WDC - Earnings call transcript Q1 2019 | Western Digital Corporation

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Operator

Good afternoon, and thank you for standing by. Welcome to Western Digital's First Quarter Fiscal 2019 Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct the question-and-answer session.

As a reminder, this call is being recorded.

the to turn will I call Mr. over Now, Andrew. Peter

You may begin.

T. Peter Andrew

Form laws, good Thank meaning conference Please annual securities outlook. and update uncertainties These afternoon, we on and call are current and and to results industry reflect of the on events. obligation financial or recent most business trends, to on them strategies, differ will filed to SEC refer federal forward-looking no that the This financial the within our assumptions everyone. you, assume information and business and to plans information actual statements with for XX-K contain report new the materially. could more based statements cause including management's forward-looking and expectations risks

non-GAAP are also press measures the posted non-GAAP are make between the financial to that comparable the Investor included sections in our will Summary Reconciliations being references and Guidance website. today. GAAP measures of in Relations and financial release We

we During the one ask to yourselves Q&A, question. limit you that

find, of pass to the materials make in greater made in Steve, that, to everyone provide alert to on easier effort posted number to website. the an into line I information to earnings-related our our a business transparency the our significant I and changes want Before earnings-related we've information investors

Milligan, out will minutes Steve over check under With that, our All feedback. and of to the these forward now our materials new Earnings a CEO. can to turn call the we Investor Quarterly look Results website few your Please be sections of material found I to Relations hearing in Documents. and take this

Stephen D. Milligan

of Financial quarter today up Long, business good Cordano, guidance. highlights Mark first afternoon, second Mike Operating and with cover After a Mike opening will financials and Thank you, remarks, Chief my and Officer; summary President fiscal our provide are will quarter and and the With recent Chief everyone. me Mark Officer. Peter, wrap

your will questions. We take then

of at share XXXX, XX%. of a during $X delivered cash per interest million quarter non-GAAP over were quarter. the and margin with fiscal first non-GAAP year-ago has structure capital we the reduced in of revenue significantly the and, billion For earnings in the $X.XX expenses of and expense, we gross $XXX level operating operating that reported Non-GAAP help flow

While impacted our drives, results more a first capacity average challenging basis. enterprise, global industry strong business were hard XX% in a year-over-year selling declines and by we over quarter and flash with solutions, creating in embedded performance Current prices, flash geopolitical growing environment. are revenue surveillance on dynamics each experienced

it smartphones, on of highest latest in embedded of meet improvements. to remain improvements actions and for introduced drive to conditions trade be led the monetary SATA-based XX-terabyte and our near-term These customers of further plans and Quadrant to systems December upon an manufacturing The in reduction has our economic will With in Longer deliver industry of shareholder volatility ask forward XXXX and For business we in volume include bringing the our resulting Digital industry's to conservative and We data client our to cloud to a cost-competitive solutions In combination flash term, output UFS and planned introduction depend value our projected storage provide SSD China, QX impact hard focused rightsizing beginning align ability the increased thank challenger our successes with with include: that, our market. team in high-end that starts pricing operational long-term to most environment. to recent products. ongoing fiscal ActiveScale output equipment. Day – conditions, SMR-based will ActiveScale ongoing insight wafer support. imbalance the Investor remain capital through to response flash today's data. deteriorating in the to our recently object look hosting our Highlights ongoing growth the world. the are total and for our Gartner flash. in on hard on continued example, will is Gartner these product first We in broadening BiCSX technology leadership, our our center with areas of XXXX. commitments I value cost of I our these global these and tensions changes ownership policy, more on making immediate customers Magic customer drive systems a deployment Mike to recognized associated impede the portfolio causing solutions deliver lowest innovative has supply, The flash corresponding a well will positioned X as market X.X our want nor are of the demand, of demand demand goal about with delaying a to partners including XXXX reduce – to actions market wafer share we for to XX-layer the highlights. accolades slowdown with our leadership for duration in data-driven exchange and long-term and output This softening ability resulting foreign footprint. in the and for our not growth solutions, rapid reduction the to Western capacity better opportunities operational in impacts drive, capitalize and will growth successful their the leadership the now

