WDC - Earnings call transcript Q1 2018 | Western Digital Corporation

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Operator

Good afternoon, and thank you for standing by. Welcome to the Western Digital's First Quarter Fiscal 2018 Conference Call. Presently, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session.

As a reminder, this call is being recorded. the to turn Blair. now would call Bob over I

You may begin.

Robert Blair

those our of the call measures update forward-looking Investor non-GAAP will between measures. we to measures website. on XX, exclusive effect this will including financial into our of the We August acquisitions, good and including and achievement reflect of demand call laws, regarding expected growth expansion the section financial new afternoon, storage portfolio, that differences applicable other uncertainties legal statements subject undertake business positioning, will product and financial any is memory. and and product XX, statements made based commentary our materially, ventures you, new financial on the concerning actual may market and and or to be information differ of performance, not future and announced contain that reflect provide cause forward-looking efforts securities plans, opportunities, meaning to be could This activities, These deleveraging does expectations listed obligation Toshiba the proceedings, the transactions be X, execution, during are XXXX. are SEC divestitures joint goals; on to to flash Annual on our call outcome comparable everyone. Form Thank our non-GAAP to data risks our one-time of of references or market integration our Fab synergy within forward-looking October federal development filed markets, the related in trends, of results and NAND Relations Any our events. management's during and Further, statements with supply Reconciliations GAAP this forward-looking XX-K posted strategies our and statements investments current acquisitions, after the with the in Report of no transactions XXXX. expectations

Executive because that financial most fully these be measures not items of control corresponding unreasonable cooperation. are guidance material Accordingly, today's that reconciliation effort. the the available their part measures In guidance limit have not question-and-answer a as full callers cannot call question in Milligan. GAAP to non-GAAP we as our to of Chief And possible reconciled our ask GAAP to the non-GAAP will our I the one question. Steve you you now, turn measure impact to is financial call, for over Officer, and/or I We many your predicted. reasonably in ask advance measures to without thank yourselves measures, directly allow comparable to the not

Stephen D. Milligan

opening thank you With Chief me and the of Mike my a and Chief afternoon, and summary Good Financial officer; Long, remarks, joining Officer. President are fiscal After Mark provide and Mike first and with guidance. will business our recent Operating cover highlights, us. will wrap today up for Cordano, Mark quarter

we the solutions can the a take then data quarter, our platform value underscoring the power performance continued will and of reported deliver, September in storage financial your We We demonstrating leader. differentiated strong questions. as comprehensive

of continued with unabated where we continues we for it quarter, in a would our been are situation, our opportunities operating billion, notably resonate creation our of and I transformation spend has growth coverage $X.X most a the per end $X.XX. We in speculative. few of There to earnings minutes customers, challenges markets, significant new and reported this marketplace. September reviewing like to businesses. Toshiba. media the For to data leading now in flow, lot is and around generated XX%, revenue non-GAAP non-GAAP gross cash margin share reflecting flash-based our demand With of strong in healthy

collaboration and Toshiba priority efficiently emphasize deeply appreciative to been joint meet government and invested the of remain a under to in full TMC control forward are consortium. lenders, INCJ-KKR focus regulatory equity the JVs concerns operate relationship. we this Toshiba longevity TMC ventures. the to SanDisk. and into as our intend and one innovation our this other move we our of This is energy maintain. by benefit that and point, a from have dedication That has of made and of XX-year suppliers of agencies. the of management. participation resolution, that to numerous and has from would I customers, and the want that finding negotiations, professionalism, much matter notably, the in the success continued number beginning, best It stakeholders, ensuring directly we and teams So, minimizing we in why industry, so the starting Most hallmark the the respects of the talent been the the and needs thus we also From productively, the Japanese that as time have addressing would which can one continue allowances eliminated Throughout resolves spirit we The TMC's so course ownership, such and key JVs partnership, exhibited meant withdrew stakeholders. risk from of

