WDC - Earnings call transcript Q3 2018 | Western Digital Corporation

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Operator

Good day, ladies and gentlemen, and welcome to the Western Digital Corp.

Third Quarter Fiscal 2018 Conference Call and Webcast. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time.

As a reminder, this conference is being recorded. to like now would introduce Mr. I in Iyer Investor Relations. Jay Please go sir. ahead,

Jay Iyer

X, of the that update XX, effect applicable onetime reflect Reconciliations website. undertake non-GAAP information to GAAP and our does the February financial XX-Q not exclusive no this non-GAAP call between securities everyone. Andrew, joint our or to our XXXX. the call measures. statements platform, federal positioning, will concerning expectations be and our our to divestitures, forward-looking you, measures allocation trends, ventures growth made and financial based technology product efforts, Investor with filed references capital expectations financial forward-looking on This other during events. expected section to development commentary on our that meaning including could future acquisitions, current of the be to XXXX. after with plans. obligation the our new good and management's the to cause These April is regarding within subject actual be listed any announced or transactions will Any reflect Thank market those market statements Form Annual risks are the this business on afternoon, We including provide SEC Relations measures conference uncertainties strategies, during Toshiba, comparable on statements product performance, and Report statements forward-looking forward-looking will we may differences call expected are results of of Further, opportunities, and our the and laws in financial materially contain our differ of and posted demand transactions

be is items limit not guidance today's the callers measure In advance fully Thank full our GAAP cooperation. cannot you impact Q&A to corresponding part to financial unreasonable our that we ask predicted. measures possible to financial as effort. question. We allow these material because many yourself the a the measure question Accordingly, available to most non-GAAP have control your the that reconciliation guidance are for and/or without you measures of in directly call, one reasonably in a comparable GAAP you to not not of measure ask reconciled non-GAAP as

also With copy As now quick of reminder, providing our and turn our to and a on the will our the section of webcast Steve a with prepared a on we that, slides presentation I be will CEO, also the website, are remarks later including Fact call Sheet. this over today IR Quarterly Milligan. available concurrent our

Stephen D. Milligan

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

$X.XX. performance $X of We then quarter of non-GAAP take strong reported of March We gross with revenue XX%, your earnings per and margin in financial billion, will the non-GAAP questions. share

enterprise demand solid continued NAND in Mobility high included with Cloud quarter achieved reflected demand third the remained Macroeconomic strong execution flow supported cash and products. healthy our our as products, supportive particularly dynamics The operating demand conditions drives, Our capacity by serving Computing for revenue. quarter flash positive primary quarterly record which drivers. for

of quarter on and the demonstrate platform in focus agility our global a team. our power results the sustained execution March by Our operational and

to require robust data by of X market, and these platform with IoT this The access, trends. billion unprecedented positioned by comprehensive allow and creation to of growth creation rapid billion well play Artificial to secular storage value and growth today the We long-term with key role in a our transform preserve, solutions at growth infrastructures to data. from Big In XXXX. The continue of pace keep XX grow pace. fueling a to Digital storage hyperscale upwards will growth accelerate applications significant supporting Machine in for strategy purpose-built number capture, is expected the and an worldwide Data underpinned positioned product center pursue users CapEx and This solutions. a connected an that devices growth long-term to ever-increasing Fast valuable of Western Data strategically Enterprise Intelligence, to is exponential our in capture data, opportunity represents cloud opportunities diversity in data and customers are spending Mobile applications. Rapid to portfolio. continue we advancements Learning, their are

capacity continued average enterprise In We price drives on what technology. moment, quarter, we driver MAMR a in In performance He categories environment some growth the smartphones of color our a these towards on progress our in to strong terms you exabyte increasing Digital. and Western expected discuss of the Flash, with long-term based high capacity seeing normalize will will growth. ongoing declines. third be Mike we on delivering to update in saw provide innovative for expect market also during are continue