Michael D. Cordano

everyone. Steve, you, afternoon, and Thank good

market mentioned, today. like our additional our into flash of actions Steve insight end supply align demand. we actions to current to I'd As announced some to provide taking aggressive are

of calendar reflection XX% our the to reduction Our is The supply XXXX. of actions equipment to midyear the starts dynamic capital output immediate bit by of deployment in planned and XXXX. in magnitude growth wafer of to reduction adjustment needed bit improve delayed supply-demand is of a these XX% a year

calendar expect in be line growth we XX% to market our in our XX%. demand to between year bit of of our with view growth to adjustments end XXXX these With supply,

conditions up monitor situation and additional make dictates. as or market to will We either adjustments down the continue

As factors we a market that are we near-term our results. fiscal quarter, second will impact faced with enter number the of

the to by we current X% be challenges negatively flash include: CPU between Beyond situation dynamic, with the widely expect lingering early the the into Industry growth XXXX. unit impacted supply calendar for estimated PC publicized the be quarter other have constrained year shortage. to potentially XX% analysts will

several for slowdown capacity We long-term expected Data particularly of spending, growth of a Center providers growth are rate enterprise. experiencing XX% the by temporary service cloud capital after quarters above in large exabyte

midst in to more adjusting a growth normal are of the We rate.

stronger For calendar to orientation growth to has our of U.S., disproportionate is having XX%. with Based These project markets. our of risk now outside on XXXX, on year the already particularly we talked capacity impact the with a averse we China. business exabyte expect discussions customers, about end second half calendar in resume XXXX. growth year dynamics certain Steve how contributing a enterprise environment the the global are markets end approximately

As our while driven healthy portfolio, embedded both we markets the conditions for in actions progress device, demand Client including future year driving versus providers hard across our are aware growth Devices mobile increase and a our is ongoing to Client for capacity Data brands Devices in solutions and for demand Solutions and Solutions WD. ago. are primarily grew per were: the in we we smartphone G-Tech, year-over-year, flash the drives respond, average ensuring first SanDisk the the Center experienced industry which mobile our across and drive. macroeconomic current and enterprise continued all a of leadership surveillance growth management invest revenue to hard and quarter our Leading taking Examples appropriate maintained in continue by well serve. leading capacity team, products. of we position

a addition, center our we our Day Mark over growth now in we revenue data turn the in discuss I at experienced will to products, more for in call financial emerging detail Investor area will strategic overview. upcoming In the record December. systems

Mark P. Long

afternoon, Mike, you, Thank good and everyone.

into As Revenue presentation a included we earnings flash shortfall year-over-year for on on business. our will available disclosures the performance the quarter. below financial September X% earlier, quarter for and revenue review drives. our was These September additional the Peter weaker-than-expected are was of original IR we've for the our now of hard a particular, quarter. products website. In basis providing are driven transparency our outlook I margins The by total gross pricing. decrease non-GAAP and a investors and to the our billion, $X breakdown for provide within flash updated disclosures mentioned with primarily

year-over-year. X% products $X.X and flash-based sequentially, down had growth Data revenue billion, the for XX%. while The quarter Devices September XX% selling was was of Solutions average increase our an bit of Center Specifically, price revenue

was Our $X.X to and We which client cloud-related was drives. offset Data a revenue Client Client surveillance Devices Center compute flash revenue by growth XXX OpEx year-over-year, margin driven embedded essentially flat flash margin by ASPs. be revenue market primarily flash XX% significant year-over-year. million, decrease the of September hard prior gross totaled quarter. had pricing. continues for for was products, declined September year-over-year. with trends storage. $XXX driven Solutions quarter Non-GAAP reduction growth in XX%, the points was the a million, by normalization in basis the in due quarter Non-GAAP down Gross $XXX consistent to billion,

quarter a of top non-GAAP our million, $XXX million income flow. basis, Given or quarter, continue per In was to the spending priorities. cash the net share. align current the operating for $XXX environment, generated September we we September our On $X.XX with

