WDC - Earnings call transcript Q2 2021 | Western Digital Corporation

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good afternoon and thank you for standing by. Welcome to Western Digital's Fiscal Second Quarter 2021 Conference Call. Presently all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this call is being recorded.

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

may begin. You

Peter Andrew

good everyone. you Thank afternoon, and

Joining Executive Goeckeler, Eulau, David me are today Chief Officer. Chief Officer; Financial Bob and

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

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

David Goeckeler

us $X.X per above These in in thanks second at reflect were Thanks Peter of results quarter non-GAAP and in revenue for retail or $X.XX. was our start, today. upper reported of We ranges strong everyone, what we quarter. To October. guidance share end provided growth of seasonally billion earnings the and results joining continued a

client our to as well as demand our desktop products stronger revenue. in upside contributed SSD hard and addition, drives for In notebook

by We communities. in business manage our work challenges the to continue delivering changes the to and We and adapted to pandemic. hard partners, presented shareholders, our for continue customers, ongoing

a optimized customer product having such organizational base, portfolio, benefits and the fantastic diverse a reflect an of and results structure. now, deep vast franchises, Our

on excited their the executing focused HDD analyzing effectively establishing the few a solid teams, in result, the leaders months last I'm and by development, in we've respective recently opportunities evaluating who we capitalize a capturing their are product front markets. business and technology established progress about and on made As the franchises exceptional of end led us. are customers, significant over Both to foundation growth have and strategies target units. highly by with engaging flash

in we've SSDs. we we our are with making including the great advancing on transitions. roadmap, product to earnings product committed delivering highlighted our As drives are our hard of product calls, enterprise and previous Notably, headway energy-assisted transitions

all multi-quarter journeys, you but pleased transitions As detail I'll these are progress, our with shortly. I'm know, which

and done. to-date drive still remain progress to Although is to be our extremely ability there's continued work sustainable our innovation results, showing shareholder We long-term value. on enhancing tangible focused

any increasingly which around growing of into penetration recap The Let SSDs transformation this is HDD of anywhere rate PC as notebooks to remain such form but resulted by the spurred it necessity The store tablet the to devices. pervasive to me pandemic of needed driving leverage positioned from a cloud entertainment. tablets and digital businesses. powerful we percentage driven by Within to now provide a and a represent Chromebook. notebook, all-flash use and way end access learning all consumers address we a transformation that very using ability The SSDs client and for continue Furthermore, schools and has XX%, not share XX%. our ability technology attach smaller as are factors, device of client storage technological advanced robust demand. the desktop data businesses, total Chromebooks, well exceeds while by on much in particularly accelerated daily Flash and of based, only access, work, Flash, the demand, in now form and has has the cloud, innovation

a breadth to high the of of OEMs PC revenue, NVMe-based a position Retail strong Our continued our relationships SSD strong achieved client and drove SSDs of two-year with major our business seasonally we brand in the exabyte well quarter, in to portfolio. perform level and by a in record supported our shipments. and our strength leading client the

progress nearly XXX completing our We make second-generation enterprise continue SSD with to products, qualifications.

process we Importantly, to an One at Cloud quarter. committed completed Titan, the last qualification we objective was which

Titan We are shipping fiscal third to this quarter. Cloud the in

of December The technology and began remains we layer quarter. SSD Cloud From customers for in most that. of and the a capital-efficient technology the preparing node performance history qualification the in underway back and of with Western Ultimately, node significant Titans client blend XXX through OEMs. product going ramp this technology XXXX. and second-generation enterprise provides NAND SSD offers process our cost, best the BiCSX perspective, additional and well a is shipping want products to large we Digital a are recent power, the BiCSX XD era, that

deliver coupled Our focus we enabled that with per the per bit highest lowest architectural scale our and have venture the layer on of technological size the to Kioxia, has and innovations, with industry's cost bit. at benefits density joint us with

As the performance are technological joint bit we record able growth the lowest the with inherent capital the industry. advantages result with innovation, particularly consistent deliver scale to our our track of and and intensity of required in venture, the

BiCSX productization. confident begin calendar and to We are our momentum BiCSX highly ramp as year continue in this through ability we XXXX

drives. weakness propelled our we we biggest the notebook and than last process distance at initiatives the work-from-home completing our offset qualification cloud persisting of hard four side HD in and drove PC, and XX% the hard high. titans. trends quarter, growing outlined enterprise. and drives a HDD that touched demand with for the hard video now business, three PC, revenue drive demand The cloud titans mass I'm U.S. upside of market solid energy-assisted business smart at continue to update is completed The to share desktop qualifications the higher recover, against progress in pleased earlier, notebook, upon sequentially. have both video capacity smart retail three-year learning more to the On I The

the another cloud slipped quarter. one anticipated line completed titan titan in While in second to completed quarter, scheduled qualification quarter third fiscal qualification in cloud the now the time complete fiscal beyond our second was

anticipation behind enterprise we drives fiscal propel second staged expected this stabilization the believe have ramp of continue second now XXXX. demand, quarter in products which these these and bottomed significant of With as are anticipating XX-terabyte segment of the be through the the capacity leading is in demand to going growth in of point and the into a rebound in forward. fiscal year, us, capacity half in quarter. OEM milestones abating as we we calendar With digestion cloud should nice third our we head the the

of through expect we our recover. to gross and ramp calendar the volume these As to continues year, revenue the drives margin

it what's Before I summarize over turn quickly our to perspective come. Bob, on I'll to

the pandemic no certain deal continue the be normal We one can effects far-reaching with to new of and of look will what the like.