SK Toshiba by consortium While best Toshiba provided we and announced potential we led Capital. the believe solution the and the transaction Hynix stakeholders, Bain to their with

moving which arbitration, to for momentum, following leads not be constructive the made is potential respect in this matter Shortly without seek of of we to concerns X, October near to track the process. thereafter, consortium are paths Hynix-Bain California transaction engage either clear On we resolution. hearing or regarding are rights will consent our will stakeholders intention that and Arbitration future, the we three-member Toshiba successful panel. our are its motion. record panel confirmed explicit, our through relief in request we courts. strong feel our transferring in two the The the interests without with informed JV resolved With to where our file There arbitration consortium be to SK panel today. arbitration from International our injunctive It in relief. Court permitted are confident the prevent set forward the and consent. position dialogue will have injunctive point, continues at to our The consent. will therefore objective SanDisk's SanDisk We schedule clear. their for That officially soon, a we

We in expect a in announced ruling the part advance proposed to Toshiba's of the of first close XXXX timeframe transaction.

Just lightly. not to be litigation we undertake clear, do

Toshiba the And only X. context We invest the you surprise was respect unilaterally a to that it would during negotiations it are should not that, summer, This this tranche, us. recall in the venture X, last of relationship. for especially over joint first resort, litigious. Fab in Fab With be a may announced investment to

our the announcement, In made investment. To remind the are of joint the tranche with you, when scheduled fact, Fab associated its ongoing. negotiations time prevented are investment. Toshiba already investment had This for first SanDisk to the was actions, from participating new X was further second Toshiba's more discuss first that subject regarding meetings in fab we The a tranche, arbitration.

commercially to we the investment, investment are as we first Toshiba. Just participate all intend did to by during agreeing and negotiations terms jointly proposed reasonable good-faith the tranche, the in for we

condition unilaterally be not reached tranche we as what agreement investment has is terms waiving confident not Consequently, consent this will that Toshiba to at either. we this are will an such participate, its SanDisk However, on a proposed. or as which agree next time, to rights negating

obligated to agreements, As Fab investment confident arbitration of directly-owned we in want focused supply following; management for solely these in planned our the whether capacity the X. emphasize of or the is it proceeds Based on differences have process. X that for that a XXXX initial XX% not tranche, outside Toshiba's If investments bit JVs. resolving to directly-owned In entitled through and noted, second joint growth remember XX% Toshiba's calendar on investment would also calendar supply also Toshiba closing, in XXXX. negotiated is are its planned venture with first, the rate agreement XXXX, Fab the unilaterally Toshiba, capacity, of us board initial irrespective for provide be our to important to remain our It JV JVs is with our and is the share of we are I flash capacity. through that

steadfast Western Digital's protect are to our we commitment those stakeholders. Second, of and our interests in

positions confident to right are relief. in fact-based and our injunctive We our legal

earlier, Third, channels. there through great a mentioned has been of as I the various marketplace deal misinformation into provided

best and this persist, to reiterate Western the our activity interest continue through to I the success filed this about that has with this joint want in number our forums And one to continued Digital this commitment ensure changed our priority public legal transparently, to our to team. and the call. recently expect been potential did and want we ventures. situation like the outstanding FAQ, Digital have Western contributing I and as we longevity to We finally, confusion acting communicate stakeholders. will to rights. the thank of From also day or of one, priority not consistently

You customers continued our Mike will Mark and to delivering of With your spectacular our have for the focus innovating share ask in and quarter. and maintained that, I fashion. highlights

Michael D. Cordano

Steve. everyone. afternoon, you, Good Thank

client with driven our in and quarter Client as September than remaining to the demand revenue NAND ongoing flash SSDs. expected, quarter, continued In fab Our Devices, Yokkaichi embedded better the strong. results for nicely were demand joint we for increased grew conversion and products further planned, operations made year-ago venture from XD The in progress our technologies. products by

products, expect December increased current client expansion OEMs solutions the pipeline Our in September ramping these for solutions the embedded within growth OEMs' further We product within and for launch due based our for in and iNAND, the our for markets. adoption we to such the compute product our further as our our for client offering. portfolios, mobile deepened mobile and to emerging And XX-layer OEM quarter, flash quarter. coinciding design the eMMC adoption with Demand our applications. gained began grew win XX-layer of SSDs SSDs ecosystem, both