XX-Layer the our long-term Memory We revenue Western development platform to allows as celebrated calendar opening strengthening deliver Toshiba our to perform memory operations exceptionally ongoing XXXX. pleased Fab continue and to joint future continued well, industry-leading am I Yokkaichi, us growth, X XD in and XX-layer joint investment sustainable in March, engineers. Iwate plans In shared track. that Corporation across The venture NAND report on with the to ramping profitability. our collaboration of our deploy excited among product Digital. of planned for our portfolio continued margins, healthy our will our I gross we our of the center power and technology be in technology remain am about throughout

the our business. for partners With opportunities Digital thank managing and and for I portfolio ask ongoing and their will product I sincerely highlights. to markets continue Mike Western towards team important like support. our share optimize ability evolve an that, be to would will now As our to lever business mix to grow, the higher-value

Michael D. Cordano

everyone. a we well Flash good Demand The positive, previously for Digital Data Western supply storage described optimize us market trends March during strong shipped output and XXX of resource We exabytes afternoon, optimized to as Thank record you, our chain as products. which as our the Flash demand normalizing. of Embedded and conditions capabilities leading allowed for our industry-leading have in were product Hard mix. Drive our during allocation Cloud products. strong expected, markets execution Operational performed total a and to period we platform PC responsive were Center, the solid, pull quarter. and Mobile Steve, was and

second We half cloud Flash the Datacenter be possibility calendar expect constrained substantially, of grew drives in Solutions, year-over-year the capacity to both constructive sequential market and Devices enterprise and to basis. demand environment In higher our for XXXX. on supply of a for XX customers with and continue a terabyte the

basis. Our exabyte shipments for this a category more on than year-over-year doubled

we Just begin fifth-generation few qualification the new at point. days to a drive we capacity begun, commercial this Customer XX our helium ramp activities ago, expect and later terabyte launched year. this product have for

year. above meaningful begun our XX%, We drives in to XX%-plus. half air-based of is expected we of Additionally, calendar estimate earlier revenue XXXX, capacity the the basis in launched capacity have grow year-over-year on at well our prior enterprise calendar first least a the now of midrange estimate that market shipments

previous XX%. increasing also of estimate are XX% XXXX to for more exabyte full greater We than for calendar growth our than the

at a Tier calendar with and Our The a demand our From been are meaningful long-term hard exabyte these the we the metrics offerings of to growth on production sampling for capture industrial home, the leading deepened, of MAMR our and XXXX. win qualified drive half enterprise is for further in in best-in-class our Technology a strengthening XD strong revenue and in during solutions unchanged. automotive funnel flash-based compute groundbreaking estimate Ultrastar of X SNXXX opportunities position sectors. In iNAND quarter. Sales connected technology to ramping experienced workloads. begin mobile, track our NVMe variety long-term we verticals standpoint, expected remains for XX-Layer Devices, ramp delivers to design This products. Recording for embedded, second expanded iNAND has XXXX our XX% of product Switching Client SSDs, our calendar performance customers.

a business. was base. slightly With we years, new customer a technologies. storage the for embedded Flash portfolio to comprehensive and based diverse expected. internal growth market eMMC, to We mobile first smartphones capacity of covers the range client better see UFS for continued quarter a SSDs PC March in than solutions announced full market our average estimated three Our interfaces opportunities two standpoint, our on for proprietary years firmware every long-term and mobility controller double From

the the leveraging announced a portfolio investments. our for G-Tech, successful Black seasonally highlights March Client accelerated expansion and high-performance same our The delivered of WD gamers, differentiated our product in of Flash-based the In consumer We architecture. WD products quarter. serious execution SSD healthy year-over-year a R&D Solutions and both also category, revenue growth SanDisk drive for slow our for strong preference brands

indicated. our this quarter for XXXX initial to commenced third our joint operations Flash milestone offerings technology. XD technology technology, particular, of garner very output Our approached ventures, calendar market the XX-layer levels as continue levels. Flash This that The X have approaching flash In and of also flash achieved progressed in In accolades. expect by XD manufacturing BiCSX, development our and our are a ramp Fab manufacturing. yields leadership yields demonstrates BiCSX and significant in further, mature our we is