of increased analysts for able To data there point, for lasting flash lives, portions course years. next both However, turn our to raising such to strong and for spanning in position. of industry the and and flash unique be our ability both technology individual highlights some reliance XX cloud Digital's over impact storage have we storage share customers only the that which cloud, will certain the Western are hard value personal come. not our now importance on to I'll consumers Bob the over of demand is years our hard has provide call broad industry portfolio extraordinary and the the in competitive details drive professional financial solutions and to the on are no results. titans, to transformation possibility the this market, accelerated meet as a digital the the question and solutions will the drive confident to

Bob Eulau

everyone. Thanks, Dave, and good afternoon,

and end guidance was the we billion, X% in ranges As for at/or Devices results a the October. $X.X overall & quarter decline Dave were our offset slightly of fiscal by up mentioned, year-over-year. end and Growth Client Solutions Data market. Solutions second Revenue mostly Client in the in was Center sequentially, provided down above Devices upper

for our the was by hard within leading for to Devices trends both drive hard and over flash revenue and video demand Work, as XG Looking value demand bottom sequentially and with applications. from drive our XX% billion, customers. our sequentially, of the sequentially solutions And XX% recently $X.X down introduced growing sequentially, XXXX Mobile hard to from In each XX% drive for expected, dynamics desktop, OEM of offset set grew revenue revenue power of up at and highlighting smart Client lastly, portfolio continued markets. fourth the Demand desktop growth the than drive quarter and was XX% notebook our our our flash continue home COVID-related notebook lockdowns. height China. and year-over-year. was phones for fiscal school much recover and in game stronger in end during

Devices down year to SSDs both sequentially XX% sequentially. X on Revenue were ago. was enterprise XX% Moving and and $XXX revenue Data Solutions, enterprise capacity Center million, down from from hard drives &

Dave had As delay in an a a cloud mentioned, titan. at we qualification unexpected

As result, drive our and enterprise during quarter, a were negatively shipments capacity the inventory grew. impacted

noted, completed new since cloud of a separate qualification qualification. titan on X Dave energy-assisted qualified And this titan ahead of have drives. as now given that have We our we completed was cloud schedule, X the

to beginning XXXX. we through year our addition, calendar SSD In ramp enterprise second-generation are products

powerful and home go-to-market Solutions above hard revenue The was trend ago. flash-based Client up year from work, billion, and school gaming $X synergies of a again, both Next, this highlighting from sequentially products, XX% at drive the X% expectations and channel. benefited

was revenue up ASPs X% Turning XX% hard and like-for-like to sequentially price billion, exabyte sequential and Flash $XX. shipments up X% Flash technology. On were sequentially. X%, total by drive on blended was down $X.X X% on per revenue and XX% $X basis while X% up were sequentially average revenue down a Bit shipments a the down and year-over-year. drive up basis. basis, a X% year-over-year. Hard decreased billion, were to X% down sequentially

was the of in end please As to all for the upper stated otherwise. we and quarter cost margin guidance non-GAAP provided sequentially results slightly related range will and expenses, October. note above that second Gross into XX.X%, unless up of the comments move be my

XX.X% we last X.X mix in margin a experienced shifted solutions. Our strong client SSDs was Flash as toward gross seasonal up quarter from the and points client quarter our the to

achieve We cost solid continued to reductions.

impact million our flow towards was approximately above $X.XX, Our Non-GAAP and our COVID-related drives ramp mix $XXX The notebook cash and range. early the million. hard we million. fiscal was paid including of on cash notes. statement earnings include margin. pressured $XXX with cash $XX of paydown million, and for quarter our the $XXX drives off flow equipment, related This debt, energy-assisted drive second points the guidance flash $XX activity desktop hard the per cash of was quarter, property, free of gross an a down our second flow of margin $XXX to and includes remaining was in share plant SanDisk Operating debt $XXX Capital of million and million. X.X sequentially. and purchase optional convertible the shift gross XX.X%, expenditures, outflow joint which ventures In million

liquidity strong. and of was outstanding Our continues position to our $X.X and At had the quarter, $X debt end we cash billion billion. equivalents, in gross cash be the

debt-to-EBITDA times Our in quarter. ratio second was the X.X

adjusted as ratio in $X.X agreement, credit leverage in sequentially, times. our Our of was flat resulting a defined X.X EBITDA, billion,

depreciation $X refer Investor As earnings not associated on flow details. in further a billion for Relations Please cash This to reminder, statement. is ventures. the in the our with reflected joint credit website agreement our includes the presentation add-back