of Solutions strongly driven the diversity Client flash-based from prior revenue year, the our grew products. by of portfolio HDD and Our

as of demand enterprise resulting In industry capacity the growth drives. and industry-wide products, our new During and consumer portfolio, launched global The Home, enabling to brands, In iXpand XXX be the of combined previously muted by quarter, well Data slower key commented, is the decline Devices capacity lifestyle in similar in petabyte product to hard and along the revenue broadening our calendar DRAM, with principally a Cloud year-ago XXXX. marketplace. was in expected to components, to appeal quarter as retail shortage we enterprise, differentiated microSD enterprise two offset secular value as Solutions, growth strength Base the card to highest-capacity at to My ongoing quarter, September we SSDs deliver as gigabytes. enterprise mobile continue and Center drives in continues world's the was hard revenue performance due us

in saw the our XX-terabyte track drive, activities component we quarter, As ease. calendar such driven third-generation into market to we informed with In will traction migration a Customer planning we accelerate expect the its hyperscale our higher to December planned we further annual capacities XX% offering. the September in with continued our drives, remained and our varied of by commercial is shortages as growth increasingly fourth-generation petabyte XXXX, on joint in will ramp customers, to with the and qualification look gaining the XX-terabyte expect rate. which to workloads, our the offering shift handle enterprise offering, as growth by XX-terabyte quarter. helium capacity be reaccelerate helium This

of helium note drives we more XX million platform are in this pleased to XXXX. We introduction have that since our shipped than

Just we known we commercial make successful have reality. very announce over achieved to magnetic a breakthroughs formally MAMR, microwave-assisted important weeks to also event as ago, a recording, technology two hosted

next-generation solutions, the or more this making technology in internal an technology. HelioSeal have drive in the MAMR even past almost leader justification investments most magnetic been manufacturing infrastructure. in technology of recent availability changes no a ecosystem maintaining Further, the of compelling. recording perpendicular with additional this technology, MAMR customer MAMR The being substantially processes in it for advantage requires is that our choosing both next in step is leadership. innovative capacity We significant commercial leverages enterprise

previously XD our September to XD acquisition diverse terabytes ramp will areal advantages the the take capacities at The our We Tegile XX production the quarter, XXXX. we this during enable we As efforts are yields data the a provider planning also for improve will to believe in focusing In calendar stated, in NAND MAMR we Tegile to to to data, enterprise stack, have joint customers. big in MAMR addressing combined for In can us into products the we that for helium increasingly enable higher our and stronger bit of active us of provide met is NAND, to company technology. density deliver output XX-layer crossover flash growing fast scale move and Tegile's systems and of industry-leading completed market Manufacturing a ventures, applications. provide accelerate With IntelliFlash quarter, center of the years data Systems, value ahead. fully leading position storage our products on customer September workloads. acquisition flash address for differentiated BiCSX, continued versus we achieved XD this our the our objectives NAND. drives up

We low for enabled we in into of bit base of are pleased XX-layer us XX% to the on positioning XXXX products retail calendar mix flash are XXXX. long-term the XX%. our that of well at entire our in OEM outlook industry to growth portfolio richest for expanding offerings, report standpoint, been industry's also underway From BiCSX end to remains a industry and estimate our this already, the uses our calendar of has deliver technology

industry For to we expect continue to calendar in long-term growth XXXX, range. be that overall bit

will long-term continue confident Given previously that that are industry of platform, competitive up position our financial strong and our manage and best financial power our team, we ingredients half XXXX. the business we to growth products discussion. combination bit The remain solid of make revenue within bit drives as in helium our requirements the agreements year-over-year XXXX the enterprise provide ability and our demonstrate turn serve us base drivers secure, go-to-market capabilities range. to achieve XXXX September a including favorable technologies, to based the our Mark better of JV on current results calendar diversified quarter of over with our our our indicated, platform. our flash I the the customer are various closing, In the supply our and drive base our the fiscal in and the call now that continued believe to to this products, and helping will capacity through for secular to calendar calendar strong, persist first should conditions we ramp growth outcomes. continue growth BiCSX strong year. strategic The Furthermore, are for for