cash share inventory we in a increase to contrary had common of which was dividends We identified. in business primarily These driven repurchases Flash market resulting target million free inventory put quarter, September on as In for grew depending year $XXX September factors was million in levels us of stock a the of $XXX that continued operating of shareholders, the products. during to return reinvest a to $XXX In million of by capital XXXX million. billion slightly with we share $XXX normal and Mike sequential enterprise trends to million quarter, result the capacity normal conditions. $XXX our seasonal in on our repurchase goal repurchases. investments flow our fiscal through to $X.X returned market in

We the in long-term our outlook. this continue have an confidence demonstrates attractive and allocation we believe opportunity to is capital

and closed available-for-sale cash, We equivalents dividend amount a securities $X.X totaling quarter also billion. per the We with the cash declared approximately share. of in $X.XX

Before I and capital through of financial reduced guidance, starts our our to delayed provide output describe I impact decision would to of equipment. flash reduce wafer our the deployment like

output, with we GAAP-only is The charge reduction expect of occurring to We our these to output XXXX. to $XXX XXXX. flash $XXX our environment by cash supply XX% for actions plan This million fiscal XX% of planned our year reduce majority more demand current supply of expect take year not an spread bring and our range fab line of quarters by in to the calendar goal Based over temporarily million year of calendar is on the our in payment. to charge with flash the reduce does to capacity the decisions approximately by a the remaining the incremental driven reflect XXXX. middle

plans now the provide our As extent could Mike adjust may of a non-GAAP the we and quarter charges. on our of guidance conditions, for this fiscal impact will based any second XXXX indicated, on basis. market I

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

expect a will session. $X.XX now operator of begin result, non-GAAP I the Operator? to the earnings per over to to turn Q&A $X.XX. we share call the As

Operator

the call. Ladies today's and question-and-answer gentlemen, portion now begin we will of

from comes question Aaron Wells first Our Fargo. of Rakers

now line Your open. is

Aaron Rakers

the gross laid Yeah, just on given that a by the and on line, appreciate take simple this just dissect a assumptions math to are margin looks percentage also, about out. us to margin quarter? rate in what's consider guidance the that little gross flash cost-down try quarter. question, then and a thanks you want for bit your hard last assumptions. drive able I How cost taking the year-over-year current understand the is making you're Thank Help and And this disk the disclosures basis additional assumption high-teens flash the down variables like I you. thinking to the you're of just for and revenue equation tonight. the between you that

Mark P. Long

and with side Mike Well, finish don't the side the and then let why question? first, I talk product about the modeling I'll cost

Michael D. Cordano

Yeah.

the and So, low been on end operating operating the as between the think expect talked we've costs, We've XX%. range just cost-down, we XX% and about be about of to near of long-term that.

roughly expectation, this in We relative between at see on Analyst with Relative impacts, that in it's the obviously, business the perspective the impact the equally the update more to and product as to and HDD December. Day continue flash our sides we'll further question. both impacted to

Mark P. Long

reducing when from revenue lower the to HDD compute so changes then the are function modeling pricing The side, you have decrease margin side, enterprise revenue. capacity well a the a mix then mobility environment Yeah, environment of And declines. the contribute on of the enterprise think standpoint, pricing flash flash drive capacity the on hard client the and side. we about in as as and largely the

Aaron Rakers

Thank you.

Stephen D. Milligan

Aaron. you, Thank

Operator

Thank you.