on Moving outlook. to our

quarter as follows. Our guidance fiscal is third

in in and implied the third flash revenue quarter. expect when second. range and $X.XX as the to have the were similar be revenue seasonality, billion, range you a $X.XX expect which in HDD range the they quarter, consider of X% in This normal a we third sequentially would better-than-expected is We to be decrease both to in

gross be expect We XX.X%. non-GAAP margin and XX.X% between to

flash margin will gross gross Hard down We quarter and drive margin is to due continue. expect cost we the and anticipate sequentially, flash reductions volumes production our price fiscal be expected as volume. of reduction improve from in sequentially, to primarily will planned improve second XX-terabyte declines higher to drive a

this should which the leading of capacity as into expect growth half be the going in head the second forward. segment the drive calendar XX-terabyte we propel to year, point We

to to between million. in between the fully We XX% earnings other $XXX $XXX quarter, we be quarter, be assuming and non-GAAP operating share XXX approximately expected expect million is shares. be third and approximately million $XX expected per and $X.XX expense The the third to to million. tax in and diluted $X.XX approximately is expenses expect be Interest rate

back it turn I'll Now Dave. over to

David Goeckeler

Thanks, Bob.

end markets business workload industry-leading favorably that technology more our discussed, to that becoming has less HDD encumbered for we therefore, We're data two us. ourselves as that and further mix shifts applications. Western position aligned As business storage by And flash will these efforts, the is franchises know running accelerates. only this is continue to thanks address the digital today Digital by transformation growth worked to and has technology. unabated to and our grow hard driven in more market We in

We of made on are is exciting It the will Kioxia the we Q&A. operator us. we right with building behind continue company leading our joint opportunities ventures differentiating and focused business fully are capitalizing unit company have our on call time also front positioning, asset. the investments I'll a and now Accordingly, strong industry to over as momentum our tremendous for begin an the to strategic portfolio. brand in turn extremely strategies,

Operator

question comes the line Instructions] Rakers Wells of Fargo. with Aaron from you. Thank first [Operator Our

Aaron Rakers

question. Yes. Thanks taking for the

just kind some which market, to about And puts help on XX-terabytes. on the question, a nearline? quarters, quarter you the first of next of you. to know the however the disk hard can as expectations nearline But discuss the I you shift going talked -- shape you cycles you qualification us want of is takes capacity expect ramp us that nearline on help of capacity kind of quarter, understand on understand kind guess shipments what as forward? over of regard for the all, far the that in couple and did Thank drive ramping with APTV's your Just the I

David Goeckeler

Aaron. I Yes, thanks, say -- would

was for most So, mix I still would XX say last the part. XX, quarter the

in But one calls said, of as some following are the right first kind working were quarter. Of we there. course, on that finished we mixed week in the XXs of of there

So, we now to expect start that ramping.

abating. digestion said as is I think I in remarks, cloud the think I

up out the So, ones there ones big first -- out come we are players other expect to come and starting it to go already different we And year. think through as pick of rates. the at I the different

get expect So, capacity where leading point into -- that's part that the big us. thing the our we as XX middle at happen for that's for to year, the will transition is we of us happens, for the business. the as And good being

how basically we see that's So, it.

Aaron Rakers

shipments And during the what quarter? capacity

David Goeckeler

for quarter? have do capacity Bob, the shipment you the

Bob Eulau

see enterprise split both enterprise it that Data don't the quite specifically, Solutions, & well we mean, bit was as I driven Well, by were can on the that we Center out down but you capacity as a Devices SSD. and

Aaron Rakers

you. Thank Okay.

Bob Eulau

Sure.

David Goeckeler

Aaron. Thanks

Operator

you. Thank

Joe Stanley. question comes Our Moore Morgan next from the of with line

David Goeckeler

Joe. Hey

Joe Moore

ask Great. question. the Thanks Thank you. letting me for

terms the you're the off? down the with NAND margins, where is improvement you the quarter expenses us In QX, that the from can improvement rolling where and in that of that you like-for-like new in X% remind December coming gross prices And you saw seeing sequentially the are start-up with from? fab

David Goeckeler

Yes.

we the see quarters. through far the we went saw And kind and seeing better. to channel costs? say, markets negotiated more KX as retail last couple we're started through of as the of the -- quarter, basically, I'd So, as of improve. markets, about transactional we quarter, over pricing in as talking get But parts we'll that We next flows how the

Bob Eulau

I Yes, KX. you on can update

I guided originally KX startup at around in, came in $XX quarter I in million. costs this $XX around And So, this volume. the we and think be quarter, to had quarter million production normal will now we're actually

not reporting start-up start-up anymore. mode we're So, continue to costs really because in going we're not

Joe Moore

in inventory think level, terms of Where the increase terms your then I And you. side. in Thank on said are internal drive that you you inventory? the Great. NAND your mostly of inventory was

Bob Eulau

some really, capacity and in start mentioned – -- drive couple remarks, consistent of we higher as with inventory the as We're really and the on of in The inventory shipping, side. not our inventory we drives we the new forward. higher really go anticipation haven't the is We enterprise quarters. to built new pretty build last that's flash flash volumes going

Joe Moore

so Thanks much. Great.