of is expect supply meaningful the calendar calendar calendar conversion bit bit end Flash bit as range. with from supply Digital's long-term ramp bit analysts the well appear manufacturing estimate industry in than complexities market portfolio growth the variety XX%, with has exabyte their call conditions. we companies outcomes to further for I over of With into a as XXXX, bit in XX% XX% we product platform growth financial our Western calendar on BiCSX along convert growth XD record-setting resources allocate XX-Layer expansion beyond, and our rates shipments. NAND believe Digital have evidenced flexibility overview. and that of remains as increasing market to expected of estimates to our supply in portfolio, summary, to deliver with data mix the are expectations for value growth of utilizing With flexibility XD at of stated reflect XXXX In range by optimal of the total our with we industry. unchanged quarter XXXX to the DRAM. the industry unique calendar to results fundamental our the XD of Flash of model the more strong and Publicly third For capitalize and growth able our drivers XX% XXXX capacity the to strategic to deliver positioned turn product. commenced, converged high data the financial and XX% The to of technology March Mark now of the quarter. to some of output participants to Western the to in best reflect consistent will the rates continue constitute for

Mark P. Long

our and in with increased the gross quarter. growth. our on the power of executed Thank of of pleased everyone. afternoon, achieved margins, significant we expense, all array as financial very good expense interest reduced performance which broad you, targets platform, capitalized in across Mike, resulted I'm well March markets earnings and We our

on an a We generation. billion, of revenue an and result and cash Revenue our March strong was year-over-year increase continued March of billion, $X.X liquidity Solutions increase flow strong a XX% for Devices March improving with also as the structure of Datacenter for finished was X% year-over-year. basis. quarter The capital quarter the $X a quarter position

be cloud-related growth business Center by in to driven storage. Data Our continues

along strong We products. which for compute As in strength our driven Flash With in points year-over-year investments driven of totaled million. Client Mike billion, Solutions Embedded products, stated this drives. operating incentive $X.X respect revenue and XX revenue. from short-term $X flat Flash capabilities, by XX.X%, enterprise expenses, Client our quarter was and basis had the a billion, products points by by compensation. significant margins in Non-GAAP prior hard was mix essentially development, OpEx ongoing Mobile higher projects with client Devices of enterprise and by offset led year-over-year. XXX demand in $XXX an significant gross increase to growth IT basis our capacity capacity revenue product go-to-market non-GAAP hard was retail year-over-year, earlier, transformation was growth This up X% and devices. was drive up included

year-over-year. primarily a due net the interest lowered rate decrease other XX%. $XX a of was billion increase year-over-year of quarter effective non-GAAP In or basis, tax flow, March billion transactions March effective quarter, quarter, our operating share, and This of the $XXX of which interest income XX% X% $X.XX expense X%. an On for March to million million, non-GAAP was million $XXX our Our net non-GAAP per rate year-over-year $X was generated we cash expenses increase In approximately the March includes financing on a of for the debt. the $X.X decrease of recent interest the quarter, an year-over-year.

we financing scheduled quarter the for interest third As paid quarter. approximately million was part expense of recent in originally of transactions, the our that fourth $XXX

bought the We inventory capital seasonality ongoing continued drive totaling free with activities. million had also dividend quarter we investments, third to fiscal quarter. paid our hard totaling $X.XX in a year-to-date XX%. approximately flow, million resulting quarter the for amount business reinvest cash manufacturing previously closed with cash the in increase transformation the of shares generated million cash, of In $XXX cash declared billion. in an declared for capital we share. program. securities and $X.X $XXX of our $XXX quarter, March $X and flow investments, buyback due the billion of during to On primarily and equivalents $X.X in operating cash in flow in in increase the per of as of billion. deployed available year-to-date free We sale billion $XXX an We worth part million dividend a resulting $X.X cash basis, We on We

out of revolver of $X.XX have $X.XX billion total In addition, we capacity. remaining billion our

following program. the priorities: $X.X billion organic activities capital outstanding approximately principal quarter investments, of flexibility, our while by and quarter total restructuring capital to deleveraging, optimizing $XXX fiscal available ended quarter basis. billion. with to the We will remain and and million guidance of financial delivering XXXX for dividend a As the debt on we enhancing business during our our inorganic our capital buyback now returns Recent and through cost fourth provide $XX.X a I liquidity. result, our of approximately decreased structure shareholders allocation non-GAAP to capital share committed the

expect XX%, million. effective expenses We of XX% interest to the expense and of rate to $XXX between $XXX X% range, gross shares in $XXX million approximately billion, to million, and an billion $X.X X% operating of and $X other tax revenue margin XXX diluted approximately of million,

on would out share for to point result, to a track $X.XX. we for we prior exceed of our EPS remain fiscal expect per outlook, current non-GAAP As meet or on $X.XX to revenue non-GAAP earnings our XXXX. I like that, based expectations growth and

the of XX% margin to will turn over call the expect Operator? to to high long-term the model. XX% non-GAAP expect non-GAAP For model begin now that now indicated the XX%. quarterly our gross session. our calendar the continue least of of calendar We margin long-term at end XXXX calendar to the be XXXX, be revenue for high growth for remaining quarters that Q&A I each our operator of had end will XXXX. gross above would we we of at Previously,