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

open. now is line Your

Wamsi Mohan

of But sense output flash year try demand. share to think some you similar That's are they thinking you get be you're thank the pricing helpful. by as a the way that might competitors to in back gain do how you into supply-demand Yes, action bit the and here you. do take next sort to strategy can appreciate gains, flash give Clearly, line versus what potentially side. other reducing it Steve, growth possibly currently be in long doing? is, about very taking of of disclosure actions that And followed with to output Sounds some opposed that down will curtail on expect you're us like balance? to keep this to it. the mid incremental why you

Stephen D. Milligan

that. me add Yeah, so let on color

in equation the of by middle to efforts know do. the to We industry – what the get supply-demand of we're are our rest calendar the XXXX. is balance Our don't going intended taking that

And industry's correct so competitors. think upon your a comment that going we characterization, going to in terms behavior of not why of the depend follow, to that's the that's our

demand have that it to perspective own our if the are call to market. opportunities to on we're point the in better And so, the will expect that finer better would if that, from we of a to a particular, not house taken you call is, get XXXX. better And had position it, half it, in take put than calendar second really, getting advantage in inventory long-term of our us balance would we in And do growth want so these would we actions. been what pick situation up seasonal let's kind positioned trying order in we otherwise of,

Michael D. Cordano

in add a that, expect Yeah, our costs with the and color be. line demand just us what end we to on bring to little market

So straight calculation there is it's obviously intending to maintain share.

Stephen D. Milligan

implied I thing position out reasons. a a demand to better supply outstripping really is to and different or to has forward. that us going our matter prepared of add enough or commitments. no indicated I still is my in other the for And would we demand loss Yeah. there is in bits customer bit supply have been variety of share In as remarks, We shift numbers. This want intend the our words, excess intent other system get of

Wamsi Mohan

as coming quarters these about flash you few the should gross here, Appreciate you. to next expect going beyond point? quarter like But ahead, color. compressing about at obviously, really at been to reductions least we margins quarters December gross trajectory think compress of Thank margins for here the couple this the If capacity I think margin quickly, when you here could the and the a Steve. have Thanks, continue.

Stephen D. Milligan

we half a market Well, We're I'll but don't to to calendar the XXXX. going it's continue is would through a of that, have see, great know question. wait would expect be to challenging of And sure. we and the first flash that sort reality face we literal, for

see. a will have with that margin what at the dynamics could begin and reductions us But rate, to for there these will – for hit we're And of that but will half be of perspective compression, lead to the quarter competitive making we demand first inventory. It don't us because start to us to first do got we'll be we're until allow whatever just for be industry. of with. we that wafer so the implies XXXX. from But environment we then, our further challenging the that primarily time to dealing we've expect dealing reduce XXXX of continue And course, and not

Wamsi Mohan

color too the (XX:XX). for Thanks

Operator

Thank please additional yourself in you. time, please interest and re-enter the we that question. to And, ladies gentlemen, questions, ask of you the one Any limit queue.

Our next of C.J. Evercore question comes from Muse ISI.

Your line is now open.

C.J. Muse

on Yeah, this you would best-of-breed you CapEx, factors for I to to of Thank enable good change thoughts and start hear the in my about afternoon. your guess, wafer cost-down highly and scale delaying taking question. in think competitive light how market. love other

low to other perhaps YMTC QLC? lift XX% of of players in six the or on, of to love you. above focused in end entering there are to pulling avenues of you're XX-layer Thank light faster range thoughts, sort or hear particularly that that Would So your the plus move fold.

Michael D. Cordano

are Yeah. It's Relative highlighting of The less certainly over realities points. horizon. so XD the XD to on lever. they era, the longer we to right. the in of going just That's era. the QLC were which capital to thing in more the the a as of cost intensive declines, implementation than node, tech you're and declines They're in transition, next cost projections convert the rate the now we bigger be are our is the and

market So is and the to plan that's all part the of how industry differently. having

Stephen D. Milligan

have – and reducing it's reduction scale of despite capacity the of because to And if operations. structure venture, at output the But broader wafer total to the continue because look you to Yeah. starts, scale the we continue from semiconductor starts. joint the we're of that, we our manufacturing those wafer we expect only to benefit venture benefit continue in that joint

C.J. Muse

Very Thank helpful. you.

Operator

you. Thank

Daryani of from Our Daryanani] Amit Capital RBC (sic) [Amit next comes Markets. (XX:XX) question

open. is line now Your

Amitesh Bajad

Amit taking Amitesh Daryanani. question. Thanks is our This Bajad for for Hi.