Mark P. Long

and good performance I'm Mike, everyone. very financial you, with Thank afternoon, quarter. the pleased in September our

portfolio, growth. of capitalized and expense executed team our across diversified margins our Our increased earnings achieved markets, significant gross we well on broad in and of array resulted cost product all which as targets,

that finished the performance improved also an as financial September of to our year. fiscal generation. quarter the flow liquidity operating position It We result is with included XXXX for fiscal a note continued robust full SanDisk's results cash our important

year-over-year be any reference I comparisons direct will a So today comparison.

Center markets. Client by $X.X Client Solutions driven the Data $X.X increase and revenue billion; an of was billion, for in billion. Revenue strong September XX% in performance Solutions was Our quarter $X.X year-over-year, our end of billion; $X.X was Devices each was and Devices

storage fueled business be cloud-related Our largely demand. data continues by center to

products. year-over-year, for primarily other and revenue hard We SSDs, Devices from of growth global driven revenue expected quarter revenue increased Client the Devices by strength enterprise decline in performance client flat mobility capacity drives. drives sustained XX% for as retail and and saw the by September a mostly enterprise Data quarter in year-over-year. Center flash-based an was of quarter valuable hard strength significant Client Our September removable enterprise SSDs. increased result September offset and in brands Solutions XX% our the year-over-year, Solutions for

for cost up HDD strength and margin This supply/demand flash-based a non-GAAP flash-based improvements, products, margin of resulted of XXX gross mix Our favorable a basis points gross was capacity lineup. year-over-year. our the enterprise product revenue expansion from higher XX.X%, environment

$XXX projects non-GAAP ongoing go-to-market IT our product totaled in development, OpEx included to Turning operating to operating transformation expenses million. related investments and This our capabilities, companies. expense, recently-acquired

interest investments make We of for million in integration September capabilities. our continue making and future million, of expense. progress targets, $XXX Or other was synergy expense inclusive non-GAAP to toward our the interest quarter while also $XXX

interest basis, offset income a Therefore, intangible quarter, million in a net non-cash billion were period non-GAAP to GAAP the per September compensation. operating The billion which X%. cash income $XXX charges of increases. year-over-year, and the net the partially we or was September approximately flow, In net integration for we result in includes $X.X Our share. basis, per GAAP primarily income income related $XX generated the year-over-year. between a for by million of $X.XX increase share. non-GAAP net Or or is LIBOR primarily $X.XX effective an stock-based our amortization, decreased September rate quarter charges. was On activities difference On of had quarter XXX% and the non-GAAP savings, $X.X tax from repricing expense the GAAP

to on our businesses $XXX continue free capital investments, of in spent reinvest cash million with in flow We $XXX million. resulting

remain flows in $X also September to billion We and the our available-for-sale quarter, billion, working $XXX quarter, dividend year, cash, billion combined net the generated decreased cash liquidity structure, to the of cash our $X declared had mostly to We contributing the fiscal revolver the capacity. fiscal quarter. plans, achieve of of committed business. for synergy HGST We in our us, strategy both to our of from share. have for sufficient flow retaining the cash I closed savings operating securities and also The capital cash planned paid at the million capital our totaling to approximately optimize commitments results undrawn targets and of We of the liquidity amount in acquisitions. our the contributed with the equivalents end $XXX now while totaling previously-declared $X.XX second will performance Since quarter our track a to we to significant the good and and per driven the $X the strong financial cost remain XXXX the on integrations capital in our We guidance debt on $X.X established. a quarter during will dividend non-GAAP flexibility. resulting beginning deleveraging approximately basis. provide by available our the previously by validated SanDisk continue including of and time billion programs has and of million

to billion. $X.X and billion expect be $X.X We revenue between

to expect be the prior than gross quarter. margin We higher slightly

we approximately other Turning expected to is be approximately operating Interest those expense and to million. expect $XXX to be expenses, $XXX million.

