Western Digital (WDC) 8 May 232023 Q3 Earnings call transcript

Good afternoon, and thank you for standing by. Welcome to the Western Digital’s Fiscal Third Quarter 2023 Conference Call. Presently, all participants are in listen-only mode. [Operator Instructions] As a reminder, this call is being recorded.

I would now like to turn the call over to Mr. Financial Analysis President, Investor Vice Andrew, Planning of & Relations. Peter

begin. may You

you, everyone. good Thank afternoon, and

today David me Chief Joining are Financial Wissam Officer; Officer. Jabre, and Goeckeler, Chief Executive

assume contains remind Before assumptions let reductions, and obligation management's such, and business no demand as our everyone financial forward-looking performance, cost statements, does and expectations, and market that product we and these portfolio, including me uncertainties. update include current today's statements. and begin, plans results for expectations on We discussion to risks trends, based

Please on that refer information filings SEC financial results to on our most materially. cause more could Form with recent report differ for uncertainties other XX-K to and and actual the risks the

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

now remarks. to will over turn call I that, With the introductory for David

afternoon, our guidance for expectations challenging with Thank quarter quarter high-end third exceeded environment. performance Peter. our joining quarter results. metrics gross Western thank at third a discuss of resilience to range, Good company's third loss of core non-GAAP the XXXX and reported margin of demonstrating X.X billion XX% a $X.XX. in revenue of We you, non-GAAP call Digital’s market the share and you the per

delivering agility our address Over is range several the business of storage on and innovative a data customers. demands last industry the years, team products increasing our of enhancing leading that focused

guidance beginning we gross of I our due a right to Flash us execution year both HDD with am the business to our and environment. actions navigate The strong range margin higher-end have size pleased have groundwork since our businesses. to we combined fiscal of the non-GAAP that we the enabled taken across at delivered this dynamic and refocus laid

in best delivering portfolio our product value retail center optimize gains customers focus enabled to strategy strong margin. margin HDD, have In gross Flash, anchored client our bolster In go for and SSD gross on our enviable broad market HDD. resulted our manufacturing and data streamline market to offerings profitable share us footprint to franchise in the our early placement actions bid and our in a upside on

During saw the consistent quarter, PC across fiscal and across OEM, product HD channel, better consumer, mobile we were demand flash each major various of in signs markets. client, gaming. third with stabilizing shared we expected demand the Our area end expectations came January. and we In results for than in In

enterprise cloud, January. the our was set demand hard with in demand drives for In capacity for expectations whereas drives consistent improved flash

updates jump Before and that Flash reiterate we provide updates ongoing into I and strategic is as our we to I will process them. would review have the HDD businesses, on like

business to turn with starting update now I'll HDD. the

the During enterprise third in growth HDD declines fiscal sequentially our retail capacity in offsetting client. quarter, revenue and with improved seasonal

During capacity our the became product and CMR the above of volume terabyte among all drive our XX highest points. quarter, XX terabyte

position at point. capacity Demonstrating our leadership this

innovative our quarter. multi-generation of technology Ultra qualification XX fourth In in complete we addition, terabyte the products our the to fiscal These expect SMR customers. benefits provide

go industry our positive Digital venture consumer, combination delivered shipment fab channels, unique our brands, product premium market supply Despite from underutilization Western Turning and low gross excluding by with decade, in to worst products. higher cost broad of expected margin, in a OEM, retail joint Kioxia. experiencing over flash total charges, and mobile, driven to PC in channel came Flash, than downturn the exabyte the

as SSD led well channel for Furthermore, we OEMs within gaming, see signs by PC growth optimized continue mobile in client. WD elasticity flash to Black, as price and content encouraging driven of retail

quarter. its front, technology achieved anticipated cost crossover the the during On BiCSX

several node, a technology that is bonded BiCSX Digital Western XX, of reduced which builds and faster March to to circuit IO under benefits, This ramp, the success products yield including upon leading provides on circuit Moreover, groundbreaking when cycle based array array scaling, Kioxia better time on on performance BiCSX new architecture. next technology generation compared based and our architecture, and or industry BiCSX. lateral announced

We a aggressively Western broad productize continue conditions for will Digital range which BiCSX success of to for applications, position improve. business as

in cloud look fiscal to we demand customers digestion decline ongoing at and the will client. be overall a As quarter, inventory fourth hard by impacted sustained drives, in

demand. from to certain OEMs In beginning PC digest while the customers applications cloud emerged of are into fiscal in and China. closer and have end to are at now quarter. we remain inventory per strong, are for in We remain growth soft. experience anticipate shipments signs However, fourth bit demand will seeing unit. Gaming will shipping Flash, we increase enterprise improved SSD stabilization content modest

we hand I like for network I in disclosed Xnd. team April Digital Western efforts over the made Before thank the the to incident addressing the Wissam, call on would to they security response

to precautionary on plans. Our successfully our measures operations continuity secure and executed team business took and our proactive