NAND this do ASP do to think HDD? the see on pricing side you you risk the that well? HDD actually, of what Or at any you substitution on versus down slow could declines pressure pricing to having decline, HDD to the point Just cut point SSDs you ASP cut of at as NAND

Michael D. Cordano

Yeah.

We think in is that the SSD in really And have HDD we versus pricing, I PC exit about case cannibalization. not impact. relative year we expect that's of XX% It accelerate. of the seen rate of terms space. direct the the the in would

Stephen D. Milligan

the continued as is, of painful because facility to just drives. – terms Lumpur particularly in decline, announced comment anticipated client the And hard Yeah. manufacturing it Kuala our on closure as of that

And terms footprint drives has so direct of that. that But SSDs was to And that plans. we'll look factored expected uptick substitution do for manufacturing continue closure, in of light take our KL in that to response done in not lightly, but we our optimize to hard the into of anticipated at at how opportunities it uptick. been activity,

Amitesh Bajad

range, XX% Thanks. And one XX% follow-up. up you The think that of if next could just to you kind have could do of downside a ramp I like cost-downs some as bias have XX-layers? year

Michael D. Cordano

a So think we I commentary bias think in end lower that you to year what give of we'll more next December if question is the downside your look range, like. will

Amitesh Bajad

Fair enough. you very Thank much.

Operator

you. Thank

of question next Our Hosseini from comes Susquehanna. Mehdi

now Your is open. line

Mehdi Hosseini

cost-down, cost-down, of minimize manufacturing at there would you downside erosion. margin be flows And just the my going other this risk? taking than debt given especially covenants that have and you're the the the do comment default? the entire guide about a to for your Thanks year, curious how thinking you. could is improve that up since question. team. Is about there is Inventories and Thank of risk your the and earlier for anything cash covenants, I'm any This been

Mark P. Long

position good optimization in our ourselves through And the current calendar remain to manage our balance of respect keeps a covenants. standing us terms covenants, in we volatility. we of to in respect this earlier to So, position refinancings sheet with in good through and good our year, a put compliance. our forecast in our And with

capacity and capital. looking managing to look at business how That's manage look We out. Steve at we as the with all We hard footprint. As efficiently working business. We growth levers, opportunities ways that we the and levels, OpEx it overall as review. pointed some as we investing we for current in and very we look good are our constantly to as market at in also we can potential our and enterprise pushing flash both the relates drive right very see respect flow, long-term good are are part make side to sure our our of manufacturing some manage the cash on environment then what at the

Stephen D. Milligan

to from capacity, it's when Mehdi, were not I cut decision add cut that, us in at a think the meaningful did emphasize, positive. was looked we mean, instance, think with answer that And to Yeah. action to was a capacity, just ultimately, we we for I a cash And, a important of just what perspective. as color to because what itself, solving net better cash provides and for

we looking at And so that basis. on constantly mechanisms that is but on a are a long-term something only to basis short-term not optimize

Mehdi Hosseini

to at? XX% with that of is I'm it of mix my inventory ties just the you a are to cost-down, is your or needs And this inventory is X% understand, up year-over-year the And what question, that still something repeat the pattern something up be looked this kind focus with and with there there But hubs happens. inventory? on is Q-over-Q, it into and as – days

Stephen D. Milligan

the that supply it's inventory some right? want than we're we flash all demand. give The that in color that so up we get me a we situation. and why level, One let's to down start on have first. more than that terms principal taking be, inventory cuts is let wafer better But of for acceptable the That's is inventory out It's it more back more matched up. we'd like, there Well, to up put reasons. three is inventory okay,

through being the changes those the that there because be of of over be corrected XXXX and actions. – will well, that in thing, corrected, will calendar that middle demand of kind other of So next course barring the

more have more we of inventory, is up but built that inventory, is inventory. not a The excess other bit thing

manufacturing, because factory As to it another we unplug that and our Kuala into manufacturing. not need transition Lumpur close facility it can't inventory to lose enable plug any transition look and buffer you and some that factory we from one