X% to rate expect the an in We effective X% range. tax

expected shares to Our are diluted approximately million. be XXX

a resulting the calendar and per our share of As a believe XXXX will for year non-GAAP $XX.XX. and $X.XX, growth in earnings key product and we between that platform profitability. differentiator strong, long-term EPS integrated expect $X.XX is result, approximately We technology enable

share per based on capital non-GAAP seasonal While structure, fiscal in X% begin operator we see approximately revenue $XX of our the the to Operator? X% our growth our we long-term over achieve expect current decline outlook earnings XXXX, be will session. end fiscal model of Also, for will now the to our the to fiscal turn Q&A to business second XXXX. of expect I at for normal the see half we call opportunity and high the XXXX. to

Operator

you. Thank

first comes Mark from question Our Moskowitz with Barclays.

Your is line open. now

Mark Moskowitz

see get you products outsized for Will or And a any actually appreciate guidance pent-up for there of for to here you you Do a do Yes. My give NAND WD? HDD SSD-based terms Thank NAND-based come the sense as out? question only the for does how Good around afternoon. versus here the change of you. you. sort XXXX. Can to really be is potential demand SSD in Thank actually down? details you related of I more play expect Toshiba. pricing mix the here benefit us there?

Michael D. Cordano

you let Mark, give So, that. me color on some

bit we as progressing see the market placement year, with fully various of think segments. in So, through our output this I comfortable feel ourselves we fiscal

consume bit think penetration So, untoward. planned, the I sufficient the an output. though somewhat based continue kind mix the that demand to at is of is We as to basis. penetration there long-term slowed NAND sort Relative nothing to of would constraints and our industry expect SSD, of upon

Robert Blair

please. question, Next

Operator

you. Thank

come will with line Capital from Daryanani question proceed. next RBC Our Amit Please the of Markets.

Amit Daryanani

Western C cross-licensing Toshiba the SanDisk together? first calendar forward D dynamic, secure Good to you've me that lot. if details, the Toshiba, that does don't I XXXX does even mentioned, with production held with, guys if done they've to do think to talked give do and curious, they And you guys. it's that only proposed, you cross-licensing a the the you question afternoon, start but while the a plan they both up viable agreement decide guess exact maybe on Thanks ramp and need apply without Or have capacity Digital? bit beyond B, the go I'm have you the to get IP, up about? for broadly, unilaterally transaction

Stephen D. Milligan

the venture licensing time, require would a is prepared this period I'll question provided in is, Steve. prefer technology as comment I the second remarks, work. And Amit, take second of thing first. agreements in indicated of on to the the then Yeah. bit out I be us to XXXX. arrangements that not my joint to to over terms how output

Amit Daryanani

there enter you the customers? on one I guys I'm guess just some follow NAND a talking up long-term if $X it. of perhaps on prepayment fact potential and guys what given to their demand XXXX call, that? outpacing could billion and XXXX. your just already for is signing keeps is are even of are talking on into that about, agreement a based doing Got that in And agreements the getting for you curious, Intel, maybe with you NAND thing, about I supply bigger strategic

Stephen D. Milligan

Yes.

I long-term think be part ongoing are can those our sort of practice. arrangements of

do those yes, from of those would time-to-time, agreements. we of things, prepayments and So, elements sorts the be one of

Amit Daryanani

you. Thank Perfect.

Operator

Thank you.

will question from the Our with line next Mehdi of SIG. Hosseini come

is line open. Your the

Mehdi Hosseini

for Yes. follow-ups. Thanks question. my taking Two

economics are with that you ramp-up think a should think how tightness, Or long-term by enterprise we customers SSD between customers smartphone availability, the each of And allocation? agreement, allocation? mix Right allocation to are you a how we these which terms we given about follow-up. require have. through context, And, OEM about embedded the the application? have dealing I of now, should some and in you driving have fulfill? going of In Do of would NAND any that

Stephen D. Milligan

Yes.