With that, I'll to over it turn Wissam.

quarter you, profitability. market the the on revenue and $X.XX. Thank Total good continued Fiscal environment reflected for everyone. per loss share was quarter $X.X XX% was with Non-GAAP sequentially afternoon, down pressure results David, XX% year-over-year. third billion, challenging and and revenue

decrease shipments, by billion, total by increase which X% capacity enterprise X.X end of offset Flash an cloud down Looking drive at markets, sequentially, driven revenue in a was shipments. represented at XX% in

XX% products, exabytes, for hard a a primarily decrease XX% driven our shipments decreases flash declines to year-over-year. SSD bit Nearline price both of across in in up Flash. shipments XX% down of shipments XX%, billion, by well was products client year-over-year as flash sequential represented due sequentially. and decline were revenue price Client lower and PC hard and and drive drive as Year-over-year, total $X declined the basis, XX XX% at and both On revenue application. sequentially

in of flash retail price well flash. decline price year-over-year retail of XX% X.X XX% flash. as a retail revenue shipments driven both declines declines decrease represented by shipments drive down to billion, decrease sequentially, in in and and the The year-over-year. consumer at due as XX% drive Finally, total was Sequentially, lower hard was seasonal hard products, and

revenue revenue was Turning and price sequentially and XX% a X.X year-over-year. average exabyte to billion, revenue Sequentially, total per On drive Flash HDD down XX% total by up and unit decreased X% to per HDD average $XXX. and down hard XX% basis, year-over-year now [XX%]] HDD price increased sequentially increased shipments X%. X.X was XX%, increased year-over-year. billion, shipments XX% segment. exabyte

XX% basis on Flash Sequentially, shipments a basis. were on XX% year-over-year. down Flash decreased blended and XX% X% like-for-like a sequentially and bit ASPs

for margin stated underutilization, please percentage X.X comments was and my million expenses, the that This and be non-GAAP otherwise. related third quarter manufacturing down for points fiscal sequentially year-over-year. items. points costs other Gross to write-downs and of would to percentage XX.X%, note $XXX inventory results Moving unless includes charges XX.X

related other underutilization projected primarily HDD $XX Sequentially, gross Underutilization percentage was million benefiting and $XX charges than points, the X.X increase less down were capacity as approximately points at or to and partially manufacturing to percentage higher charges. million. manufacturing at enterprise of margin than from XX.X%, was X.X anticipated footprint year-over-year. offsetting lower X.X charges well streamline volume, and actions costs our the higher sequentially up points due percentage as

XX.X points associated negative was focused percentage as X%, year-over-year. percentage margin were less the charges percentage reduced XX.X Underutilization we with sequentially, manufacturing expected gross points, down points on and million costs. volumes approximately Flash manufacturing than XX.X lowering or $XXX

incurred of charges the we inventory projected the cost write-down During million prices of selling quarter, $XX falling from flash resulting inventory. below

tightly year-over-year. million manage $XXX We sequentially million were million continue which quarter, down to expenses, and our XXX XX operating at for the

tax million, taxes expense $XXX Despite was items quarter the charges, we those write-downs in to driven in consolidated have $XX loss in was taxable income areas. inventory in million. other and Operating million. by resulting payable XXX a geographies Income loss, underutilization certain continue totaling

quarter quarter was of an Flash share activity was purchase $X a related and flow million and our of was convertible flow flow million. expenditures associated property, was of $XXX plant, on the equipment for million. equity. cash of include third to cost ventures the per Fiscal cash statement XXX loss an preferred flow out joint and free dividend Operating which million XXX the with inclusive the $X.XX, third Cash, capital outflow cash

the the adjusted XX credit quarter. X.Xx Gross our defined resulting end was in third a gross second to as the quarter, debt billion, of fiscal X.Xx, Trailing in was agreement the at the X.X month X.X billion of in at compared leverage outstanding quarter. of EBITDA end fiscal third ratio

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

million. of term unused end of X.X of X.XX $X.X the loan equivalents and including liquidity cash and billion, was total capacity undrawn draw delayed revolver of billion, facility cash XXX billion, quarter, At the

fiscal the for guidance business I'll the cover quarter, I discuss Before fourth outlook.

at revenue cloud ongoing We sequentially, due decrease to digestion customers. to expect HDD inventory

than We declines. decrease expect more modest sequentially as to offset is Flash revenue by shipments in ASP growth bit

We growth quarter, first expect by XXXX. will charges and underutilization Flash of fiscal to gross bit accelerate in pricing. negatively fourth Flash shipment fiscal total be half impacted the In year margin the

