WDC - Earnings call transcript Q3 2019 | Western Digital Corporation

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Operator

Good afternoon, and thank you for standing by. Welcome to Western Digital's Third Quarter of Fiscal 2019 Conference Call. [Operator Instructions] Now, I'd like to turn the call over to Mr. Peter Andrew.

You may begin.

Peter Andrew

afternoon. good and you Thank

and Before I contains and that discussion to and most remind outlook, risks cause and with include uncertainties. to We let looking statements me assume expectations assumptions for the forward update current trends upon our more Please everyone such materially. including does based risks today's management's begin, as business and on could report differ financial information refer statements. obligation financial results Form the uncertainties SEC actual that no to on these recent XX-Q filed plans

also posted to GAAP call Reconciliations financial will our the of section in materials press With financial comparable between included Milligan, CEO. are measures other in the Investor I the Relations We today. turn make website. will references now measures release over our and being the that, Steve are non-GAAP to and non-GAAP that

Stephen Milligan

formally good Mark May Operating XXXX. you Mark afternoon Executive Chief newly years' Vice And Digital and everyone. and today I'm appointed Long Financial President has him Cordano, the role CFO welcome X, to leadership is President XX take financial Western me experience Team. more the With Officer. Robert us on Also than Officer Chief will Officer, and various Eulau, Thank who today technology Peter, industry. with Financial are and and the Bob in operational Chief over Long, in from roles pleased to Mike

Robert Eulau

investors in future. Western to with I forward excited I'm working analysts Digital of to the our Team of Steve. be and the Thanks, part all look and

Stephen Milligan

client in expectations certain are said, see we incrementally encouraged That as and generally been compute. in Turning to our being market business, consistent January. such enterprise improve with demand capacity to our areas have described conditions

perspective, product from products looking for the is the hard quarter demand upside of capacity unchanged. than products demand for hard of And expected. largely flash Higher nice of further at sales bit we environment points. calendar balance the improve to Our a rebound higher a drive both and a for enterprise stronger expectation the XXXX capacity and most for saw drives were drove at

a are ramp with XXTB smooth our product. experiencing We product very

also for we the products better our than was a of however, presence more anticipated. addition, in significant mid-range. In than expansion flash-based realized expectations; prices declined Demand we slightly

rightsizing the are plans last we our and out product in executing production lowering levels, structures. our quarter, and enhancing on cost advancements, well terms our laid We lineup, driving of factory technology expense

progress commencement this based toward internally to we platforms. revenue report track SSD NVMe and product volume remainder the on calendar our the shipments over ramp XXXX. pleased of enterprise We continue of our commercializing make NVMe developed are excellent accelerate I'm the to of to initial of

density already cost our realizing a wafer output position. SSDs and expense first BiCSX NVMe we are is manufacturing and leadership announced enterprise incremental without the previously believe substantial perspective, our shipments Lumpur later terms through recording track The our to flash continuing energy-assisted In technology of BiCSX the We XX-layer, year. half our this ship we and are are capacity other on combined drives realigning continue energy-assisted Kuala to The well. flash of ceased has as we From aerial reductions and compromising industry largely progress cost ramp on savings. the with actions made HDDs, structure. cost and XXXX, We In facility operations supply of commercialization XD lead technology. client we will technologies of highest calendar is our progressing our industry's cost flash, volume also in runner output. commence manufacturing on based in BiCSX, become which lowest such SMR second

near the Western technologies company autonomous highlights. business Digital on up immense Our best future long-term our resulting such in long-term is support. data. share XG new the of storage prudently Long his applications thank him Mark for their as now and Mark creation for wish creating the use navigating conditions. requirements and IoT Western artificial and amounts data Mike and Digital driving business been the its preserved, machine in his innovation growth for cases to the Emerging The in while need relentless well I such Team as ongoing for accessed thank value intelligence, like focus and applications Western also that I learning, open be stakeholders, to has the will and will vehicles, pace our would growing continue Further, transformed. to service of captured, Digital. mobility data bodes endeavors. want I to volumes transformation the very our instrumental company. of opportunities that, to With for and partners generate