So, you two which Obviously, is dimensions. one economic. referenced, has our philosophy allocation of them

is strategic. other The

So at looking objectives diversifying results goals multiple of we're mid-term product and our current between across customer of, and base of, our sort growing optimizing and our financial long-term segments. our

formula, based really it two segments things. you Obviously, is based of activity. the of So, of on can some basically those and our growing we those complex see upon it's a and in results, results are all that

Michael D. Cordano

think that, our Yes. to that, the from diversity perspective is a to design. oh, And I have, – add we model. product, it market, And the to us just a resilience by other and is more it customer that provides by perspective way, the financial from allows thing

something So business. think diversification concept the the we way to central is run is and I that that that very manage

Mehdi Hosseini

to especially longer the going for should products products, trying is to the could when when be outside, technology? to higher And both market and are we cost MAMR the for figure then out benefit and from And we're look we it. looking MAMR and there. out earliest out HAMR that out the each with that expect term, us And the figure nearline differences samples I'm into Got density be and there? assuming

Michael D. Cordano

or our reasons made obvious areal was would in confident get once production commercial technology to of achieve clear comments around us. get needed said my announcement pretty in a choice sort on. that but required, the breakthroughs Obviously, some we that out I our of technology to done, choice economic it, the for Relative the have which in to for results in we ability samples competitiveness a us. density it was XXXX, late our just it obviously I to XXXX our view for picking stated we commented is So, and

will the and or and you tooling PMR to to ability in manufacturing things we place. based have leverage processes, technologies the the for our of point I really perpendicular current manufacturing is internal One us

Mehdi Hosseini

So, data between would compare help by we difference the should that two? XXXX, us late the see field

Michael D. Cordano

in ramp we will ship XXXX. No, production we customer XXXX, in samples will

Mehdi Hosseini

you. Thank Okay.

Operator

Cihra line of will Rob come question the next with Our from Guggenheim.

line open. Your is

Robert Cihra

up after that Thanks in Hi. capacity is DRAM being Or seeing irrespective picking DRAM sort in is talked a availability you mean about reaccelerating by an in thing? I growth Great. the very also of demand XXXX, mean, availability? I you their there providers? back to of XXXX. builders, part Thanks. Mike, terms much. or service muted high-cap component cloud in of you a customers, are talking looking indication better just

Michael D. Cordano

Yeah.

Let bit. a up little me back

demand with happening close think planning So, factors. in that. muted along, upon XXXX by what's the I certainly is outside based view has reflection customer temporary been been is true environment, our or there not And it's all the a right? of base in yes, and XXXX demand our of external of work both hyperscale

Robert Cihra

depends really And on taking mean service your at cloud the do? you stage, just OEM they from guys this find they is cap do traditional Are Thanks. more – I it enough to OEMs? what it in high customers are offset declines now mission critical? Or

Michael D. Cordano

its us substantial of or yeah, the a new the buy at enterprise and consumers hyperscalers. to Well, But rate get, storage architectures traditional the performance tier are hard still capacity OEMs with better impact on a displacing can certainly big capacity providers, enterprise for really design so the that cloud and it's system it's new not cost you performance based and that, drives, architectures SSD's flash eroding performance products. relative enterprise new

Robert Cihra

Great. you. Thank

Operator

question comes with Rakers next Aaron Our Wells from Fargo.

now is line open. Your

Aaron Christopher Rakers

you. Thank

forecast ability are up that XX% terms long-term for as I capacity, – making know should curious XX-layer down the own about talked your you your XXXX into XD in what And ability curious, your as assuming I say, in – price erosion far you and XX% as range. growth you context, I'm that as assumptions calendar ramp of to take in beyond? you cost your what and supply fiscal What growth? capacity you cost, to to supply roll are XXXX looking Just I'm assumption just sorry,

Stephen D. Milligan

can Yeah. Mark and Mike can part, take the then second part. take the first

Michael D. Cordano

expected we've Aaron, talk same rate, expectation growing maintain to range, that We about XX%. we XX% we able sort cost models from our as at that reductions industry are to of we XX% the and talked growth Yeah. an that XD, to to expect be expect would we be at for to convert will in the XX% in bit continue which is to longer-range XX%, level. XD XX% about, it's which to

Aaron Christopher Rakers

of Okay. potential as overall indications far And at I industry year, know about more shortening? trends dynamics, the first look you or supply/demand same context, through or extending less favorable seen as or either negative, talked that that any have positive as kind of you a you half reiteration in all, at of further the the even

Stephen D. Milligan

really point I too point. to this have any it's or side think Certainly, this early we the at to at don't Yes, strongly one other, indication tell.