Operator

And of from Moskowitz comes line Mark question our with Barclays. first Thank the you.

is Your now line open.

Mark Moskowitz

afternoon. Yes. Thank context versus if around disk much more I State very the number us strength; just Data Drive there. a you in can terms contribution But Center you. revenue from Good revenue? drive of give Solid to wonder growth, came how nice little

Stephen D. Milligan

activity; drive we hyperscale it majority enterprise indicated. the build-out of high-capacity so hard was drives, Mark, as

Mark Moskowitz

like respect of solid of versus then, And on is follow kind or just year-over-year even going few last where Okay. maybe it was a quarters with seems the basis? improving composite a to of kind as state, up, it down that solid revenue the is sideways state,

Stephen D. Milligan

total? a about particular market or talking of the just you in part Are

Mark Moskowitz

Thank total. in you. Just

Stephen D. Milligan

know know memory don't Flash-based mean, that's I I momentum terms But comment. it our breakout of down in Mark. trends. we versus drives. products. Flash-based consistent with if was revenue seasonal can seeing we Flash-based revenue but specific terms provided I But seasonally, haven't Yeah, or hard good in of are we

shape good in are that things regard. so, And in

Mark Moskowitz

then just one for Okay. question Mark. And last

now buyback flex next stock investors for back the the about should Thank refinancing the ability the think in runway over stock, model given or or recently so? to year the how you. the Just buy with

Mark P. Long

you SanDisk announced, million intend $XXX shares reinstituted that the we $XXX the of bond the basis, of out buyback, remember, closing terms executed of part to hedging million of additional we as following and we approximately in take Well, of issuance. of the $X.X transaction. the And million had did buyback we we billion as an execute to that convertible part opportunistic on this the that had is the the and broader worth authorized $XXX

Stephen D. Milligan

you, Thank Mark.

Operator

with line you. Wells next Fargo. the of Rakers comes Thank from Aaron our And question

Your line is now open.

Aaron Rakers

the for the business. I'm quarter. curious the margin of congratulations thanks trajectory on also kind on taking Yeah, the questions, gross and of

You talking a guys about gross now are XX%-plus margin.

drive as then business, So margin the raising should about that sustainable gross hard margin the question the are above as of target I was what around the range. kind is in range is, the HDDs the to solidly long-term think seeing had think gross particularly about disk historical that XX% first a we that think on And now of you business, XX% mix been? potentially range? past we

Stephen D. Milligan

take Steve. Aaron, this is so, questions. Yeah, I'll both

long-term we our margin of XX% have continue XX%. of terms In to the margin range, to range long-term

continue course, what the whether with we're for should range or perspective; based the we margin a Of evaluate go-forward to and and not to sticking that being, upon change, will see look our XX% time we but from XX%. experience

in nice drive We we'll will have our this specific drive to forward. but like almost disclose was we the very you our disclosing but a look margins space hard bit stable. saw from very, actually been little we'd – drive that our margins pickup strong our that But of at our Flash-based just affect capacity at other margins, quarter. number, you and due And hard in a quarters look margins strong hard entirely color, if continue, by demand – hard don't margins that margins have a we this quarter, driven hard perspective. for you to to see if give or the enterprise without past dynamics and If Obviously obviously look several going that drive mix our the business saw past very drive mix.

Mark P. Long

this the model be And insights into the we long-term indicated we'll half back be of providing of Investor in Day our kind that more at would year.

Aaron Rakers

And real quickly...