You reason. consequence of that. downtime have manufacturing second as That's a the

is largely levels high just say, been terms very let's the capacity demand we previous reason third over that have at The in of months, course of running the enterprise. nine

so And let's buffer little to we've a been bit, hand much in inventory of without inventory. mouth call terms capacity it,

our well, market, for demand drives a it begins that customers service. don't more of so bit is a that As predictability a only great. them on to order normal down to not but hard drives, They go see having more we and not partners necessarily softens, returning the we'll hold soften, for maintain as of little extra in tend to the to levels inventory our to level in of high of or want capacity inventory part capacity because terms

in So our the that's balance. what's brief on with inventory explanation going of

Operator

you. Thank

Stanley. comes question of Morgan next Joe Moore from Our

now is line open. Your

Joseph Moore

Great. Thank you.

the cash the charge cost you missed a JV the I underloading. utilization works could give I you're pay those this, take my down? taking GAAP little that higher but the of the on it's fab understanding that underloaded you still for more us is reflecting way wafers if the when that Sorry bit color guess, to

is? So, charge help me that actually can you what just understand

Mark P. Long

the of purpose is actually JV wafers. technical to of not purchasing payments not describe. for It's the you make that cash the we the JV, but as structure it's So

do – with appreciation, to we basically no result, cetera. in have but make what continue payments, pay to agreement to as we incremental cash I a the it's connection As cash JV referred our et CapEx, for the payments

Stephen D. Milligan

The we CapEx have that directly. not funded

Mark P. Long

Exactly.

Stephen D. Milligan

that. They labor. So the have they own buildings. the They do

that. things We have labor, for the pay to like

Mark P. Long

Right.

to is taking. have anything this underutilization true the wafers. that do doesn't with purchasing are a So we charge It of

Joseph Moore

Got it.

Okay. much. very Thank you

Stephen D. Milligan

Sure.

Operator

you. Thank

comes Munjal next Our from UBS. question Shah of

Your line now open. is

Munjal Shah

is your Yes. the drives. but mentioned the I the broad-based enterprise outside U.S. is capacity You had from How it more softness of capacity end on macro customers? a side? broad-based question on impacts,

Michael D. Cordano

Yeah.

of assessment – capacity it broadly comments relative market to of really seeing our specific quite China more sort providers. were it So side, China. the broad-based. on the the to is cloud all not in We're across our It's enterprise

to the impact China. providers So on just then China worldwide it more service comment general to broad And in market basis. cloud broad separate distinctly, a on slowness was

Stephen D. Milligan

Yeah.

that. I add really, in alarmist, about from simplest it seeing, terms people to I of a characterizing all what terms seen what's we've to that. other of demand mean, The and terms happening want end way but is don't it in to Just customers, we're mentality broader that, sound a a us of talk bit kind perspective markets, of of in our risk-off of there's in reports

in So kind their out leaning effect everybody of is supply chains.

the at they're were utilization look they you guys, levels what if push So hyperscale to maybe going operating than to up higher their rates at.

their say, are If going you out channel company, at, our PC look chin thin they're it's to inventories, a partners going to up (XX:XX).

bit balloon this of risk So there's guise just the of from air standpoint. of a little generally out a kind taking under but it's – of a

same. the doing are We

absolutely environment. capacity actions We an that reflective of are perspective, is taking from perspective expense cost, from same that and the a a doing from

Munjal Shah

just that's inventory mentioned you that have, I inventory? provide related, No, do you they going to have service, more you forecast customers might but you that cloud double know to why extra keep have that And the might of (XX:XX) and you do like, that's given kind higher think order? or help. think ordered

Michael D. Cordano

Steve think, we as more I of they No, have taking don't posture. I are that, specific conservative but any said, indications a think

in that's I driver. indications, continuing the some consume think inventory, but not primary to they some are

Munjal Shah

much. very you Thank

Operator

interest in ladies of queue. we as question. that ask a you the the time, yourself re-enter to And and Thank gentlemen, you. please Any one limit reminder, additional please questions,

