WDC - Earnings call transcript Q2 2018 | Western Digital Corporation

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Operator

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

As a reminder, this call is being recorded.

the to turn will I call Mr. over Now, Blair. Bob

You may begin.

Bob Blair

statements Relations during provide GAAP in the financial Reconciliations we posted of measures. to our Form or Annual and structure our securities are and January transactions capital Thank to product expected and update be and the differ development section This that federal positioning, concerning Toshiba materially, applicable our expenses, expectations good undertake optimize events. financial between and during our conference other cause non-GAAP our opportunities, cost acquisitions, business Cuts Act, one-time or is to of non-GAAP financial including Stephen, expected reflect the on XXXX. measures forward-looking exclusive based results meaning of certain of website. job including and our future XX, our obligation on deleverage expectations uncertainties after We forward-looking efforts, call Further, the call regarding to may current within measures financial everyone. trends, those joint information forward-looking market with statements our could strategies, transactions divestitures actual product afternoon commentary are Tax Any reflect you, the statements demand to portfolio performance, does management's Flash. new These be access the market announced made statements impact the our and listed to call reduce references subject Report and Investor SEC November forward-looking that XX, with the will of plans to our effect XX-Quarter growth will on will our XXXX. any of laws, and long-term ventures and the this in contain be risks and no this the comparable differences not filed to

fully your directly these reconciled be the part not because guidance the In measures to our most that have today’s call, impact a as want that a predicted. are to callers available reasonably for financial our that, are control today's ask website their available cannot I slides GAAP remarks we the PDF in corresponding will effort. measures question-and-answer you that full in to Chief in be quarterly measures, many to allow Executive our the will GAAP IR section items without that I later We not measure factsheet. our with comparable one Milligan. non-GAAP question. not displaying to commentary the call over reconciliation cooperation. financial and Accordingly, non-GAAP With material unreasonable thank of of limit also as of to ask the during our to measures question our the today deck possible Officer, Steve turn on guidance PowerPoint and/or you along note yourselves we of I is advance a

Steve Milligan

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

creation of as year, reported flow markets demand am achieved we results Entering of take EU spending. at are has demonstrated there service a categories. economic U.S., flash-based I record The advancements increasing for of in our very worldwide storage portending strong is growth then unabated that pleased of drives healthy; new global too mobility, the of level value for We a positive, trends significant each and long-term rates the gross once in accommodate a our non-GAAP the is platform created in strategy. CapEx power Data environment larger and data the pursue in billion, market we and reflecting financial healthy questions. revenue The margin products. a quarter. of per robust. providers in capable generated record non-GAAP end of share the intelligence our our been growth the is cloud the hard driven noteworthy by is We capacity Internet cash data end by revenue this XX% infrastructure. growth the earnings computing, more again notably year-over-year artificial December calendar $X.XX. $X.X Things. We spending The IT and creating growth pace need most of will and enterprise China and We are cloud with value to operating GDP global your non-GAAP several continued in

hard market center continue detail, am Michael The development. in resulted As high enterprise pace our continued base manner this to powerful has addressed as later XD progress our model financial our out positioned to technology build diversified compelling product very calendar we delivering more healthy year. broad a our drives. storage product NAND our XX-layers with of and flash backdrop, increasing a are of I capture, value-added we this an pleased to results. customer our across in with a breadth in deployment Against XX-layer demonstrate normalizing technology wide resilience data. ramping recent be of platform the will technology constructed provider transform serve reacceleration by portfolio a our solution we will of markets; with and and capacity of data is demand for a access The preserve, well diversity enable ever in of

report to XXXX. happy delivered. ensure capacity results the the share year well. our Toshiba partner our of lead flash our to focus business and and our JV our of sample will drives proud extend industry on We very MAMR-based calendar access that, enterprise perform was remained am ask the continue of to half relationship highlights. I the that the long-term With very It to plan gratifying helium to operations they continue with strengthen hard of a and with and we I to platform have the on at high end with our calendar second negotiations I capacity and JV resolution driving Mike our execution our and team to am in