David Goeckeler

Thanks, Joe

Operator

Thank you. Bank comes Mohan of the from line And next Wamsi our question of America. with

David Goeckeler

Hi, there.

Wamsi Mohan

sequentially, given the side. on in half comments can margins one Hi. margins given OEM HDD get this segment I the fiscal quarter, versus basically data pick timing, the this Yes. sort your the the fiscal the more you. of color XXXX, fourth the sort on in quarter? your qualification year? end see will is And waiting the comps – we for of second center Thank wondering, tougher just especially get half or pickup Thanks AT&T, fiscal the that second was by by of of around worsening are you. sort fiscal for Thank gross grow comments plus help of basically before your of HDD fiscal you we abatement up cloud as end pickup material year these

David Goeckeler

Okay.

decompose Let me that bit. can see I a little if

expect year. – in as So pickup the we throughout a we yes, move

of But flat margin. on of then see start margin think We one quarter move the into to the the and next call to have through quarter your throughout on a I guide side, expect getting one – I as the the number as move head. drive revenue at maybe higher kind into we margin my on quarter AT&Ts. back you're right on the We the we down and end of we'll year-over-year then don't see coming we accelerate, more that gross kind better of time. percentage top especially year. of of the slightly

Wamsi Mohan

Okay. you. Great. Thank

Operator

Toshiya Thank next question you. And with comes of Goldman the Hari our from Sachs. line

David Goeckeler

Hi, Toshiya.

Toshiya Hari

gross thanks. your wanted Thanks in I to business, so margins for ECD Hi, David. question. follow-up much taking on the

is again, flat this to going to So as quarter you be down. mentioned,

is today so ago? at versus related think of you. year to to is with going profile you hopefully, XX% Thank back assist costs years or mix costs next reasonable over some a target, improving, COVID structurally move the away. a the different ago, energy year or you margin getting Do some forward two abating the As point, maybe

David Goeckeler

No.

for there. about as hit mix But mean, we about. of hit better. I then – issues multiyear of we I a fast about it's we was come costs that the how talking path freight high. a just obviously to back fast in last of mix, get pretty been it's couple down. X.X% the freight profile mean being about How costs, In get sticky the get wildcard. cloud on need think really the have We come bit out see into a been XX we the digestion, believe we – we all, margin see cloud fully can the to of into as first margin think to last COVID's the digest It's I talked move quarters. structure. go you're And where kind XX, a you back business. a quarter as of and more of – path I we to traditional retail said, I COVID you'll we the headwind

Toshiya Hari

Got it. you. Thank

Operator

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

Mehdi Hosseini

Yes. Thanks taking for question. my

to as side, please flash the of the were of flash gaming? I have color that provide On do you how And follow-up. And can a percentage revenue what year? rest you see driven some for from the trending

David Goeckeler

Yeah. there quarter, quarter, last still Gaming as a was given of it anticipation the last it's as buy I was initial not think builds. is -- significant lot in of

well, can a with it's of So, down to console just I the side the market good It still us retail as WD margins business the has because which we we're a in the very, little great and doing part the very but addition it's Black, product. retail play retail of is are it and brand say investing well-received been reason, for the would is sequentially, the in in bit channels.

market be but a expected little throughout year. we down bit, good the sequentially to So as a move still

Mehdi Hosseini

follow-up out? Titans, supply call, or or this flash and one and for, is demand they one you up then term a prices to OEMs just contracts like do you conference finalizing couple how the earning from to going of OEMs signing as stepping on Last away that especially be as you at And two longer to see or contracts, alluded quarters guesswork quarters are with a you. the Got additional fact side. plan

David Goeckeler

Yeah.

basis, say, activity. what think and that's on pricing is, about qualification is target there's was a about a negotiated of can talked that bit. move sense The I gives how But agreement OEMs a market actually and a a quarter long-term let's the I on works. that multi-quarter of, the the what last year a quarterly you timeframe a at share but around little

Mehdi Hosseini

compared But dynamics to you October how call? do see conference the like today like

David Goeckeler

the which pricing? the or share, the part, call, or Of

Mehdi Hosseini

qualification coming look remainder negotiation? Well, I suppliers, be you into the of you how the it back as year, do and of to more or to hard is see still power think going the pricing a a

David Goeckeler

NVMe October, mean quite -- put quarter, qualification were I scheduled start all said qualification is in a SSD -- we think OEM into I and that qualification is were into ship fiscal qualification And multi-quarter it's this the last to product, I which to stronger quarter, mouthful. second-generation the is I to start enterprise scheduled in underway. a we that our process. was a so assuming product But did And us about that quarter. our said the Well, big which -- start in OEM. successful, second a position

So it's underway.

in development and fact little think of said I've bit. The expand in for working talking a my that the for around sign I we're is qualification of I TAM quarters. that It product. to -- remarks, about of good process. is a move a it's book phase As the can couple the the But last been prepared the now underway