Stephen D. Milligan

in normalization that a market. terms Yeah, the us I quarter, is we've products markets. wanted strong is think is really very normalizing you've proof why of the to point got see that because past is strong very I all go play when these sense together. market, quarter-on-quarter add which our opinion, Flash – made to that or a basis. terms we ahead, you hard things What a there. point businesses this we're in seeing got up got this put But margins little that a together, a of to But two as really allows margin to is, that on you up a we've Aaron. margins add that that various of one means important – went of across And in – thought got bit my of our portfolio drive of We've rate it businesses

I impressive. think that's pretty

Aaron Rakers

Yeah, I agree.

of normalizing you view cost a follow we can margin? us on the said, consistently to sustain look the And is, gross that just take on – implied you've the Flash we as mean, though where Do that forward downside. Just normalizing. being and kind stand on remind I as company

didn't think where hear can cost quarter, Flash. think I you but that I that referenced on execute last of you quarter down this you'd

Stephen D. Milligan

declines normal, at environment seen going a normalizing mean means consistent comment, little a I'll it'll aleck I about with environment well, environment. of a a that like normalizing. obviously more that normalizing. ASP looking that And talk comment, and allocated we've ASPs sort little wise controlled is thing, but first like of by were rising means in what a bit historically that to when we and Yeah, we're we're more a And sound in normalizing my

bit, but way. So, in you're a percentage margin measured seeing even basically very down the drift a

seeing It's by a We're environment great we're of a bit so, alarmed not us. And that. it. still for

And can margin so by normalizing. pretty so we based we're going still current terms as you forecast, good calendar Mark of in our what XX margins, margins that's upon see, a really of to our have said percentage and greater for terms gross But us. XXXX that's in mean than what

to And so comment And declines that's cost little the then area. Flash Mike bit color on of normalizing. in the a I'll ask on

Michael D. Cordano

Yeah.

Aaron, build-out. So, sort we XX%, on and in XD exactly XX% that era, about, and footprint about of are between think the basis, where it's is talked the and you depends annualized where on with capital if transition and nodal we've

So we that. that's what confident you should remain expect, and with

more a reductions, does to to to this largely reductions I that last our not add ASP quarter, by expect commented normalizing We which And happen little throughout and are cost year. offset where color offset. Steve's entirely mean,

Mark P. Long

And some factor that which doing. as think should just revenue get I mind keep we it's MCP is another margin the in we increases, pressure

Aaron Rakers

much. very you Thank

Stephen D. Milligan

Aaron. Thanks,

Operator

our And with RBC line question you. Daryanani the Thank Markets. Capital of Amit comes from next

line open. now Your is

Amit Daryanani

I points you. sequential questions XXX two as basis. implying margin guess a is June on maybe to gross guys. essentially slightly well, one, is on revenues quarter going almost first be higher guidance basis down I Thank have your

Just maybe understand. help us

on basis while by the revenues are in basis? downtick were you very on HDD XXX the positive think What's a fairly I gross commentary driving stable there. sequential points margin

Mark P. Long

product Yeah, was is which higher MCP It's as HDD gaming referred it's the revenue. it's two for I and alluding really Steve that mix, factors. revenue of to, normalization Flash higher continued and to,

Amit Daryanani

that the is do or And track more an Got think XX-Layer the for everyone? that scenario, constrained, on versus the constraints XXXX And I will I'm Mike, I you if NAND ASPs be think how year Western plays the is somewhat if in scenario comment, the for on complicated potential June may that that you transition side. it half a back out? side of is in given of half Digital it. back Perfect. wondering, then the NAND industry mentioned guess, comment

Michael D. Cordano

Yeah.

and you they the about So is, at market look I how products the way in got to sectors individual and think markets. the those it play to think

play bit it really the was this sort And progression So, level That's progression the being sort been by at industry and see difficult moving that. level will at and has is such a – to then challenges predicted of an making seen of direction. XX-Layer what XX-Layer. that all growth more rate, industry than of as time, previously in the you've shrinking over we

we it's those demand let's with that in play. be what So, the that in half factors environment. to seasonal second of on combined I the And ASPs expect won't year strong that specifically possibility be in comment

Stephen D. Milligan

be But, more obviously, environment the balance that gross in we indication calendar reflective gave of is statement for Mark that the a could the constrained that margin year. in

Amit Daryanani

quarter, congrats And Understood. you. Thank on the guys.