We this cost and continue to tightly dynamic be operating to expenses environment through million. below our manage structures expect $XXX

XXXX from expenditures approximately year year our XX% cash more as $X.X XXXX, fiscal than expenditures to cash projected year from expenditures approximately capital X.X fiscal we a gross fiscal and forecast we to For capital The XX% capital billion, billion. approximately reduction reduction be project represent XXXX. be entered and

I'll now to turn guidance.

as is range expect guidance follows: non-GAAP the our in $X.X quarter, fourth revenue We to of fiscal the be billion $X.X billion. For to

across X% to gross be includes between margin and expect which to million. totaling X%, $XXX and $XXX We HDD Flash million underutilization charges

million. operating XX be expect $XXX expenses We Interest million. are to million other expenses to $XXX to and between be expected approximately

and We to be expect income $XX million expense million. between tax $XX

per loss XXX $X.XX, $X.XX expect approximately million shares share We assuming outstanding. to of

David. the turn call back to now I'll over

Wissam. Thanks,

successfully Over while the of products rightsizing commercialized storage past technologies, cost concurrently we structure. few quarters, a industry-leading innovative have and series our ramped

Our returns for Western future levels. actions the demand as positioned normal favorably to Digital proactive have gradually

Western products remain our In do. would like to to all we highest the upholding unwavering I exceptional advancing members deliver we [Technical our in in thank to innovative worldwide, the Difficulty] and dedication to commitment their and allowed efforts for team committed and people that operational standards driving ethical have in efficiency. of Their Digital support closing,

Okay. I look forward to your questions.

up. it open Let's

[Operator Please Instructions] from ISI. go Muse Our Evercore comes ahead. first question C.J. from

where XX%. inventory? taking demand afternoon. revenue for XX% suggesting guess that, kind I HDD you versus question. you to in sense of you're guess the a down where part still for pockets get looks seeing it embedded X% stabilize And SSD see love guide, good you're of XX%, maybe like I as down to Thank of Yes, your I'd to

is do you do where you think to think some then as inventory I of kind work that, And guess of need stabilization think we that part more? right down and it? seeing about So, the where way we're to

Inventory mostly correction there is behind us.

this past still center what our well really inventory very very in The performed much was. quarter, I issue business is it's think, lumpy. channel Our above expectation data and

We big have cloud customers consuming. some are that

really We and have full anything. others taking digestion inventory aren't are in that a

still where expect So that next going we see couple market that for of a I quarters. is lumpy to be And inventory lot of the on. digestion

China. of about some signs seeing that. are stabilization We in We talked

I is the going to half up around the think a setting activity in for about RFPs the and look more like of half. second demand recovery lot second discussions it's year, what

that's So, the an we market. overview of – bit see a where

you're are I than more think your probably HDD. numbers, down on little on a we

probably sequential on kind a that's of think more number I a single-digit basis.

charges a beyond helpful. thinking can follow-up, us as you're you the through kind today underutilization quarter? what Very of walk terms in June And of quick

going for about a I'm number, the I little drop business. in smaller part talk of well. a quarter. here the next sure is volume HDD let's HDD, Well, I to as Yes. to will still and add but have bit Wissam which each we're see think significant in mean,

see some So, we'll underutilization there.

to On underutilize dynamic We're fully side, way, we it. inventory we've in understand and a a we month-to-month of make the week-to-week in Flash keep to continue where want our managing it demand fab. position kind sure the very

next but – will both see definitely business the of And quarter. so sides we underutilization on

around add And business, add [XXX more to charges. or [SSD] roughly this – our by to the a two-thirds XXX] color, guide, I [ph], we're just think underutilization HDD of to – estimating one-third range C.J., is in Flash, just one-thirds And sorry, [ph]. bit we

Thank you.

Thanks, C.J.

Morgan Our Stanley. next Joe question from Moore ahead. go comes Please from

you. Thank Great.

Is falls about You mentioned and overall NAND, down? market adjusted or you're any take then it charge – cost talk the market on a that that methodology for price you taking you lower do there? product charges anytime individual is pool can the that you below

the So, our Joe not charges, respect we with level. it product It to LCM pulled. do finished at is good

Got it.

from how charges do defined as you charges in able remove and of to you you. And EBITDA covenants the underutilization number the the know in things to Are Okay. Thank be those like defined? then are that, to the terms going be going covenant?

allowed credit to typically are be to back our per EBITDA. Those agreement the added

very you Thank great. much. Okay,

Joe. Thanks

comes Fargo. Aaron next ahead. The Please from question Rakers Wells go from

Yes, thank you the questions. taking for

Just last that be to build to question, safe. on just

Your expectation that charge flash inventory assumes not? this commentary if guessing the expecting so margin I'm business? gross another in current you're quarter, why And in not the