Mike Cordano

Thank you, Steve. Good afternoon, everyone.

demand well are XXXX we solutions. results. strong executed with We that finished our and pleased with We continued our calendar products strength for December business quarter across and

nicely first for client saw year-over-year shipments offering most products. to embedded a and demand in and flash-based of platform our customers. driven flash market broader We As embedded solutions power the compute notably with by quarter, our address year-ago began of market us including XD beginning our markets categories, our end SSD broadening reflecting grew Steve Devices, of and Client this our opportunity each we set year. allowing USF indicated, addressing mobile In a of calendar our market growth and from revenue our

areas, connected industrial In saw surveillance continued products verticals. addition, and we strong such our growth as demand home, for and

received At revenue our increases further and preference leading CES WD in e-tail remains our Devices continued products partners drives accelerated. December we during ongoing month, quarter. in year-over-year made holiday the the our innovation capacity terabyte roads further this the helium end Solutions underscoring and to enterprise highlighted half Client demand drives Shipments brands transition engagement to earlier and this strong a with XX delivering strong. for value capacity and our Data awards, Solutions, market. terabyte the the Solid We differentiated dozen brick-and-mortar for and during season. G-tech, point of the Center XX grew are SanDisk In

the December also We shipments terabyte of began hyperscale applications quarter. industry leading XX our drives, during for

terms an rate growth In in XX%. slightly overall capacity primarily exabyte growth component of market, of was less calendar the period than with enterprise, as XXXX slower previously for industry-wide constraints, the to due exabyte indicated,

However, In fulfilled. drives, noted for strengthening conference demand XXXX, in exceed we the call, first the ended exabyte XX% year-over-year is calendar rate of as our we we industry as estimated half the pent-up enterprise saw XXXX. as will we demand that growth capacity December

expected a mid deployments year. drives the industrial persist exabyte out center enterprise full For range. large calendar to an XXXX, the exceed significant broad end are need global in area Digital, high the exabyte throughout are to as the estimate by XX%, capacity guided as and Data of customers we trends These drives to driving of as hyperscale lower range mid part are policies several enterprise has growth growing the been the enterprise of expansion. infrastructure for Western capacity well market share. leading build capacity

X for We cost-advantages, of to terabyte capacity Asia, rising recent the products. have in range to of especially drives, with introduction new air terabyte a X based our responded demand

at unchanged achieve XXXX, the drive From We estimate and exabyte expect to cost and long-term consumption expense expect annual growth is exabyte to demand the market range mid to we for support operational of an rate higher as calendar continues capacity the reductions, our and in high standpoint, drive further hard evolve. XX%.

have we development our example, product enterprise investments by portfolio client in portfolio. eliminating For reduced and our HTD narrowing and performance drives future expenses

and of our in operations China Additional Singapore. actions include announced previously closures manufacturing

flash exceeding ramp BiCSX, more in progressed bit The XX% further XD flash XD than approach the layer technology, the improvements mix to well venture, constituting bits. supply of flash our Turning flash joint XX BiCSX quarter our of with with December of yields XD productivity. XX% and

the Additionally, product our and BiCSX in retailers XX-layer we technology initial began of production to commenced shipments quarter. December

the commence months XXXX. we initial X of standpoint, second in half as calendar growth are at long-term a starting year. growth Western industry operations to range be tranche. had investment bit high of end end of in and the bit calendar Fab the announced industry we the expected transition output the ramp a begin XD In few XD flash somewhat in bit due yields second consistent with to improving a to estimate low industry. the calendar next we to We with flash. with with calendar growth the industry our will relative XXXX, we manufacturing of in expect higher the XXXX our From Digital’s with continued perspective, growth than fab BiCSX quarter December, strength third estimate XX% the From in Fab in X participation of the XX-layer given XX% in to long-term near our to was flash the range

flash. the conclude, normalization in both Before note markets and creating the expected industry, me let for that for is flash beneficial new opportunities I

pace the leverage the the and as limit normalization strength outcome portfolio In and business of our breadth of objective constraints part to adoption innovation. fact market Western planned in updates the financial the in discussions. calendar extended drive variety expect months look launches of a to for of platform of In this further view forward is turn business market and now and We we new our it you I of solutions best the periods ahead. the products several strengthen our further over Digital I XXXX, supply to a and from providing condition. the to to call Mark will

Mark Long

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

executed team and as our array portfolio, of capitalize market we achieved target. across on well margins our expense cost and growth broad diverse increase Our product

in All earnings of which significant resulted growth.