Michael Cordano

category as strengthening for performed with with Thank expected capacity better highlights than and quarter. and Data our you, Devices demand Steve March through we the afternoon. the Solutions, our good Starting quarter, drive Center enterprise move within

to For total half the to on of capacity XXXX, basis. we be first enterprise up a expect shipments slightly flat in year-over-year now calendar exabyte

Additionally, in reach revision range. XX% for estimate if growth category significant a XXXX current exabytes that the XX% our demand trends year-over-year is was updated the to in forecast from continue, year low we upward see an industry .This for opportunity calendar prior

seamless this and capacity in enterprise industry been have leading we adoption transition. the are XXTB qualification Our drive and

are of We of the in the this a product current midst quarter. ramp in significant

fewer our offerings this heads and to later XXTB XXTB will track cost hard density to We significant disks our showcasing SMR are aerial advantage. energy competitive on drives assisted and products year. CMR Compared solutions, new our calendar optimized first containing introduce be

we capacities well enterprise increased capacity did product have meaningfully in in presence also the very mid-range our and the refreshed in category. Our line total,

fundamental highlights performed capacity This the a helium high plan. Digital of our key drives, a Just to product NVMe environments. massive customers hyperscale event play of a SSDs, for price super internally The telescope by transformation project version and black and ever that already elasticity. expectations. a ago developed year delighted In first reliably hard doubled role firmware, In altitude, role more few enterprise the enterprise image Client capture BiCSX. our played our remote in shipments product were ago, weeks Devices, predictable product market including we hear from that in throughout the for high solutions storage our harsh, which data. than horizon built hole. are unique and utilized to at unveiling Western in our progressing we we This qualifications the solutions event, SSDs, manner, shipping. with a slightly a portfolio quarter, drives in than our controller incorporates SSD are effective to platform the approach cost better exabyte demand was Consistent expect PC the expand on enterprise that In complements other strong last quarter driven client and we discussed SSD of XXXX

client microSD BiCSX and unit reduction bit we elasticity. shipping technology. output Despite of a fastest in solutions, of prior in this XXXX. In for SSD flash over world's our with essentially the track removal price devices supply begun to the calendar our From flash flash we seasonal year-over-year, March reflecting inventory an XX% XX% Average perspective, per level from on in to significant category. capacity overall grew quarter, year XX% softness remain an products the industry very mainstream presence our achieve we category external was to the quarters. establishing XTB unchanged products card, client we've expand have several our the our based first the also launched pleased through March quarter, are the we of sold continued retail in success on Additionally, SSDs In last quarter.

opportunities full a inventory allow combination which As flash growth and fourth to pursue lower stabilized impact reduction will flash we forward. going our flash to wafer fiscal levels. This further look supply to we see in in our to reduce quarter we how our expect selective be from in help more of will us quarter, starts, inventory revenue

fiscal expect related planning for fiscal In flash and construction terms the a Based we deployments, expected lower output this building on products shippable estimate in In XXXX. the our capital than XX% to slowdown of in what BiCSX more meaningful client longer with showing bits. the this on of we capital Japan the of spending is are fab as from track XXXX be schedule we industry's shipping flash, our the planned continues XX-layer flash products and pleased term to total our June quarter, represent leading SSDs. retail into of for based expected, technology

are to track implement portfolio enterprise mobile We year. and embedded on BiCSX including calendar later across our this

have Steve activities mentioned at KL As stopped facility. we earlier, the largely production

our consolidated long-term cost to manufacturing Thailand our the continuing actions demand. also head to and We lower our allowing us Philippines. meet manufacturing footprint to rightsize from are operations structure have These