Mehdi Hosseini

Thank it. you. Got

Operator

Thank you.

comes next Evercore. Our with C.J. from question the line of Muse

C.J. Muse

gross Thank A Good you to in margins? the on thinking question you the March, NAND about your And Can seasonal changes for you. in beyond Thank driving And will question. what then are than the mix? QX? impact side. you better have on speak taking how demand that your afternoon. what's

David Goeckeler

give Bob's a share and perspective, I'll perspective I'll well. as -- take So you

The security really It's team enterprise WD there. segment, so launching for new I ArmorLock, about now. and of talked gaming been about retail has been a lot we've So great doing good been in talking products. several SSD, Black work job quarters good. the

demand, that this product put the finishing about expect we me PC, there's and for talked momentum strong. And as shipping. see And notebook we we there, was it was one the -- started end right finished still quarter of we at at what titans. that quarter our past NVMe think continue enterprise that second-generation significant us let the being SSD qualification cloud a the I of way. that of milestone so And

is So that's as that accretive -- well.

Bob Eulau

I will lot from picking add. up. continues don't think Yes. the have environment a just to I business retail be to in -- work it's keep enterprise I strong this SSD home mean and

C.J. Muse

And just to follow-up on how you're for thinking about are mix implications beyond the current margins? quarter and what the

David Goeckeler

for Well, things enterprise we're would on I we're product working -- focused SSD. I position is are our mean, a before say balanced got still here. a we little even the – more. a our we're company improving mean, still on I going second-generation I goal mean, have say, mean, clearly I a big I That's been And -- well. for on portfolio.

been – qualifications into is a have I cloud still last still strength client a good which and obviously SSD we for breakthrough. a the is while. a including healthy for We We're think about And XXX mix the players, has gaming quarter. then now, mobile. mobile, big one of company talked

under-indexed I very, market, that very in still to it's to market. be because that in important but think we're the market we're

portfolio. then IoT of a mix most I expect you in and the And get and that. automotive mix So balanced across some

C.J. Muse

Thank you.

Operator

Thank you.

of Our comes next Ho with Deutsche line Bank. from question Sidney the

Sidney Ho

ago? maybe this to your think you rest the of compared you of for industry the do see to taking of and Thanks. balance price margins own and for bit shape How quarter that year you It's NAND question. my the rest And do what for moderating. supply-demand how kind calendar a NAND. shipment decline have year? the year The is improving Thanks see this growth see I good question on of

David Goeckeler

guess In is is pretty how what capital-efficient about will within mean, we – much We'll much even industry lot this. I supplier, industry get the that on would talk has very required. cycles say supplier vary how capital we've more capital vary, about capital a investment require of by BiCSX think our when require on is variability we're we no good investment been there's case, transitions supplier in node. each been, pretty little there. the I a a about we about where much BiCSX capital. which

So I that. We see balance. to mid-XXs, we a XXs, we demand probably above We bit think low good strong pretty this see and year, we see growth see still demand drivers. see low

think nothing us seeing we're the tremendously. I in surprises environment So

Sidney Ho

Thanks. Okay.

Operator

Thank you. question Stifel. from Ho with Patrick line comes the next our of And

Patrick Ho

where so far? of supply in And improve? more you most Are Is to Thank time think, you it you the at improvement now you separated, for in much. you do you year, a Dave, manufacturing very guess, see into there, efficient most you things? more maybe the the now you've here year, the qualitatively, gains? I are been that seeing where R&D with see the side as without, Where opportunities businesses almost quantification, do been you've that financial two company chain? go the your second

David Goeckeler

a say lifetimes, at happened that at mine. our I guess, to So, first an I not company it's of join the extraordinary the what is, been I -- especially in global all, XX that don't months would hasn't pandemic and least of beginning

completely been to I the company And side it's been impressive has responded it's well. to of been on and extremely think, that so, And worked that. just extremely just the issues early -- that how lot running things the have see days, out of are in a evolution supply the

portfolio extremely which dollars, leaders team, the that that and clarifying play broader strong progress products. in bring up, maps way solution early, important And with what engaging both very And and where where this immediate side, an it I separate requirements we're on but synergies our -- to map, a I drive understanding think go-to-market the our customers. the well, impact made the a said, of we're flash fact And I we've market, lot that R&D of road we to impact given I on understand are, road still we BU. it's think already in can a just you just think has drive portfolio. customers' the accomplished having are very our the the the two we -- different we the market understanding technology really -- the is on driving can they're an mean, those that in pretty but the investing customers the join of

we've progress say, I'll get And continue think really get to these the there, better but then as the which I -- other not more established. will better. expect when made thing to I good is and we groups think get get really go I leaders So something it that

basis. I reinforce something it's can't travel, our over of is, given always I’m want spent out it the leadership lot I'm extraordinarily and with really think the just a saying works to there. spend last I value because be – this that together time of of a partnership I've well, for great the we not Obviously, been tremendous me with it's the still and day-by-day Kioxia. on strength not months. pointing a of it work teams a just And part -- company, it's XX the I to

Patrick Ho

Great. Thank you.