Citigroup. Jim from Our of next Suva question comes

now is line open. Your

Jim Suva

much. very Thanks

changes think early on and to more if to getting that's your pulse a Given any thinking little Kuala that outlook stock the But change need what or of plus done share what or for kind has your the buyback for earnings, other currently just keep know there's about stock and to price sure. in you for historically, wondering in just of way cadence your capital I Lumpur a you've cash So it tempo. done your recently sense business? deployment do you shifting the of handy closing and buyback. any the the

Mark P. Long

– change our no There's to Sure. allocation yeah, no capital change there's strategy.

capital a top have we We the said, allocate balanced our As among strategy. we have priorities.

track So and We the billion investing that. share at, in the we dividend business, remain we and our repurchases course, had repurchases. said, as in our for then look CapEx, $X.X of fiscal on XXXX, targeted and we for

we So other balanced there's do going will no strategy agree use price, of than And that our is forward. current that, share really with it capital. attractive an change we the factor into

Jim Suva

quick you That dividend? mentioned use dividend it as reduced a How was flow, about Do as going should my since going think a in follow-up, we percent you then follow-up, is of be dividend the earnings? think the a yield as Could should the And is cash forward? rate higher? we about the of how dividend. word change

Stephen D. Milligan

of looking is expect would I And if to Well, dividend one. dividend. looking continue it – But a at a part. say, see we we'll allocation to I that. clearly, short be not in the assure forward. that formulaic, critical the at it to we We're that call that. would want if different capital the that you part our we're not But anything and of at going cutting And can look term, factors number dividend way key not is want we're program, to modulate you it.

Jim Suva

greatly you much for so It's the appreciated. Thank details.

Stephen D. Milligan

Sure.

Operator

you. Thank

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

open. now is line Your

Karl Ackerman

questions, I if gentlemen. may. Good had I two Hi. afternoon,

about we on first perhaps memory server of demand memory I how on curious, the level is your is half comfort think first of spoke beyond about impact The business? think the demand peers just drive hard hyperscale the end quarter? level-set things should in some challenges about question your December your demand, nearline primary what server one of I'm XXXX. to some trying for kind just really

Michael D. Cordano

Yeah.

Stephen D. Milligan

Yeah.

Michael D. Cordano

Yeah, let me answer that.

as said yes, half that I've remarks, in So, sector to in prepared calendar expect robust more we my return the second growth XXXX. to of

thinking about that's way it So the currently. we're

Stephen D. Milligan

first to So of the from to if But compared exabyte resume will above half But normal rate this, – call perspective growth certainly and the what want a be to of to longer-term XX%. was first the half back then buying we year. XXXX. the stall more continue expect we growth half was weak that last through the patterns to you in persist saw it,

Michael D. Cordano

Right.

Karl Ackerman

of lean be the with backdrop, some you're obviously Thank demand fairly drives But how operation helpful. hard but revenue going also would term, commentary run there drive Any Understood. to trajectory OpEx guess, near think today. the about facility? macro should you your a lower that we you. as I rationalize

Mark P. Long

Yeah.

So and optimizing we our both on I mentioned, structure, focused Mike given environment. and cost are market as the Steve expense very think

going And trending indicated, look for we opportunities we that reduce improve will and will to the down As quarter. continue forward. OpEx current our to in that be

So...

Stephen D. Milligan

technology a sure product also our While making that face we're competitiveness and our enabling of cutting off threshold. of our over spite nose terms not in in longer

Karl Ackerman

Thank you.

Stephen D. Milligan

Sure.

Operator

Thank you.

Our Loop of next Baruah Capital. Ananda comes from question

open. now Your line is

Ananda Baruah

Hey. I my you question. Good taking afternoon. appreciate guys

Exabyte, should used. first Just sticking muted of half right what we there, it could, And as wisest Should is as Steve, think growth the for to if I you you been with we do has the nearline. XXXX? term we flattish? – about know even mean, us though think do of think think I

think actually a you get just we – to actually should as of how So Or growth? can little back should flattish think Then... you or more think we of it it? do this

Michael D. Cordano

the flattish. about Yeah, year-over-year I it best way to think is think very

Ananda Baruah

half. the Got it, thinking for that... first then And is

Stephen D. Milligan

terms. exabyte In

Michael D. Cordano

On exabyte terms.