Stephen D. Milligan

you much. Thank so

Operator

you. SIG. with our from Hosseini next of line And question comes the Thank Mehdi

is now open. Your line

Mehdi Hosseini

taking question. for my Thanks Yes.

and is sense get technology. Looking just introduction, to campaign is critical. should to compare when going and Obviously, start a we MAMR and customers to be of hear be should customer samples into we product assume half the out? new this that second the to and a sampling? from we are kind very about as the the I And your with when alternative want able And think follow-up. how PR contrast And to going have to would

Michael D. Cordano

of in second by so the broad-based year. do a the samples, half way Yeah, will meaning in we that

production in So that translate will XXXX. to ramp

recent get internal hitting But say. those very the we those So feel confident we'll milestones. in progress they confident milestone how about And the we're our so active. feel to I the and we'll have depending be major made, have think customers we've needed very they see We about on month milestones in basically it, or been reaffirmed both what so. checkpoints to

feeling we're about good very So it.

Mehdi Hosseini

talked to because there about a due or hard drive you're and product on new led Okay. you that manufacturing. then, uptick? very seasonality inventory it, upticking elaborate is Mark, was to what Can Is significant? this that building else for, disk uptick there you And inventory the

Mark P. Long

it's Yeah, two really factors.

referring seasonal is builds then, builds are drive hard for our the second one the aspect you And manufacturing of is HDD Flash inventory it. to, the activities. transformation what So, for and

side and evolve reconfigure our optimize so... HDD of our that's the So business, ability to ability our footprint and loading factories to manufacturing the the our of

Mehdi Hosseini

you terabyte highlighted XX that the for that that Is just ramp started?

Stephen D. Milligan

that add optimization got activities, that – can me requires activities it point space. mean, factories B. reshuffling some to on that, mean, you lot as regarding kind remember the mix it have times, to different I we a we've variety you've is, – that color to buffer means that What we we accomplished a to from is production HDD ship inventory all means you still of remaining I around largely in At get Let are of integration build basically from what of you the optimum our directions. point Mehdi. That's although A working that is. the

Mehdi Hosseini

it. Got Thank you.

Operator

Research. And Thank the you. our Longbow with next question from comes line of Wittine Joseph

now is open. line Your

Joe H. Wittine

year of kind points Hope most I a perspective the expect on over capacity beyond, the Yeah, your and on could including to results mid-range the finer on drives. course point of unwinds here. and while you from air start sturdy is want of evolve cycle to out activity thank today you really nearline. you. the the points put how capacity Congrats where

Michael D. Cordano

me talk Yeah, about so let that.

the we're terabyte. strong what very in end, nice think terabytes I terabyte high X growth well. global we hyperscale that, X so basis, seeing points, That the with very at as terabytes, players. large and is so growth terabytes, addition the XX lower-capacity see XX primarily X continues a to at But on

capacity out at there, optimize different players around diverse So, workloads more as you different points. see

but very really the at is board, the well. still growth strong the see So across growth we high end as

Joe H. Wittine

cap if quarter, mostly drive off the natural the page. shortages obviously extent There or shortages those throughout lines, the the ASPs, ASP on so $XX Okay. and jumped the to what component (XX:XX) to benefit And were component those saw along you hard or similar I'm some per that boost is drive? rising ASP level served at jump of the device level end either curious

Michael D. Cordano

it's the as market the would and mostly overall on drive, but capacity I so tight. per Yeah, mix describe

versus and quite demand was the supply strong the So demand very tight. balance was

Joe H. Wittine

Mark. for hit quick final a then, And Okay.

just you tax aside. in in could the I'll rate remind If you XXXX, step jump and the expect Thanks. us of

Mark P. Long

a tax of above So to or the end function sort go in expect reform the we just range. of so to high long-term model, as our tax XX% rate the

Joe H. Wittine

Thank you.

Stephen D. Milligan

Thank you.

Operator

Thank you. And our Rakesh next of the question Mizuho. comes from Vijay with line

now is line Your open.

Vijay Raghavan Rakesh

XD on here that mix Yeah, you the could and was benefit just cost year? on XX-Layer what us do side NAND you with the exiting for what And transition. on the see your remind NAND, was where the if wondering,

Stephen D. Milligan

exiting. I XX% my so Yeah, statement, said in

Vijay Raghavan Rakesh

And the benefit cost was?