Aaron Christopher Rakers

enough. Thank Fair you. Okay.

Operator

Our next of Merrill comes Lynch. with of from Wamsi the question America Mohan line Bank

is now line Your open.

Wamsi Mohan

it proceedings with here of in will future can And sort NAND Yes. sense will that but you supply, technology the and confident Thank confidence progresses? against give some development, so future still these output sounds follow-up. go arbitration keep potentially And pretty have if JVs in as the have you? a you. I XXXX, you XXXX of beyond, you're us Steve, like up supply

Stephen D. Milligan

from advance and our interest the a Yeah, it's of capabilities the from we to a of manufacturing technology in that perspective. both best continue joint ventures

appropriately proceedings and ourselves that independent, speaking, in going arbitration to And the confident of our that frankly partner forward. continue will out. we're invest that's so, capability how joint And turn venture

Wamsi Mohan

of of guide? your embedded September Thanks, Thank expectation is Steve. what quarter? you. on much How quarter comment your you December Okay. was sort And that up expectations NAND in expectations in pricing? in And of relative flat can to sort

Stephen D. Milligan

coming had quarter we this about That think expectation really our ASPs expectation sit last quarter, as talked today. flattened. that's we that our and into I was

way at continued current up, it's see level. movement sustained don't we So but being substantial a the in

Wamsi Mohan

you. Thank

Operator

Wittine line the next from Longbow question Joe Research. with comes of Our

Your line now open. is

Joe H. Wittine

Hey. quarter, Thanks. thanks for on and JV. the the Great discussion

Mark, above ask for favorable gross so Can margin after end high the stay because obviously which the over your even expect XX%, line supply expect midterm, range. is that half. the mostly the point? north in one is demand and qualitatively, GM you to Just NAND fundamentals just how And address the on solidly you to of trend first Street you of still I through obviously

be helpful. commentary forward-looking would any So GM

Mark P. Long

look near ramp us our which continue more are part that benefit. gross we first give XXXX, term, positive as that BiCSX benefit, some into getting margin of of the a technology, Sure. is benefit we will so And I think, some and will from margin calendar certainly, the

expect margin exact gross through healthy that in at into XXXX, factors of to HDD, but it wouldn't in our with first HDD. level period gross going expect so to year, have due the net-net, there. we're seasonal some continue seasonally and the we out the slower we still for those through the look As half and to I we fiscal same the rest is mix offsetting declines would think And margin

Operator

Our will next question of Ackerman Cowen. line come Karl from the with

line open. now is Your

Karl Ackerman

your for layer and XD with on that existing Hi. fabs? X, technology the of to must consortium understand agreement XX lack Thanks. everyone. supply the X installed X limits master Toshiba wanted Because today. I Thank NAND tools circle technology Bain-led that that the that is NAND, today? in build would I Fab agreements your NAND your not, a I technology NAND plan in XXXX, if XD Fab addressed fulfill the where beyond questions think through in you. appear consortium today, current Fab your the XD roadmap and back roadmap X supply to must Good stipulate are Fab that it place the invest afternoon, were but earlier agreements Bain-led do

Michael D. Cordano

our asking, of As terms lost weeds in in success I venture, in this that at get point. the priority some provided I'd and is details joint not of some the to questions details X-K. to terms of you're longevity the noted, of indicated, prefer those in number that the remarks as and of And a we of my the lot addition one prepared I continued

Operator

the line Our next from question Katy Morgan Stanley. of comes Huberty with proceed. Please

Kathryn Lynn Huberty

Thanks. can to on exiting growth? Could Yes. When And you the then, levels calendar as maybe, comment year? Mark, afternoon. first returning OpEx see the where Good data that happened see quarter? early fiscal center as do solutions you you

Mark P. Long

can Mike Data talk then and the Devices and question, OpEx about Center the Solutions. take will I Sure.