Solutions of Devices end and X% by with billion. as was revenue markets. Devices year-over-year continued the strong and a we billion. liquidity progress Solutions Client record Client in and flow Data billion quarter our our cash also quarter structure. We December deleveraging $X.X position, December generation increase improving was Revenue $X.X was of robust billion, an in and each performance of result had strong driven our for on the $X.X Center finished of a capital $X.X We made

Our Data fueled demand. to cloud Center by storage business related continues be

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

IT for a to acquired favorable $XXX of Our totaled transformation XX.X% up the was capabilities, gross mix operating expansion revenue. first demand to full go-to-market This companies. expenses, quarter environment resulted margin respect flash-based million. a of points our and supply our higher product non-GAAP gross expenses products. included projects related from ongoing basis This operating investments Cost and improvements non-GAAP With OpEx XXX recently in development, year-over-year. flash-based margin

than achievement higher in described over As expenses guidance on entirely by our call, six driven December our are operating our variable months our compensation the October plan.

the expense This year-over-year and approximately loan XX%. of a a for million a includes $XXX LIBOR, and of of the year-over-year interest decrease partially net in the primarily from were non-GAAP other euro Our basis $X which by the XX $XXX our quarter million for expense increases weighted basis. points debt offset approximately on December December of deep, interest million, term retirement was decrease average of re-pricing our a quarter,

Let of the tax me on explain the recent Digital. impact reform Western

tax global our from by law having manner. the highly a U.S. in in cash to We the will the new benefit access ability efficient

the due the Beginning flexibility with no our a by the or As basis, in fiscal high booked for the December tax the corporate effective income non-GAAP our flow, of decision. approximately effective XXXX activities $X.X resulted XX% the slightly On to the share. next an over allocation includes tax The loss December payment of charge which result basis, integration a included was had due quarter, which the because December primarily GAAP last The the at fiscal primarily In we tax per expect a to in expected this guidance compensation. to new billion or have reform. billion tax we one-time charges of of a long-term quarter. with we the the result, X% quarter, quarter period only respect XXXX, be U.S. and is per expectations years, related is which legislation than be repatriation in in end to GAAP a years to fiscal GAAP for was begin we lower related repatriation $X.X tax have will rate X% tax investment tax, between to stock-based intangible the our we period. the reduced driven $X.XX increase the within $XXX above net greater A difference quarter, rate our GAAP In first was overall to billion net loss impact which of and our provisional spread charge XX% cash and of of XXXX. XX%. that $X.XX results. $X.X eight non-GAAP also to share our in due capital three December half net is million generated mandatory a amortization, charges or will deemed net in in rate our cash On In non-GAAP net one-time net operating of year-over-year. tax non-GAAP

HGST following by capital euro our deleveraging, capital optimizing remain mostly million Organic term generated allocation including the buyback securities combined integrations per our in the available and loan cash liquidity strong in business in cash savings synergy with reinvest expected and of debt increase $XXX the of approximately acquisitions. B million previous and paid flow results OpEx an the million the We reauthorize year-to-date billion investments the business. We approximately million the billion during declared of program. capacity. driven and flow, cash $X.XX net capital contributed billion. both decreased revolver cost our repaid cash financial and million. of to continued $XXX targets $X.X the and timeframes. our within sales also capital further cost returns capital dividend of planned from billion We basis, have quarter free to fiscal $XXX in to closed We end programs to dividend $XXX the and for full with resulting our quarter, $X.X flow year-over-year. SanDisk the for for financial On declared in dividend amount free of inorganic of structure in flow has $XXX $X.X and in committed our of through in the cash, available of undrawn our enhancing operating our The $X.X delivering the shareholders validated investments December our achieved We quarter investments year-to-date billion share. resulting business while our and resulting totaling We flexibility deployed totaling a cash We XX% billion by cash priorities. $X.X we on share $X.X our generated and equivalence strategy at the