Stephen D. Milligan

is to cost that we XX% about XX%. All this said transitions to nodal maintain allow us

been nodal benefit. explicit haven't around we So

Vijay Raghavan Rakesh

Got XX%, it. a mentioned margins at little XXXX here. And your comes for Just a in unless we you could continue more? wouldn't wondering on pricing to half down, XX% look second happen. – is NAND up expect – would potential guidance assume margin bit be you you But if bit I cost, this to trend tighter know conservative

Stephen D. Milligan

characterize I part if way. know don't of the is normalization things I of that it mean, I that's would the one trend.

normalization XX% operating gross greater. or the been balance of see scenario, our we of of more collective this on a gross to have We we terms basis, our balanced But, will calendar margins to as year, bit a environment. – in XX%, in a exceed an move allocated expect we margin. for And

Mark P. Long

to And – does that a XX% quarter rate return that not allocated environment. contemplate per does not an

Vijay Raghavan Rakesh

Okay. Thanks.

Operator

from with Deutsche you. comes Thank Bank. the Scribner Sherri of And next question our line

Your now open. line is

Sherri A. Scribner

the strong hoping provide all to half? calendar range. helped this the get the business business the move bit the thinking drove you could are or of business stronger quarter playing terms year on you year, HD The high versus detail reach you about Hi. of expect will business. NAND out of NAND the how you think back you Thank growth maybe you. and HD little continue we a in your was be Do a calendar that as do end your through to into I cloud

Stephen D. Milligan

so really Yeah, both.

in half. we stated really the is remain traditionally we exabyte would the will as growth So upgraded Flash-based our strong half, And be expectation commentary. our drove that growth enterprise, second. in strong product the expect for on strong the the cap in was – second That seasonally growth will first

us to see So, conclusion. leads everything we that

solid. pretty is visibility our think I

Sherri A. Scribner

Okay.

in growth the you rate half, year-over-year the versus... NAND terms to expect back of terms growth accelerate the in of would in So

Stephen D. Milligan

right. That's

Sherri A. Scribner

...the March quarter? you. Thank Okay.

Operator

line next from our And of you. question with Rob Partners. Guggenheim Cihra comes Thank the

is now line Your open.

Robert Cihra

couple cap Great. and cloud. A much. high more, surprisingly, Thanks questions the not on enterprise very

booming I of genuinely visibility great. for which You commitments two? kind capacity do beyond do couple mean, follow-up how I or then that's get planning you quarters? here, if visibility your quarter you quick cloud And whatnot. you obviously need – the and beyond CapEx some So, have is you and next or do What – have can a get question a is possible. obviously one own get How for

Mark P. Long

good of Yeah, the pretty and our I calendar estimates have things. for the believe we think that year lead so, from Rob, expression of variety to visibility, our year we you for believe a would comes

have and commercial we our their of, we Some plans. demand tightly of CapEx some customers, arrangements more longer and have sort integrated their a of just view

it's in a those give increased things So, combination us that of estimate. confidence that

Robert Cihra

Okay.

Stephen D. Milligan

that at Rob, that would if would the I what indicate sound – that. – add this is – this the that but we're nothing optimistic, to expense on to add don't any seeing point that, I that I would weakness, mean. know want too there's to horizon you I And at

the clouds no kind horizon there's build-out. storm regarding on cloud of the So

Robert Cihra

right. All

can Okay. And just then sense. if a quick Makes ask I follow-up.

were selectively it seasonality? sort – that terms sort upside from maybe allocate there's consumer margin of Thanks. you shipping but drives electronics. and to the of and obviously consumer desktop you it head and or amount was Obviously, media higher electronics, nearline, weaker, capacity desktop Just just even seasonality as much any of there the nearline had takes seasonal in away was there, of needing in to you in maybe not

Stephen D. Milligan

because clearly, best to felt those derive most those allocate to enterprise this our opportunities. in the to – you which you demand bang. longer – a portfolio, of areas the of strength our where Yeah, of kind resources capacity that was And our the hit on and really of I going allocate the Rob, and us in portfolio point, use strong we think alluding good served product capacity customer customers' our our of relations term can media it we're the case, heads our earlier power depth well, we that we product enterprise, to to to in

absolutely So spot you are on.