Operator

you. Thank

Mitch next comes Steves Capital RBC from of Our question Markets. with the line

David Goeckeler

Hey, Mitch.

Mitch Steves

side. little hard I'm I Hey. more bit two focus actually on the had How disk are you questions. going a drive doing, sir. to

the $X business If billion is gross first I business margins. kind revenue. it was of the the compared of then, and roughly just a back it margin So to on at of -- on of kind XX% now rate the was kind run look it XXXX, right of I

a COVID-related margin, one, I XXX So, the chain assume and of or there? points start issues, basis after I So, of supply am headwind if that have about I'll with gross kind to follow-up that. I accurate roughly that headwinds

Bob Eulau

closer it's basis points think headwind. I of XXX Yes, to

Mitch Steves

XX.X, been have XX.X, in range? of would number the that So, kind rough

Bob Eulau

correct. Yes, Yes. that's

Mitch Steves

Okay. non-compute units. disclose little more bit detail guys And a the you secondly, used on then to

significantly your I XX.X. think was those going to were sort electronics better units if give up curious pretty us I'm was the it X.X it branded Q-over-Q, just can like quarter? doing more for directionality any are consumer in of more or you

Bob Eulau

into don't I too the specifics. want much to get

client on the on sequentially we non-compute So, bit a drive mention hard that's notebook, was really video But was we're just and the well. quite one did of side, up the and things smart did area. in we

Operator

Tom question Thank line you. with the Barclays. And our comes O'Malley of from next

Tom O'Malley

really taking for with transition question the the of my centered guys. two HD Thanks qualifications. My around the question. Hey is CloudTitans

You came next You mix the those bit transitions said about of slipping then one the net? in you kind recovering. little, earlier. a about kind Can margin talked a of of one into gross but the obviously, what slipped talk quarter,

little March? we're that more you coming quarter from out a it's it about do the the affects business negative the a get a or how color Do think think bottom this So, in I with one seeing transaction near-term? want benefiting just you the bit in earlier, into there. to is

David Goeckeler

think, I -- we last I up, if we Yes, that business because so think you wasn't didn't there the ship wrapped actually on XX in some it qualification of quarter, week the expected to first done look was and January.

the expect the was schedule of finish end to the and that this some in. -- didn't actually very it finished last of suppliers. quarter quarter, and we other business -- end capacity in other -- wasn't and qualification didn't towards into the other -- That to So, that sometime until it we goes of mixes But smooth. points of some then the we're --

the would says it better little is a they're that what been have things -- one could time, but on going both now behind So, have if finished looking backwards us.

ship both Does the ramp they in we're to of as help? to that position those forward, going XXs So, capacity customers a start point. to

Operator

from Thank with comes you. line next And Sur our of question the Harlan JPMorgan.

Harlan Sur

-- Thanks afternoon. good question. for Thanks afternoon. my Good taking hey, taking for

good flash the the on side in inflection see margins margins of in business, gross to gross the On December. the

coming mentioned, out quarter. are As in you the March start-up here guys costs

XXX, margin margin tailwind and a of the that, gross seeing benefit maybe pricing little of getting bit you're basis X better And from of on top your NAND. XXX then points products. higher Gen trends about initial trends to NVMe your that's So, from shipments

gross just approaching the are maybe margins understand takes here So, of quarter, and if or help NAND. you me for some gross puts margins March in the could XX% on

Bob Eulau

Yes.

side. one markets. of negotiate in good time. number we're moving We the expecting So, we quarter And as trends the say, margins last the I about mean, saw flash quarter, parts. gross definitely, The earlier, Harlan, the markets, a said I to OEM a improve I'd in transactional pricing very on talked you --

that, obviously, the and in So we it's – last middle of did quarter.

job much see the XX% how think part still continuing it's year-over-year little the a we're equation, confident we'll our good other cost we're which there. to then in of hard So on do say a reduction. And is to We very cost decline.

I So move a question a think how it's of forward. But place. think just pricing in out we're plays very we as good I

Harlan Sur

just a And follow-up. Absolutely. Yes.

are of the because here HDD your of controller from of somewhat supply, in the SSD suppliers? test merchant shipments potentially of wafer and held tightness seeing lack capacity. many some chips chip quarter ASIC and March So controller assembly back or Are controller availability of suppliers in being your your

David Goeckeler

tight, are our not clearly, immune you it chain, But do tight go have mean, plan from supply with looking financial when from we things that. now. semiconductor for doubt and things components. no there's right covered Yes, is I we're the

it the how So quarter. plays we'll during see out

Operator

Longbow you. Nik comes question of our Todorov the next Research. with Thank And from line

Nik Todorov

following look thoughts, you're visibility But know persisting probably from hear David, continued and talked seeing I we into little Thanks, retail a momentum Yes. how I guys. understand, how like Good see is think go retail bit. as in as to PCs. your would about hear afternoon. work-from-home extend PCs good. and as trends But you the I just to I we those your want thinking can the I about you thoughts forward. and maybe quarters, demand not we specifically?