OpEx, tend QX payroll the have, or in spike annually the has that do we reset to with In a we things small one we terms taxes. should is of in mind to of that have, keep of calendar

QX. year be I fiscal of that's model other And operating consistent a key long-term the minus, than position we we're long-term point to revenue. earlier relatively calendar otherwise the model, exiting in year, So expect we in long-term and think currently much our slight rest model with XX% of think our or OpEx through plus roughly I be increase The within anticipated. will had XX% being this to consistent we than would the the is

continued we're us our And synergy continue we operating transformational healthy range from that ongoing our should consistent in model. other efficiencies have projects from achieving so that our gaining to long-term targets with think I a and the allow

Michael D. Cordano

rate think Relative SSD calendar our a as Data us things, to two year factors, we good well as through Systems have I around in I talked enterprise to the Exabyte and Devices growth growth two and continued planned about to we expected as product relative Solutions to reaccelerate go. position, as capacity growth, – (XX:XX) progress enterprise Center progress XXXX offerings puts or

Kathryn Lynn Huberty

you. Thank

Operator

of will line question Vijay Rakesh Mizuho. from come next with the Our

Your now line is open.

Vijay Raghavan Rakesh

Hi, guys.

on I side, quarter wondering out. the could color some hard see give do you it XX-terabyte, drive how disk December grew on how Just and you looking and us was if sequentially the

Stephen D. Milligan

significant quarter-to-quarter Yeah, give we the terabytes. growth on you did is color we'll see XX

saw also would XX ramp the We we initial into the that accelerate and quarter. expect on current terabytes, will

business. very And terabytes movements market in this that's we're capacities and very XX with So, is how the the continued of well. moving terabytes the progressing our in to XX highest case pleased

Vijay Raghavan Rakesh

spat year? do bit Toshiba how disruption you that? at And next Got year, do it. XX-layer NAND, the of you going the ramp? NAND side, mix exiting And XX-layer this look do of the in let's say on, Thanks. middle any see And you on that with expect you XX-layer by see the when where

Stephen D. Milligan

provided that. no plans we disruption crossover fixed I (XX:XX) and realized any our into situation getting re-output we've changed what with expectations we've the don't Toshiba at think calendar that point, numbers expect so do XXXX more NAND either. XD XXXX than to of this at not impact point. we No that's the that for point. But And seen were previously, this we calendar and are

Robert Blair

We'll wrap Thanks. next this questioner. up with

Operator

the line Kovler Stanley from Research. of with comes question Citi next Our

line Your open. is now

Stanley Kovler

I discussion outlook. the about wanted the to Thanks continue much. just very

seasonality? the margins a As What's into that PC is first little the range, half, return the about year, we think the your does thinking half the staying implicitly low bit volumes of the has the half that gross should margins this maybe well? in presumably your XXXX, imply where that get back up when year? second business, seasonality the in XX% we of clearly in some as very year. most first seasonality the see about we better And in next much. area with that You beginning of market held Thanks mentioned some strength

Stephen D. Milligan

would we And include of move that half second us help example. benefits absorption on the calendar see gaming, think do one yes, is segments seasonality of see the I an consumer – yes, margin. some obviously, of as that business trends, our a year, Yes, when PC, it. your drivers into for Also the the so, you're also the perspective on seasonal we

Michael D. Cordano

supply/demand year, then Yeah. margins the the the From an for depend will environment. of that. HDD flash standpoint, calendar the see And we'll remainder on

Stephen D. Milligan

right. All

got done. you've I please? a question we're follow-up think quickly, So

Okay.

Stephen D. Milligan

we with rest speaking thank, joining day. All right. you us of forward and going today, Have the great want to I everybody, for to a look forward.

Operator

you This for concludes call. conference today's joining. Thank

disconnect. You may now

Western Digital (WDC) 26 Oct 172018 Q1 Earnings call transcript