Robert Cihra

Thanks much. Great. very

Operator

Mark line of with Miller Thank you. from And the comes next question our Benchmark.

open. is line Your now

Mark Miller

Congratulations constrained for improved NAND on another to tightening strong how your shipments? a supply, projected of wondering, quarter. to I'm due just or is projections much – be that was smartphone

Stephen D. Milligan

we a capacity mix. from our is probably growth in So smartphones. of I have standpoint, think unit reasonably modest view unique us What's to

has seeing in just did benefit we smartphone better of So, it the muted we still as the bit and are growth in industry, a completed albeit we the consumption, quarter the as at look mix. rate unit

in that's what's half back of into feeding the year. view So of demand the our

Mark Miller

Are of an NAND as pricing pricing? And declined, come some the you the demand product? up are moderately seeing because for the terms new lower lasting in seeing you of has opportunities expansion

Michael D. Cordano

XXXX, an penetration seen I of certain really go is, if in XXXX client we back markets of we've calendar what's – was happening a is that XXXX. actually entered, because such continuation was as SSD as delayed example. in allocation, into we've What it into really the think of as Flash

Mark Miller

Thank you.

Stephen D. Milligan

Mark. you, Thank

Operator

you. gentlemen, questions comes And Thank time the question Evercore. C. with next Ladies and for have more line participants. our Muse J. two from only we from of

now is line open. Your

Ada Menaker

Ada This J. calling C. Hi. is for in

cost you reductions. about talked get XX% as to transitions XX-Layer changes Can that the about about QLC had mix? past getting You how you you talk nodal enters as and XX%

Stephen D. Milligan

QLC. in general, we including long-term So in be XX% XD cost to era, see forecast XX% to a the that reduction

Ada Menaker

for in consortium JV then, the go the Thank there Bain JV are through? your Toshiba, to sale you. implications if And any terms with of the doesn't

Stephen D. Milligan

the it owner settlement want asset who effectively, was intent agreement, that The it we it short asset. to protected interest TMC our, with constructed our call no long-term if is, – or the the of answer buyer of was matter constructed the simply you no. When

one or way not affected we're So, the that in other regard.

Ada Menaker

you. Thank

Operator

Thank you. with final question Loop line comes Ananda of Capital. And Baruah our the from

is now line open. Your

Ananda Baruah

on Hey, two guess results. me. I Congratulations for guys. strong

least declines wanted that about just quarters, guys a at you're I offsetting NAND cost had quick believe talked Then see Thanks. after have just stable. The to to price a gross at margins you couple quarter-and-a-half, first that clarification. is the I I all that. altering question be past outlook such here. if that And expected you

Stephen D. Milligan

that's we normalizing was what offset market the the that So, as seen. largely And about previously would what cost the talked we've ASP we've declines said declines.

Ananda Baruah

Got it.

were expecting what and (XX:XX)? So, in no change you

Stephen D. Milligan

just Yeah, does not largely entirely. mean for clarification,

Ananda Baruah

And margin then year not into it. made would it's of the now; constraint process half the what baked the walk a in my it that see just the Can the this happens I but particularly potential comments to second NAND – know it's Mike just Got question you right second you and be, with us you as what thought incremental to gross through regards because that one in is of environment supply you you could on (XX:XX). through constrained two, could all walk them can touched half? the signposts that be us lead see – supply Thanks. or if

Stephen D. Milligan

Yeah, is for year. already so at our of growth bit estimate in quarter-over-quarter we've sort down terms for industry been signpost the has talked on, the coming about, number level, which expectation a of which

demand with side's combined going like. the So what think look that we to

the possibility. in year. out will second obviously But our see this I point, coming that we the booked – actually of are majority think there still So And clearly I the at of think business, in the see more not for we months. half remains

better this So through progress as have we'll feel. we quarter, a

Ananda Baruah

Okay. much. Thanks helpful. That's really so

Stephen D. Milligan

Okay.

Stephen D. Milligan

Okay. right, All thank you.

rest speaking the forward. we joining So with Have going And thank today. look forward us day. to you everybody for a of you great

Operator

and does a program, thank Ladies This disconnect. may Everyone, in you all have for wonderful and day. gentlemen, conclude the conference. you participating today's

Western Digital (WDC) 26 Apr 182018 Q3 Earnings call transcript