progresses as calendar industry the capacity points, fourth estimate back but improvement growth, the industry both we Turning in year. retail. elasticity flash very XXXX conditions expansion current quarter. our migration history. industry prior additional enhanced to half remain In lower moderate summarize, NVMe of capacity data supply best product in and from price few conditions compared to in leadership on significantly technology to of announcements, due the pricing our line the in growth strength year To portfolio demand of supply is of somewhat for SSDs points in a brand calendar our manufacturing. incremental our our we forecast. the outlook, continue to plays be demand decline rate the our to we a client and and enterprise driving to Based tough In see in for slowing in product higher recent seasonal XX% we slightly indicating will strength product Flash higher more and calendar anticipate Flash, our rate current challenging, than drives portfolio to has XXXX, with the HDDs, been have a

environment in to the turn will Mark, challenging ourselves steps appropriate to the ongoing a taking I financial call are now over discussion. success. market for for We position

Mark Long

bit in of due Thank X% to Flash price, was in seasonality, sequential sequential per the our decline billion with everyone. gigabyte weaker quarter revenue and products. of sequential of mobile was afternoon and The a XX%. range. decline Flash $X.X March embedded selling was Revenue price revenue of middle $X.X a sales and in decline guidance the primarily you, Mike average good billion,

Flash Drive similar billion, margin DRAM. related point gross XX% or excluded drives, to of enterprise XX.X%, which is approximately due due flash prior down from a the impact non-GAAP was reserves. the a venture LCM write to better charge market to operating or expenses to of below rate by the $XXX and was contain that revenue $XXX non-GAAP Hard revenue of cost drive LCM gross guidance fans. basis of as the charge, result compared driven margin targets. million non-GAAP of an joint a margin lower the productions $XXX our quarter. the a related basis was the XXX prior million XX% guidance rose $X.X quarter quarter was of of expense in to of capacity aforementioned multi-chip charge for Our portion price inventory reduction million; incurred our the to mix million the towards to XX% Non-GAAP an under-utilization packages gross on our increased lower were $XXX Non-GAAP primarily of progress cost

operating results reduction of XXXX. reminder, cost per quarter September full a $XXX the to to the efforts As see million of expense for sold, by our reflected expect benefit goods quarter the we million within December XXXX. for of expenses, end quarter our non-GAAP reflected be we of to cost reduction And be of of the efforts quarter expect the per non-GAAP $XXX full

Operating tax non-GAAP cash profitability EPS dividends available amendment rate our $X.XX. true-up, The provides cash, lower sale operating $XX non-GAAP a announced for principal successful and primarily we due dollar than we $X.XX. for EPS Non-GAAP amount credit quarter execution at million, debt impacted additional today, expense flexibility in million by under Earlier income. shareholders. covenants and $XXX our billion. The level. flow market fixed navigate paid effective cash to approximately agreements. was to of relatively negative was tax diluted to is the our quarterly financial $X.X and this estimated the was we $XX.X In tax fact $XXX was to Digital that with cash and quarter, and existing outstanding At an financial securities March to was free was Our the the due a cycles. higher significant Western which had a expense $XXX billion March LCM million charge million, the equivalents, end, in quarter amendment flow

a reserves. inventory, inventory flash dollar the hard drive unchanged basis, prior essentially the LCM Turning to quarter the decreased impact inventory of on and was after from

non-GAAP on decline we guidance a XXXX quarter sequential of now a of quarter, inventory provide HDD for June and fourth the into on Looking flash expect basis. to the basis. I our fiscal will

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

earnings As a share non-GAAP $X.XX per result, we $X.XX. to expect of

Steve, session. that, thank serve great you. of Finally, It's please modeling Team In weeks that all as Digital note of before please to CFO. will for closing call weeks. XXXX instead I for purposes, have the Western XX Company's the September and to Mike, with normal XX to been the the entire the would experience turn With the a begin Q&A, opportunity Q&A I quarter like for the operator, the operator the working

Operator

the [Operator begin will And America. our of question-and-answer question comes Bank the Ladies Instructions] Mohan of now and with first today's from call. gentlemen, portion we Wamsi