David Goeckeler

resurgence very lockdowns Yes. in and pandemic environment I more certain the in of and the world parts mean, seeing parts it's obviously the with a dynamic of world.

of guess guide mean I in Black storage I one We a folks. time, what hard new a doing it's have and how I And is to quarter a that to to I think say going dynamic product, other we've I like is environment for but this introduced in Again, a it products think we're little good co-branding be we've received. been quarter it. that really think We understand with been just that the one time. I and WD call at gaming the launching dialed I would the than we're bit in us. your So well nature retail, product around question security with broader. more deal

to in brands, an able high. some strong, are area back. share which of where of make keep sure lot voice been couple the of get quarters we momentum, investment we've has a and been a momentum some I So And keep it think, going

So and very but to is, point, dynamic it the COVID the lockdown. given it's your situation

we're better see do to is little that. quarter performance. weak seasonally retail, above seasonality planning bit a but QX than for we'll a So

Operator

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

David Goeckeler

Hi, there.

Ananda Baruah

Hey, a sustainably good side. for gross taking you to on to margins intermediate the term, Thanks I afternoon. guys just if could flash than the view, guess see a XX% margins. longer-term and back path Yes, the I question. go greater Longer

talked I you've it past. it. of are need if the what manifest signpost that Appreciate case? the kind about have the be think in to or to mechanisms And so, that

Bob Eulau

on we as We've lot I and last pricing Yeah. And in with encouraged, can guess, we about over of that. with transactional what's months. start the the I this few the going industry. on supply the demand markets depends the all again, as been know, said a and

We I We've on the mean, on confident the we're SSDs. demand good had obviously side. big on there's already client think for going move the the SSDs. see strong pretty demand side we're very year. mobile on demand a a just enterprise we forward, As to position

the XXXX. demand it's pretty should But I see be pretty milestone to I but the case, rational. in there, a And be from margins here. or I going think to put a And side. on side feel don't confident supply appears if want pretty improve out we market we to think the So that's good we think goal particular particular a

David Goeckeler

Yeah.

of do helps negotiated a exposure ahead Again, for now. we've it's don't we'll couple how to quarters. the a to the positive have get out transactional think I over been want of We going but in markets, ourselves. when we XXXX start got see which more flow and signaling quarters that to direction, the still, to of couple that next through things market plays about

couple Bob other of I've technology earlier, of earlier, the highlighted Kioxia, a in our provider largest on map. I'll thing develop highlight this times We our the remarks flash NAND jointly I touched really cost sure The we in as our important, just memory position. with And road we're the is on and and make industry. partner, said prepared maintain what is

that bits tremendous power So we're got us to that. allows invested heavily in deliver We technology the we've believe need. performance we

it's That count lower is than technology You efficient others. see our layer means more process.

that good declines. drive XX% us So continue year-over-year we the up to sets that; about feel to cost

equation that we as sure So keep make well. on we eye the of got our to side

Operator

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

Bob Eulau

Jim. Hey,

Jim Suva

been because of that executes it they they done implementing to you Digital company segments, or seems and And are on have tightly Hello. times known lot their seeing focused other we're few sometimes of the little different of out much well the those has been very still you. fruit the their more out for now. a and bit actually still very this, rolled HDD efforts, a and like a your has now, be Western for Thank work a all have of segment, fruit prior to slip-ups. two where a efforts leaders the Have and flash -- implemented those kind have to

are early figure discovered to at at So what that point found I'm the we forward? wanted you. implementing now their trying and actually just Are them innings? and all the we we the should changes of going they mid-point expect to align out, Thank in where

David Goeckeler

the that space, run multi immediate Yeah, portfolios of leaders to get you Jim, time we benefit that an think you're from to -- add see going benefits business your to I any are billion I all, -- technology in so that. $XX first think of

very leaders job a providing is all reviewing of that every pieces main day, engineering into that two customers perspective a integrate are You the level together are engaging very, have and with their day, to and that just looking developed day business. is portfolio every at business more senior the different products highly every

got of To going for different the looking timeline And going to to payouts I've going going your me, to of places. our to products immediate like I'm But see benefit the an working those be then fit. we is right right in? you're of time on, are What So investing your that, you sure -- going company. horizons that. markets and you technology start make they're start have. in to invest? at the an are roadmap the are of the okay, to kind roadmap and Where of articulation different value there's future I'm

see person have the So very another process of into years customer, with parts for to a that and to middle and a understands example, in communicate information, in so senior making if now teams can decisions it of you'll benefit. think other in you're years you to immediately big and from technology a their now you how or how to in and guide it in market that X There's what to going come franchise X an are involved you way, engagement that immediate I come we're how own where engage now. get a from on products

all horizons the over get results, of their really given best the job so the and And is we time to put in business. integrate investment those

execution, And you'll that portfolio us the give So you be the think to see making. the and optimized to there more for see come. investment I return is will we've will best But we're crisper already. seen benefits

Operator

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

Karl Ackerman

your me letting a thank ask Yes, on, Drive just I the Hi. for Hard good had question. question you guess, I afternoon. Gentlemen business.

capacity also curious achieve a seeing about business first in fiscal you I you recovery juxtapose nearline you're that do for you if such that you. well? capacity cloud in ex within could year. you hoping I'm hoping can was the and expansion if Thank can if as XX% you half And I growth you the plans And business? of center what in if with data on on-prem XX% And achieve existing x by was today spoke may, then that XXXX growth, guess, across your your peer Your resonates could thirdly, with I could that by nearline your I that touch or

David Goeckeler

are question seeing your part market. we on-prem say of when I what was enterprise you first the think So about

So...