have and for as coming calendar over continue the our now XXXX will transactions non-GAAP the our to synergy I of the of a basis. end the we expense third deliver these target guidance While achieved will from benefits of years. provide we both quarter fiscal of XXXX, on

other Gross Operating XX% expect to between million We range which to approximately and $X.X effective shares includes tax payroll margin the expense be The be X% X with revenue Interest million. tax and to annual to fiscal third in our between seasonally to million. the quarter. XX%. rate between and XXX weaker consistent expenses be be $XXX be diluted XXX XXX approximately and billion reset. a and $XXX to

$X.XX. technology per key integrated As enable and earnings differentiator non-GAAP cycles. our share creation long-term a platform between we We a through profitability $X.XX expect result, and strong and believe industry product value growth, that will is

X we to earnings our on half see high While growth of seasonality be to we between fiscal in capital XXXX. X% $XX.XX share the structure, for we XXXX. to second at expect business current and normal end and now model the XXXX, revenue our long-term will fiscal outlook fiscal continue for see the $XX to non-GAAP expect achieve of per of opportunity our Based

calendar For our of the model. revenue continue we term XXXX, expect growth long to end at high

long-term that to session. will over the the be of throughout high the gross expect to I the call to year. range above operator XX% Q&A will also Operator? model margin We of our non-GAAP the end begin XX% turn now

Operator

of first Our question call. gentlemen, and comes begin now from the Instructions] will of we Ladies Hosseini Mehdi portion SIG. question-and-answer today’s [Operator

is open. line Your

Mehdi Hosseini

the destructed we the to I In by were start-off past question. year, longer with want term Toshiba.

Is that the the the Analyst context longer so? XXXX like year of there change strategy? at the presented longer term evolving next to any change about in -- December past I term of updating should objectives beyond any your longer especially few you method the How forward, you've the looking or a with while. in is see Company Day quarters? next us think would few kind and revisit those absent And you over how been there has do since that been Now years term growth of we

Steve Milligan

and our perspective, long-term to had how consistent. strategy I no Mehdi, rates there at market think evolving so, say and but remained would from thing up coming the perspective is, our from Investor relook to that changes does been fundamental in fundamental right there industry growth is in our Yes We no say has constantly change. an contemplating we One would we Day that strategy, that our I sense now since and here other essentially make it change is are the fall. Analyst Day have about, real

will we the made be internal our or haven’t But investor decision on We been our but there strategy statement, updates our Day. on everything change providing as and general big formal either from an saw has view fundamentals no at certainly a base. or a appropriate to perspective them Investor that, our fundamental refreshing as to we

Mehdi Hosseini

this to of your But X%, SanDisk, and would I December below Sure. of at a it maybe But little months Devices that quarter, doesn’t a was and why asking I center, after by Q-over-Q data scaling it is an acquisition basis your was kind shortage. segment Client have understand may been thought happen it to you for look the show for constrained NAND update. XX your down have me expectation, I you on when especially was information

happened not, impact? -- had come seeing should overhang So, by now? an of kind we're the the that outperformance distraction is there not with have Toshiba If how

Steve Milligan

are to. quite I you referring sure not Well, numbers what am

it little take So and I into bit. we’re we that a I offline should maybe think But fundamentally think that, probably dive pleased.

seemed a through enterprise, on negative less that of that’s I’ll year here One, universe about anticipated, first we if We As the grew was calendar last in Mike to a comment two indicated, bit had had talked you little that being statement. what than short-term the we reacceleration a slight expectation XXXX. want and things. capacity that call half in

our little grow So what and that I data would business of than kind center term. longer say devices bit less expect we a would

strength market cetera. of which our or growth, Solutions to On of speaking really time side, the positive brands, over we position, of a period is strength actually had of products kind decline the extraordinary that to segment modestly market et saw our a Client expected the

said, always there have So, is takes pleased the particular segment. no what from perspective, financial the to an am operating a there very within I years, to going proud and people an from way extremely I I that say But with of as both I our perspective. Toshiba that and XX puts last execution was balance have the accomplished am and be overhang on from