Wamsi Mohan

Steve say just quarters, but versus EBITDA free expectations to the that credit material your changed prudent, the has a cash would is is and in over of this amendment this facility or next Mark, few fashion? flow preemptive generation you

Mark Long

we our to low us give favorable cost. very the and the credit significant a amount it this do with were took opportunity of additional We markets amend does because were to Yes. able and agreements flexibility

Wamsi Mohan

expectation few you sort of quarters? the EBITDA to that? And your generation care price would next do you expect as just of look How you -- the over

Mark Long

good prudent in not flexibility. was to a us was gives any This that This long-term near-term response concerns. just move

Wamsi Mohan

from you base really were there? standpoint talk you there has could what changed demand sort just in largely quick, color uptake? do trends is enterprise you think and that Steve mentioned coming of I even you. capacity maybe a Could are where some if unchanged. And -- about Thank customer regionally What that if

Stephen Milligan

were see a bit detail on Client capacity at more than comment decline, a but least PC Mike we I that. enterprise, have we at on I enterprise a rate you as which expected, will more stronger which a what of will -- know, I more indicated I but largely so expected, what very bit from compute volumes is investment were the mean capacity we of declined to a little as provide expecting, pleased Sure. than but a it volumes bit down saw. comment continued moderate to see they was result one is area a we think lower perspective, community of enterprise bit as on upside little known draw weakness capacity the handset did we a demand that a were can of that, in bit Mike little than bit

Michael Cordano

providers. Wamsi, capacity saw both demand sort we think and capacity, Asia. the in Yes. domestic would fairly it hyperscale XXTB a and think products At viewed I I enterprise as in our highest was broad-based. strength We of in of be then XXTB strength saw it mid-range,

enterprise So, the we capacity strength gateway. broad saw a across fairly based

Operator

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

Aaron Rakers

can I quick. Two, questions. the taking if for real Thanks

flash of like gross XX%, XX%, of gross first keeps number assuming given, be also the gross kind If up that gross rolled you you've kind margin. assume to about margin the the of coupled Lumpur to Kuala drive us hard maybe guidance help appear closure margin you margin the to particularly kind the it demand your how understand with positive So, were in here, on of just around commentary would drives. flattish that all range. high and for a thinking stays that looks Can trend facility capacity of we XX% disk --

in in quarter? go terms that So correctly are discussion pricing down kind of gross underneath and cost about for flash what of June making the of kind assumptions the of am I you context as of and into guidance we margin thinking first all, your

Stephen Milligan

more So, Mike I'll give Mark Aaron or either some can overall comment bit add then and little a specifics.

kind We mix would we business XX% as rebound a of in flash well implies continue. current of expect of see as -- a is that price will given the I gross essentially had way it, number. up continue we We -- you pressures more to downdraft of will some improvements that the that fiscal enterprise. that gross you guiding drive better normalized in gross quarter and believe work our let's noted the normally gotten levels highlight back into we're that expect a would what a continue QX as cost the to which those capacity as that see at we'll that nice margin I continue our hard One begin of margins for terms see in this we to particularly and we'll flat gross a, saw below the things go quarter level in space, call terms back drive margin clearly hard the margins cost if

commentary, indicated his moderate we we through as expect don't in calendar for that course know Mike although price As of will the that sure year. we move decline

So, take get declines. little of price acceptable into a a range for to bit that more time of it'll

So, in helps terms I that level of know bit don't if a Aaron commentary. high

Michael Cordano

Yes.

I'll kind The XX%-ish. at cost on of about talked Aaron of the declines. thing the flash We've other range being low add end long-term at is

think So, on to you'll it basis. way have annualized that an about

Aaron Rakers

kind a just trend term do how is of at flash in if gross that. it can, you you you consider product I kicks to I'll think what would a a what real the get as back end you. if kind of gross quick in more the what Thank longer think -- margin consider to a And then about about margin a way normalized good portfolio guys in, think And follow-up as I normalized we business.