Stephen D. Milligan

Ananda. terms, exabyte In

Michael D. Cordano

Correct.

Ananda Baruah

you just for of nearline, of sort guys down? get – mentioned or Thanks. have Is sort And risk-off then on versus a of you sense to broadly. softening Steve, just, cycle had the exabyte sort any – how a way winding risk-off of much do the there it. of Got is view

Stephen D. Milligan

I'm sense that. a to enough I'll Mike's for and not that. I'm got see dimension smart turn if sure

Michael D. Cordano

of it's the combination Yeah, two. think a I

have obviously, build-out I that a there's Different has occurring. providers been different rapid think, of their had been drivers build-out.

So, In other instances, onetime instances, they build-out, an that in do the know, some risk-off, them. move are they're to sort addition as once you a in of they'll large into mode. optimization things behind

of as going there's some that So on well.

creating that demand things those are we're articulating really a it's environment here. the of So combination

Operator

Thank you.

question of Kevin comes Cassidy next Stifel. Our from

Your line open. is now

John Joseph Donnelly

Thanks question. on Hi. for John Donnelly Kevin. This taking is for my

components of some to up positioned? CPU you build there waiting the a your how storage for buy there? Are terms excess you shortage, can the inventory to describe potential or In they is see customers

Michael D. Cordano

it Our would this. view of be

let's it's of it, call not, depending part First all, the impacting our which of market, proportionally on market.

actually as So more to it's it And constraint the elsewhere. period. in year see and a less we shipments first the in

So it. evaluating we are that's how

Operator

you. Thank

(sic) comes question (XX:XX). next Mizuho] Our of Rakesh from Mizahu of Raksha [Vijay Vijay

Your line is now open.

Vijay Raghavan Rakesh

Yeah, hi, wondering guys, growth, guide it XX-layer. just NAND looking XXXX on just and spread between XX- you the at for to bit XX% how layer XX%

Michael D. Cordano

December. We'll on more commented haven't insight in on give that that. you We

Stephen D. Milligan

that XX- mean, ramp progress. with pleased of add will making and I our good I are we very XX-layer technology. layer But

in we feel regard. competitively we that very So positioned that are

Vijay Raghavan Rakesh

little disk And get you a you terms to declines compare of you could it. the cost side? or in talked NAND flattish what cost you when year being declines increases – drive the of get Got nearline about first half, year-on-year density next side, could but on the hard kind on

Stephen D. Milligan

Yeah.

enterprise side think in same runs So the Center the particular, relative to business, we decline cost Data the that roughly rate. of capacity at

XX% nicely. of to XX%, sort tracks that in So so it

Operator

comes our Thank question Group. of Maxim you. Chokshi Nehal And last from

now is Your line open.

Nehal Sushil Chokshi

taking I thank are a given Yangtze Yeah, you of with Toshiba what get venture or the to is talked they the felt to relative some that you sense Technologies' whether absorbing joint entry cost and not new the your for the trade to share about? as question. you tensions Memory wanted competitiveness

Stephen D. Milligan

impact impact... minimal having they're Yeah, point, to this minimal no at

Nehal Sushil Chokshi

Okay.

Stephen D. Milligan

...both in terms of systems – yeah.

Nehal Sushil Chokshi

All Thank right. you.

Stephen D. Milligan

you. Thank

Operator

you. Thank

Stephen D. Milligan

you ahead. sorry. I'm very go thank So – Proceed.

Operator

closing like the to conclude over our turn back for remarks. now would I to does Milligan Steve session. this any question-and-answer And call

Stephen D. Milligan

look Thank rest seeing day. the and Have All of you to you. Day. December many a at forward Investor we for right. Thank our of good you joining us, X on

Operator

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

You now may disconnect.

Western Digital (WDC) 25 Oct 182019 Q1 Earnings call transcript