Operator

you. Thank

with Aaron Fargo. from Rakers comes question next Our Wells

line Your open. is

Aaron Rakers

trajectory you the today other going housekeeping there SSD curious, a the Yes, that and the and hear if change of I call. just as debt how your question bit should a then Can you lot is the we your capital can, return And could there, one market? you strategy? is relates that script think performance and just I’m forward I’m enterprise far EBITDA? to about just the business? question talk one of if that anything where then characterize during might if curious didn’t you quick that as about of about that question. adjusted It stand how address little to And

Steve Milligan

enterprise Yes, question the let me take first. SSD

expansion would I in XXXX happen is think our of portfolio So as and half sort ’XX. also largely towards second mid execution we’ve to stated then the of and product

the for So continuing do as beyond. part have but serve more year and if you the level hold to product more progresses the at summer that expect the we we meaningful, mid of will will, year to become are we

Mark Long

debt below to we in the way under two terms now instruments, our debt-to-EBITDA. are Yes, our times is calculated of with our debt-to-EBITDA, respect EBITDA

will executing capital kind of a do So in accordingly allocation what want top be overtime. evaluating we and position, have achieved level we we’re good and in we a that of terms flexibility a gives priorities from our to standpoint very strong us

Operator

you. Thank

Capital Our Markets. Daryanani RBC from of Amit next question comes

open. Your line is

Amit Daryanani

I side, are I cost have that seems I per you at a high and a think, decline in fairly through may? a outside that if your Does saying. how your growth as end bit of start question you the peers trajectory Maybe we bit go XX% margin? on the would you downside I’m just of think in to as line XX% ’XX. have follow-up wondering is as you flash though, think this if margin industry do flash driver in mentioned you normalization range, and the that that structure? characterize well. market a do think stable That does lot And gross we’ll range. high driver of to gross end -- normalization guys be with, What driver, do to you or your of

Mike Cordano

Yes, new this of annualized per way talked regime, year. so is cost in the approximately XX% XD to about sort we’ve about reduction think

up largely forward. view that environment such if declines, that talked see by our we in is are in the of call, happen going and our about seeing think happening the to that We ASP offset some period expect current I we you're previous declines. cost

Steve Milligan

Right, to the gives us and our confidence result guidance we the a margin above that’s in calendar of for as will XX% for a I total XX% year, indicated as that entire model year. operate gross what my

Amit Daryanani

March for payroll were in how reset OpEx could if modeling. that how I’m quarter I just slightly much just of of higher you calendar March the Mark, driving us quarter? think And of guys I follow OpEx the most tax ’XX a through And about do think as wondering, range? I then broadly, just up what than

Steve Milligan

Good question.

you that run the quarterly million that expect ongoing of and to throughout kind enhance decline we the for have of million. something I or of number million $XXX on think payroll as in $XX will decline what that to basis a So, -- about terms about we a an And a think efficiencies, we result, is year. activities tax talked the rate the $XX rest order on baselines quarterly can of so

Operator

Thank you.

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

Your open. is line

Wamsi Mohan

backdrop Steve, as strong you I to well was spoke the both you pretty Obviously, these as NAND capacity high the this are build center on economic out. wondering, on about ranges. guiding global drives upside of data

you On in XX you once that the much of the economic Or And backdrop? growth, any a have have that follow-up. normalization? bit to improving I range see for based elasticity side, this price NAND how of is building on are XX this you demand

Steve Milligan

answer I'll way. this Well, question the

been We anticipating high XX% range of that industry XX% a that saying to to and the have going that is end while. at grow for

really to over the And something months statement of to is changed as last has a longer of term so, it that opposed that. environment six three like more because something macroeconomic or

that the DRAM appeared have NAND And convert so, so. the some flexibility consistent are long-term think that investment pretty plan the market we recently more XD to NAND market, as and have that growth we while a that it seen an takes be companies then be as levels. to one with seen well doing thing is the in the so is dynamic they to levels and The interesting one that have we DRAM,

at high end, that to that as that appears or XX% downside a by that. that opposed to a be about of little bit it would So exceed XX% relative more to there to to