Stephen Milligan

I range, is... think margin the about Talking

Mark Long

basis long-term point. not model Yes. this an I are we changing overall our at mean, I think on

the we've price see should we Day. drive we need -- work about as half, dynamics moderate and of Investor to off we gross the see the the flash through about about hard and the normalizes talked at to talked improvements just declines industry as talked kinds and Steve we then inventory last the in the So, back margins the

Stephen Milligan

look you to point a Flash. put it if that's XX's, finer just at And high Aaron, Yes. for XX's model on low our

Aaron Rakers

you get year? of think the you calendar in back there the So can half

Stephen Milligan

saying that Aaron. not We're

Aaron Rakers

Okay.

Mark Long

about talking No. We're model. the long-term

the You in long-term, said yes.

Operator

of And you. comes the next Ackerman question Thank Cowen. line with from our Karl

Karl Ackerman

decline restructuring million so want underutilization total announced would of to how a from $XX on of taking there much the afternoon margin how but do million your June I the near-term to at million actions I ramping be in for initially as least annualized could NVMe your money in that qualitatively as then margin ramp to operating about you. those the a the in margins, balance that, ramp SSD and go will due XXXX? $XXX we just everyone. $XXX second secondarily good to another trajectory you and we've second you're to your cost may be volumes million, was remind costs benefit level, margins reverse Thank that? go And realized got two probably how Hi, losing $XXX of -- if think an I in that you and back us, half for BiCSX for to would may so whole, suggest your COGS the much think of

Michael Cordano

rate just and in to. decline is I'll half more the you BiCSX, loaded, more talked about sort want to shallower half so come ramp annualized talk the cost cost first and of given back half that a we the I of flash the Mark back in see downs to

Mark Long

underutilization quarter. with this in terms it you quarter charge right are of through prior Well, I majority in occurring think the the of our exactly and

receiving as getting amount So, cost of haven't the be benefit shutdown breakdown that benefit calendar Kuala said, million QX full this given our terms QX. we're in $XXX But in that year we will a exiting a Lumpur year. the we we of of

Stephen Milligan

Yes.

which about we on more be -- check more principle being it navigate we and position relative of would The talk be quality in think profitability allows as ability the business via measurement sort that. of about discussed to market, selectivity, inventory I'll all to our improving when other comment us thing that's selective the and sequentially that our and to

Michael Cordano

top our the if seasonal with I'll meaningful year. I through you commentary, expect provide at as know enterprise a largely to demand Yes. I talked at from in consistent call line up, we is line we'll allow have which a mean last perspective. -- a be That the obviously will from hard top little a calendar you as One, look we both the perspective, what demand that us move -- will at of a rate and pick we see starting earnings balance additional bit about revenue. improve from capacity higher as well flash drive as pickup of

also in as We the particularly we of of more quarter the into will reductions, move and then have or September benefit December. the cost expense

me Let terms so, the we we is hope that what the bit that as continue that year. plan that for that of and through like? look see the in to that, principally you back reason want call it our now really our at as sense And the because the going answer. move if going same say margins the assuming will to the to of gross improve is I of What some best. margins we will to becomes in want it level doing continue worst going allow balance color us flash this drive balance we of our the through and the more to that, wildcard, see said move assuming? the the Flash on through I'm expect hard provide pressure you're a move is year. year. question it we call the calendar are we're in The we that margin last We're to for calendar to we're is to again little to question get as our lift big that terms is And earnings, the of which half trying

control. is of margins levels, are do know factors to demand levels, that our of to that upon Now, going happen gross lot What dependent do, we our and production that. don't outside Flash a all exactly competitors other because what's

that don't going is going but out, from So, safest gross to we exactly our it's how assume remain under we're to continue Flash to play see a our know we to the standpoint it move move calendar the albeit to maybe some half we degree the pricing moderating through from of back through level year, pressure a year. margins of as as perspective at