Karl Ackerman

specifically. Nearline,

David Goeckeler

of on in it's above -- the it. are of remarks prepared OEM Yes, term was market. how used that's I what or would we're enterprise telling I us. the of our the the forecast I I nearline. say seeing think customers And of kind It's think stabilization

easier yet. surprising it's that's but to not looks better. back not environment wouldn't -- given not COVID certainly I forward, going judge it And it we're And So where to pre the was. it's in.

that different the cloud talked exabyte different far digesting far then at exabyte come the providers out about as XX%, cloud, as we growth. throughout of as in see As year. And we growth, that rates XX% range,

I that see see forward. of think think pandemic, that's tilt technology the Again, does see long-term I or on dependence that. that line in We going have industry. the yet not, the that the we but see, the coming given been we'll up growth out we cloud of all

through capacity growth move good enterprise the see we year. So we business as in the

Operator

SMBC Pajjuri our And Srini of next question with comes the from you. line Nikko. Thank

Srini Pajjuri

Hi, you. Thank guys.

growing I clarification First, have XX%. the devices on a client Bob, Bob. for

grew and said XX%, grew there an desktop notebook You and issue China. and in video XX% was the

Just in was to. that trying that referring you understand what mobile China in to are

Bob Eulau

we last talked Huawei, actually Yes. It was about which quarter.

drive we're side. hard so, the side on shipping flash And Huawei or to not on the either,

Operator

from comes Research. question next the line of our with Cross And Shannon you. Thank Cross

Shannon Cross

of there? next you. be anything you years should also, cash going market? had the I hopefully, much. I'm if an over about on little curious, you a what that, CapEx needed as to think, amount CapEx. just if a you've And think And we few your shifted are from as the just Thank into that's bit Thank the I very CapEx question how thoughts more, look It at, seems flash then improving ventures. on there's

Bob Eulau

first the as the well sheet Drive made say are in investments in of it's And good terms all, of define of balance I question. well our CapEx, the No, as flash business. joint is Yes. that our of the as ventures, the business which -- own a gross as on back would what investments portion for we as the we Hard Flash end make

year the little and quarters. said -- We side. investing this billion a of CapEx to more I've expect been $X on is are hard what this What's year, gross that's different last year drive we around last the of relative that couple

I As to reinvest we years, the is priority look be the next mean going always out first over business. few the in

And market. investing the to where for is would so, what next we'll and years the at that in the probably support make the we’re growth over about think sure now I I see few growth But the goes future. about we're how think right

Shannon Cross

you. Thank Great.

Operator

Steven the last Fox of with line Advisors. our you. question And Thank Fox comes from

Steven Fox

broadly starts seems around this you where cloud Thanks service afternoon. squeezing thinking be pick providers are for It based talk the like about, maybe XXXX? Can on your edge Good up could noticeably. just what for me compute a Hi. to it about that talking year in.

how And you. where you're NVMe competitively? think do Thank so, you HDDS? to And you're you with play think drives positioned going versus

David Goeckeler

I that's a think, potentially very Yes. mean, deep I conversation.

if NVMe how So be -- market for actually is there HDDs we're big obviously, quite on well, growing think can But SSD a a to in as that's lifting are And enterprise our enterprise well. lot and long is big positioned? because SSD. going I why will so positioned focused of it's time. we be we're we storage a play the heavy of time

talked so it our -- is a be technology-enabled. getting could world exciting business. for It's this see we be that. compute mean, I could mean, As going of that out, more to points I the and how I far to more is you, the But something been I have whole with at of edge, that's think storage as closer cloud about you're clearly, are as this the the architecture more I devices agree that get enabled about closer. plays think while.

pandemic I accelerated that. the think

And all architectures no I cloud We the continue think have we device. play edge, well the And the portfolio we play the the evolve. that's to going are foundation on well. positioned, to can the the support clearly, of as that out. to how to think plays way that matter at I

be. So, it's to fun place a

Operator

over the any CEO, Thank would call closing now Goeckeler, Dave you. remarks. I like to to back turn for

David Goeckeler

Thanks everybody. us today. right, We All appreciate for joining it.

you We care. Take the during quarter. will see

Bob Eulau

right. All you. Thank

Operator

disconnect. you may for you This concludes and today's now Thank conference joining call.

Western Digital (WDC) 28 Jan 212021 Q2 Earnings call transcript