So we obviously are beginning from to see good right. which is of kind perspective, come a NAND a bit, that down

Mike Cordano

look we those upgrades cycle numbers, of as the not how translate NAND, that Right, think of and demand the the I'll on side a only year, they the expected progress we through comment of at through we equation for in capacity sort we are demand as other period. thing sort constructive

a of more we half constrained we environment getting have into the of the year. the As in possibility the see year, second

Wamsi Mohan

and color up. that appreciate I Thanks, follow to I try quickly

of You capacity most color XXXX? you where geographically activity seeing drives about Any average And is first hyperscalers? this what up. the in spoke the the hyperscaler these half of of are pick the

Steve Milligan

Yes.

the think that certainly U.S., take at are then where is we of in terabyte we you the will the of relative terms highest domestic to cap demand at don't drives. to well that our a vis-à-vis of least take in portfolio. to they stick us. if to the think statement, as to send the better look that would air hole the seeing capacity which So, cost product competitive cap product would highest domestically China, necessarily help we and bit our market in I point had recently products, in In this they of as that X I in strong general us air that drives here speaks Yes, address a China area X portfolio the introduced out product always in to one portion be

Operator

Thank you.

Your next Capital. Ananda comes Loop from of question Baruah

Your open. is line

Ananda Baruah

or margin, gross around I gross if one Just could. margins, SEC two

have the gross just you guys to just Thanks. margin paraphrasing, it. follow-up Does want I of comment that check there. but I And I to have think anticipating spirit I year? that flattish this And around are ASP in guys a for still a hold? flattish, what was in NAND was I gross might declines that. margin hold that through then, December, be quick Just on clarify, and the them you believe SEC

Mark Long

for Well, to XX% total the quarter the as you can see, for XX%. our is guidance gross margin

an healthy. in cost Mike I are very in mostly pointed result it's think at a decline our are as small it's flash out, we -- margins normalization looking from the seeing market, standpoint the we’re and margin gross but offset some So, as and gross changes by declines ASP

Steve Milligan

Or relatively stable.

Ananda Baruah

calendar actually ’XX I was guide. to referring apologize. the year I

Mark Long

we’ve December the case where in maintain talked about would gross margins. above margins flash long-term think being position trajectory certainly we the that talked the in where about, and that’s I we respect seeing, we’re what gross with total was so a Yes, of to range

we weaker I how first on also of Mike the of half, again think total margin gross trajectory some in calendar gross in -- from the visibility margin Mike heard market in the of latest to then remember function I gross half have year. margin some of -- back this terms the a And in materializes. a be seasonally side pointed be the that much will to the out, declines may declines our as while in tightness of flash function commentary suggests the you think going are the

it for is have there this that margin. positive market certainly feel a which tightening a on to effect continue potential and is we Mike constructive point, this as at gross would pointed So, out

Ananda Baruah

case declines ’XX? for What’s ASP NAND base of your calendar sort expectation for

Mark Long

We haven’t disclosed that.

Steve Milligan

we’ve largely declines by said be that declines our that an our gives that ASP the would is, thing you cost only expectation Yes, would idea. around offset the and be

Mike Cordano

XX% with cost declines range. the being Yes, in

Ananda Baruah

Right, okay. be think Is there cycles any you’ll different reason declines? ASP to from tremendously past

Steve Milligan

in it you it that best past saying will to it at yes, is than part bigger positive a Well, way, our but look to try if talk be different we and I it’s as that, explain and what to ability, of think it market. cycles, a we’re

and still capacity of think DRAM moderating impact I that’s the also degree additions, are incremental and the XD NAND and So some that’s that you think conversion from seeing to set you that seen economically I not has are just rational been behaviors same focus the volatility is in of level past. more from a resulting seeing but the and volatility that of

Mark Long

and market I strong normalization very of open trends secular increase NAND it the it will some the so demand Mike actually remained markets end in and for those markets highlighted demand the new to maturity healthy mature think will extent sense. because as And is of the price market of the

we go can from the to cycles demand apply outcome Steve XXXX previous and just feel as very side both and were think that that get the and a the patterns period is dynamics this So on are and really right supply for period. on was constructive side you there highlighting, going calendar the you

Operator

Thank you.