Karl Ackerman

capacity If I endorse last may, a just question out the maybe in until business. hard technologies ask secondarily, your on Steve has of near-line line line storage from at through from quarters, Mike, at the part these in you more the reason competitive the demand push provider's the changing you your how near I'd progressed been soft or thoughts And higher qualification? half? as you. all slightly would if why that line drive landscape drive of a near the offer back appreciate to two industry hearing different least Thank raise draws view due for on

Stephen Milligan

within of levels growth broad broader driver actually the inventory the principle think levels. based was I So, hyperscale

year, for for modest of drop next the in call an some that. So, Relative I levels capacity point back but primary of talked secondary them QX and sort it, role, was yes is and I our role inventory customers think in really there the half let's waiting saw played, the we correction. a about making calendar inventory to the the that competitiveness

viable point less capacity and competition. will us I a vis-à-vis we're advantage quite the our cost disks, it with comfortable at with our heads approaches, gets think there give multiple next which is approach, there

important leading an talked we've of application though, from our in way us. standpoint being advantage the us technology that's that to assist a So, energy about our gives

benefits of we'll that As a will technology it enabler, continue give the to the and next in generation expect confident we see us be we products. that

Operator

from our comes Thank Mark next Goldman with the question Sachs. line of And you. Delaney

Mark Delaney

taking and for afternoon Good thanks the questions.

to topic, taking The explicit point if half be expenses cost now, not underutilization both target was you'll a first that downs. can that the my Where still be those second and NAND stop cost NAND whether question more you. per whatever about somebody do do in related was, for to underutilization company the expenses annual bit bit fall XX% you excluded. you And of asking second that has on within expect year. then or getting the Thank calendar the question underutilization think XX% to

Mark Long

charge reflected of left portion for Well, calendar underutilization remainder Okay. in very that will small of in as as and And utilizing to terms relates the a heard this of extent and Mike. the then majority plan as the it year. say full you the first be of our the standing me is -- that changes earlier, current the is taken [indiscernible] half for that,

Michael Cordano

annualized expect, in estimate And cost of relative as you what to Relative beyond Yes. through to this plans any reflected down. changes conditions. implication cost would the our we'll point, of continue around to XX% we've monitor once, announced. that's market of additional no at But sort already then we're course period that

Operator

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

Mehdi Hosseini

line Is Mike, growth Western guide? the industry near that that follow-ups; for or Digital XX of said is Two exabyte XX. XX% you versus

Michael Cordano

we that. that's think an than better bit we a Mehdi, to obviously Yes. would and industry do opportunity hope

Mehdi Hosseini

growth low for of production NAND XX%. expectation to bit shipment growth? And the bit your What is then, in NAND regards

Michael Cordano

not bit is That production growth, demand.

Mehdi Hosseini

I see.

Michael Cordano

Supply growth.

Mehdi Hosseini

inventory into and Supply growth, on decline, then, to given NAND comment declining is looking-forward? we has assume going for the days And finally inventory okay. both and of your that June should HDD quarter, peaked

Michael Cordano

inventory be same of in decline then range and the days QX to expect roughly would and the normalize begin backup. to in We for

Operator

Munjal our And you. of question Shah with next UBS. line the from comes Thank

Munjal Shah

on one enterprise. capacity had I

last see then half the Have situation similar stronger that any do can year, seen second that quarter. have softer? as this be half or and could that thought, stronger, a risk we a for is demand better be can than indications saw you run You initially demand you could what where into first you

Michael Cordano

No.

bit we'll the additional XX's total forecast Our reason growth. is we low growth half and on strong, second that some strength the year-on-your believe expectations year-on-year first see calendar to we drove in the from our our will view half approximately our year and the bit in commented update that XX% for remain growth so

Operator

with you. from line And Thank of Muse next our C.J. the comes question Evercore.

