular Bond/Debenture, Affirmed Ba3(LGD5) (assessment revised from LGD4)

Outlook Actions:

..Issuer: Micron Technology Inc.

....Outlook, Remains Stable