Research. of Citi Stanley Our Kovler next question comes from

Your line is open.

Stanley Kovler

clarify the to line market. trends wanted some of just I the near in

So talked mix, there going and drives the shipment of Thank versus as think we revenue remind line HDD especially HDD a And there? line we range overall high Could to You've of selling how within about you. your impact near end you follow for think on mid the year. more us gross levers should the entire half first into about the mix? the you have near line margin I versus mix guys up. between volumes XX% about

Steve Milligan

Yes.

a about diverse think to is now. it’s think I market more thing So the

robust we're focusing which So market. strategy been part the highest of we the remains -- certainly, our capacity at have a drive,

our leverage seeing ultimately now our capacities, is utilization. across our that The volume component about through so think are model of to demand from right. way perspective, though We unit range helps, a about

as in expected common. and it X, terabytes for about most heads and rate or think the fairly is to up the growth you when those XX those combination whether media CapEx or on tied side XX the So, to drive remains figure can of manufacturing, get we exabyte

So you are modeling than the just to as just scenario on high contemplate different historical unit volume sort of cast. view

Stanley Kovler

Can mix well? coming improve is understand volume about down. I So to going how versus impact the when help overall me you shift the ASP as overall there the portfolio think

Mark Long

seasonal the benefit as some and HDD expect we from overall margins. have parts do So, know standpoint of -- volume stable relatively side know a declines we from business. we we’ll a we you on do We we gross mix result, see standpoint and the to a ASPs the -- have

Stanley Kovler

could you November. for a buyback the cash, And at say separate quarter. look back if repurchases ask more the I share should to there?. related flattish I I in count on the with are then What share the contemplating If authorized follow-up outlook or program in you terms about of reauthorize current looks

Steve Milligan

public Yes, at plans we our not about made any point. repurchase have statements this

Stanley Kovler

sense on cash? timing just use update or provide of Any of an to that

Mike Cordano

contemplated look broader was already our go repurchases think I our through capital and set already will creation. mean indicated I and value capital drive structure, I and to business, of in want term back don’t a read, as we’ve optimize the considerations, it we as to first longer priorities. deleverage we what thing but with list, that allocation invest be on our

Operator

you. Thank

Our next Rob question comes Cihra Guggenheim. from of

line Your is open.

Robert Cihra

XX-K? on there. of go go if just mean I or drives your performance stopping a no alright. point and end and life and clarification clarification give there point The although so, is they that like end if mentioned, life is it question, was back you’ve of in more slide just could you one little briefly is that’s just does development or that And development one info A development or on if wondering pulling back? they at

Mike Cordano

clear, Yes, very we XX-K me be let and RPM have drives. ceased development hard XX on

new in obviously we are them don’t last the products. long through our our and of but introduce tail, So, products manage to market will a intend we the products,

Rob Cihra

us be? years? months of you Is that might Can tail or tail a what tell this

Mike Cordano

long years. of tail a it’s No

Rob Cihra

been debate and just if any Or has equal in terms forward, of been for it or of could now question. and Alright think all? decent tightness and then how you to there the obviously you actual market really I have both. than think cannibalization would otherwise frankly left if then demand get you Can tightness? for think the change that much because drive help a There do had obviously you meaningful talk there of it's in if impact amount drives sell you has about back has looking several ask months been helped to looking much that’s

Mike Cordano

so area its mobile. real that, that is has only Yes, one there an really and in had effect

inch drives markets then it of rearview would had and at modest a the HDD X.X So and size looking we effect on positive the then say mirror.