C.J. Muse

shaped I to to you most guess March was bell roughly you before similar quarter more I and hoping charges the utilization back the margins. be into now would in $XXX half focus 'XX. at first further guide the plan thinking question like your of is and and heavily were on gross cash quarter now charges it based taking June that appears I on you're believe million take a

So us. you could with share

Mark Long

expecting and underutilization $XX million in the let's very clarify account that quarter. that let's the quarter will all for be $XX beyond amount there'll -- portion will the million virtually our was that charge, June the a C.J. So largest June the -- March of between in small we so just then Then are clarify and quarter. go

Michael Cordano

C.J. we our so original have reiterate, modified Yes. not to from all the what plan at just announcement; said. Mark hence production just

C.J. Muse

about was XX you that's January amendment, that still ratio as guess I And into think the really the all leverage adjustment September, right the goes that into December about you times unchanged. X.XX higher on rate the have so

view need back an as at going as you look EBITDA adjusted So, you to project basis half, that negotiate is in and something to your the today? you're LTM on curious into that

Mark Long

No.

that down for had the year. So what down times. The that amendment. from one benefit leverage covenant is push step about, you X.XX out really One is X we features. was total step We by times the pushout amendment talked which to two of great our maintenance

provides that headroom. So, additional it just

we piece the CapEx adjusted by is, of the basically amount portion of for the important EBITDA JV; depreciation of to Now, changed the our that is. adjusted EBITDA the definition second increase

Stephen Milligan

That's TMC. billed us in by to effect

Mark Long

definition was But not of the Exactly. it included EBITDA. previously in adjusted

ratio. a the calculation leverage benefit provided -- that was that that of us a significant So in

Operator

next comes question [ph] with from of Tristan Thank Baird. the you. our And line

Unidentified Analyst

If beyond expenses you reduce that work how do to $XXX market much annual you're further conditions reduction have basically warranted targeting? the million

Stephen Milligan

not I conditions, forget map. future about this hard Well, were road to we just have -- at to when time, look not not know but market one it's that is the our mention market dimensioned thing or for we that, challenging. The talk don't the that we of more mean that commented we add this and structure things will if structure, the previously conditions do that about harm our to one you certainly disrupt got attempting is I let's externally. cost because to product was on expense If

-- understand And we off, a like of market and don't think have challenging, our they more be we said, to and would financial have got but dimensioned First now, go-forward go you'd if it would but more look any expectations they have relates perspective at to based next not we a as place necessary to an both would expense upon take a challenging if opportunity potential sort we evaluate they I perspective, that from got roadmap. that why harder Right look from that's product standpoint. the from that that. our

Unidentified Analyst

inventory And of your provide terms but in in the flat any what's see out NAND in your could commentary view we flash terms that know it's the of that you channel? in what's you So channel? there book, on sitting

Stephen Milligan

better in shape. the seen channel we've think getting is I Well,

that actions there's story I think to about and been in with to relative we different each We that little it's our put wanted in took. feel us position. position inventory. has a get bit different but comfortable a we it's think them certain the of with ourselves story manufacturers a obviously, case better We a of flash

things trending see we of from So, here. down sort

Operator

line Ho Bank. comes Thank you. of Sidney with And from Deutsche our the next question

Sidney Ho

you situation, you of production portion to the your what said today your now best Thanks. now? will lowering us with further today. remind XX% of terms continue what in three previously right talked you more about quarter, supply is and of Last thoughts then, tuning wafer in are it you data, months reiterate assess maybe by starts of But supply will kind to XX% also reduce and which in

Stephen Milligan

outlook. don't see at being our our current this about we market comfortable So need talked below slightly rate our growth around to output given any point, or the supply with production that industry that. position We're we're to reduce at XX%, We view schedule. of relative plan

on in of quite businesses that to planar. economics. the tends the this on long output commented good have color, output you not I'll cycle percentage XD remaining life be have percentage We of give

comfortable planar. So, output that's XD percentage we're of remaining with our very on the

Sidney Ho

calendar versus fiscal will for year down there? that; there mixing Maybe think to changes be you maybe year any fiscal XXXX. CapEx mentioned just or calendar in Are on this year I follow

Stephen Milligan

CapEx expectation in And the for for think come to I our cash $X.X at So believe just billion it, to previously in range. fiscal will be billion billion 'XX, we'd $X.X would said $X.X the around dimension end we low fiscal for 'XX.

as lower, this the expect it and in CapEx For cash be $X we at range billion to fiscal point. indicated, be Mike should 'XX, our

Operator

the Morgan from comes question next our of Moore And line with you. Stanley. Joe Thank

Joe Moore

comments increase supply that QX? in that in are utilization modeling in function down charges now. mean -- Does said winding the step should QX on or in calendar we third production in that wonder of for terms back you quarter comes I the the be a utilization

Stephen Milligan

Yes.

I the about which in about. seasonally implement be rate is chose should of way way; our year, a XX% it the the think we the pressure is to for in of talked at slightly year first We the our industry off below think growth slow. such will it we you took position half or inventory

So, I we're the go think quarter sort the view and demand back half our we of position, as is inventory well good with of in our position we reasonably aligned of this through market into year. speaking think a generally

Michael Cordano

to Yes. range And we levels a had in because that we of to inventory when felt announced down was we -- a let our cuts terms me starts, to with. get a had we which add goal, these comfortable wafer simple that

direction. made, plan the cuts moving in are we we have With that that

not was all of eliminate pockets to within the require That activities. other Our intent inventory system. will

talking we and quarter. thought we were to we a So, exiting frankly, be position the wanted where we in to June about be are

in that kind web we make that starts consequence to wafer just moving clear the So, were of accomplish or that we're terms is we production spot, want what in a made levels. but our everybody that in to I of as sure spot trying to of

Joe Moore

about move expect the around you And it's inventory Thank in and what makes -- generally lower moving to cost like of it a it of market trigger expect you I then, coming charge. talk on Can you. the charge secondly quarters? big repeat enough that sort to

Stephen Milligan

Sure.

a our of the purchase that as multi this one it product the than was said, these than the have function expected was quarters, much And just So, with we you DRAM into and the something higher amount than might chip with of to in was a it higher is carry goes to this of has package we respect quarter relates driver, evaluate higher and reasons charge DRAM to just and that typical. as had do smartphones turned one we out every it we inventory. future it

So we spend that. time explaining

Operator

you. from Citigroup. And Suva next the Jim comes our Thank question with line of

Jim Suva

and digestion can back look or and out now cloud to point? storage of cloud, they've we use is digest just was the pre-buy Thank like back whether kind there unused; purchased, to at us and of of at they help so of taking that really procured, long compression why we're coming and that's consumption of we But out. in them you. and inventory find it's what still it situation the memory exactly did better helping more some what disconnect the a our there understand if they As kind the with look efficiencies lot

Stephen Milligan

Yes.

that were factors capacity if tail -- enterprise. in lots components So constrained the occurred are on you and one listen, the all of remember, even so XXXX, lowest at of the Flash supply, principal but play, calendar those end DRAM

concerned demand bought to the availability, to out environment, build So, secure hyperscale ahead the in very of line. that they that supply continue to infrastructure, about are their ability players so about

supply the to began position. once inventory environment change, overall they -- themselves to normalize supply took So upon

that There's described So, at what us calendar within in I that the effort on the relative was to expectations, just but efficiency was within always inventory hyperscale, primary that's an least rate Yes. comprehended growth our -- the impacted driver. going QX generally adjustment. thing that

Operator

And session. further like back call to that not the any for the I over question-and-answer CEO, conclude to turn does our would remarks.

Stephen Milligan

All right.

day. you and our great we joining So continuing us all for of look a thank the dialogue. Have forward rest to

Operator

Ladies program. and this gentlemen, conference, today's thank in does you for conclude participating today's

You Everyone great may have day. disconnect. all a

Western Digital (WDC) 29 Apr 192019 Q3 Earnings call transcript