penetration normalizing is to rate that What original of you year we expectations. HBD this our behind more So, if our trend. happening running will is flash see

Steve Milligan

will to the accelerate, penetration of notebook we agnostic positive. SSD are words right, In based other in configurations which

Operator

you. Thank

comes question Karl next Ackerman from Co. & of Our Cowen

open. is line Your

Karl Ackerman

actually on business, have of in increasing to CapEx. Unis after JV your that focus contribution progress Tegile hyperscale and players, operations had now over in global to time to wanted your systems actually your go particularly the Asia strengthens now have strategy your ago some year opportunity with that a integrate you addition to large who a to I hyperscale your

to what the And businesses? have area pieces storage integrate portfolio, could or please. so this you not you target elaborate a you have market? follow-up quick done whether actually your in far I like those So all And you have to of on the

Steve Milligan

lagging step a particular was object because the the to a mature markets, in the on China our lead China question with the is all have adoption across recent think pages to slightly of I so so Yes, front end file but in and in your Sure. able forward more to market ability is China acquisition market. of be positive the storage participation to the product then Tegile

are the that of came So by an the I addition think encouraged portfolio product standpoint, from to we overall Tegile acquisition. the

or about specifically and flash addition don’t progress I growing rate we’re good of we We our added as although sequentially the and continue ray these steady the talk to and growth It with last results, in we’ve making the particularly of products of to couple all the we’re happy that. make size progress quarters think portfolio. is file

Karl Ackerman

own could your elaborate NAND saving much the adhere follow-up, qualification SSD a includes business? how in NAND enterprise in As business if internal your on you I assumption your cost your of supply would appreciate

Mark Long

The answer is easy it. an That’s I'll take question, none.

acquisition, extending decided us a the with talked us actually access went that Intel and going markets did got integration opportunity some for when well into Intel. are our that gave who especially and So out has to vertical we worked introductions we relationship constrained we SanDisk when product about with well more is we’ve position bits and

actually yielding all having business not that we a in Intel our all of NAND but the not a standpoint, we replaced from products our outcome own some that enterprise So better immediately. all having than SSD long-term economic

Mike Cordano

that also allowing can we way to think products the just thing. is in it the that relationship quality a do other and from of product what that R&D going, it’s marketplace I'll and testament the certainly our we focus add to Right on to us those

So, there that's a XXXX. benefits through is choice us advantaging number calendar of this in

Mark Long

and target that have is product our for by SanDisk benefits XX-XX period. Right, I significant intersecting transaction line time our that name has from will good the vertical we integration, as still do include that news with the indicated, so the own own

Operator

Thank you.

of question from Mizuho. Rakesh next Vijay comes Our

open. Your line is

Vijay Rakesh

of mention at the XX drives. hard side, the saw looking guys terabyte starting and ramp I disk Just in XX you drive

what be you get exit we small XX As the mix XXXX just would XX now with wondering as terabyte? and

Mike Cordano

but range, mention on we but did mix, and Yes, cap continued as did -- high exit we market what of mention we do majority our it diverse we XXXX is I this calendar I expect growth. as And be would more pursue the together. expect XX will XX

we’ll these do see used think but that or So lower geographically at capacities, continued announcement we we workloads, and but in the a also a highest mix at of mid we will week both this tail end longer steady as different the of up given a announced ago. referenced of technologically our product we and shipments see range for cases so portfolio

Vijay Rakesh

that saw I plus I On XX% assume now. the BiCSX, was XX-layer almost demand side, shipments

gross NAND the we takes and the on you the guess XX-layer down, just year takes what year, puts wondering gross in go margin? the go margins? through as So, are the NAND I puts but cost later in Where through where drive the more you can and XXXX, as is

Mike Cordano

big that the then Well, things. productivity a One so and in of year ongoing as which is the throughput half course on two is us to the is ramps additional we second node of that move on and that’s existing new continued statement yield on the gives opportunity.

Vijay Rakesh

it. Got Thanks.

Steve Milligan

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

Operator

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

You may now disconnect.

Western Digital (WDC) 26 Jan 182018 Q2 Earnings call transcript