Aaron, all our typical like reserve we sure a the our balance we guidance So we typically that exited into stated. And QX, do we the factor reviews we take the – make when quarter, sheet properly and expectations.

on is quarter. the into in like the guidance just small amount baked Typically, did the past And forecast, we everything based have in so our also we guidance. a

competitive would guys How HAMR current Have can you kind you purchased I around then increased my hard customers, the really no Okay. how is of this I like price environment? about last roadmap sounds the some business, you guessing characterize drive do you – product quarter. a I'm the forward, guess discussion question follow-up seen seeing going guys from and cloud And think it on appreciate perspective disk etcetera? your aggressiveness?

products. Yes, in been we've price our always but I this Aaron, mean, very the value disciplined market I there's about pressure think of

and was drive roadmap, CMR think things ship UltraSMR, talked volume I you we've our been is, XX in OptiNAND, we highest at one very really to things XX-terabyte feel these volume. now the about HDD above. – are starting of products in ePMR, investing the We about drive like the good

deploying number right up feel good quarter very SMR the it's XXXX, about UltraSMR finish product very got we customers quarter. this portfolio our about qualifying the next center, there, calls step clearly a talked where start data going. is, about where of the That's We've large So, and now. we'll we the next in

aligned how we're not And got and compete with like that on market able to have feel the up to portfolio monetize we what we've is a showing So, that that's needs. kind of in, price. portfolio

before the So, XXs be the away We're there. going big then that going product. future SMR we'll technologies that HAMR The like volume are get to products to product ways volume a and over couple volume the next be is after going be are will are and type of years still to HAMR. products

it time. stages It's I when been about development as in a is We're final that an for in XX above it it. everybody will confident feel roadmap the technology. for and long think be We that of and the industry excited we need

Thank you.

go Our from Sidney Deutsche Bank. ahead. comes next Please question Ho from

Thank ability but do you. wanted productions Looks the your the you products? on recovery there? more or security I are your give network any you back about normal Can have with operations breach. you or experienced update an to levels, issues to like ship ask expect to us

that. ourselves we the to environment. incident. We protect then and folks Yes, ourselves we've Internet have like but we were the as know, that the now by all When a let the our throughout the inside companies we're it, we very of been from tremendous transparent as operational Clearly, back – the disconnected team, basically feel operation. we about public capabilities nearly noticed work amount took we still far factories and restore way

when don't bring on want moving but in they and see you company there our was forward. plans, another in We so, to really but it really, got business here we they continuity the often, two, week them kept to store good were too to online the or rely had

Okay, great. for that Thanks update.

any QX, add just that Sorry, Sidney. don't the the fiscal to have impact network in to wanted numbers I we security. for

your with that, the your question production. I'm great. [indiscernible] quarter Flash you. that competition is, since your about be changed Maybe of Thank Samsung talk expect related cutting have customers bottom you my their and for the announcement, for follow-up do if curious to the Okay. That's to business? June margins –

time. on customers very I in say, We to I tone they're we what would particular all how the on stay I the have obviously conversations any focused our the one we with – our conversations doing. robust acting is have or market very business. wouldn't of player pin mean

far into through is As we we I of as the as the balance year. come market go the to mean half bottom, the expect second where

I of of and it, a own fab in clearly think to close business the demand. closely we're taking lot the to manage our actions Keep demand is. utilization supply where

our So, of the half we one through manage while, downturns the in as we the into come think year the move but will market inventory. Clearly, of going we we're most second through severe balance. a

Great. Thank you.

next go Our Hosseini Please from Mehdi question SIG. from ahead. comes

with question. taking my near to term inventory. and One Yes, thanks for more

keeps are different going changing inventory, any are the – want between wafers, have other material? can you value categories and how And understand to for there inventories absolute changes is happening how within incremental finished a a higher. good, give color mix dollar Your way us I Is and follow-up?

This out discuss think don't that would focused typically team comment we much I really we where Mehdi, to make break on here. me one of minimizing the we Yes, though, on is operations The bit too detail, as for much can. our a call. is inventory, when

So, sense it try perspective. we a the makes demand most basically to places the in that from stage

– the how rephrase of do me the think inventory Let should write-down? about risk we How question. you

market typically relative to it's out inventory ones based was, mean, is the really – called write-down for I inventory basically that where the is, based is. instance, the on price I the value

any what – do say have and And then take decline that. so, if would by we look see about when closer if impact, that's there's I prices to a a lot, but

you price moderating, that that are maybe so decline risk? is downside rate minimize of – would the the So, would assuming

end the most are is the at sheet where and value at our is, because we of saying inventory I'm what – versus prices the the we the stated level. properly particularly is, demand at look is is finished good where every saying balance do I'm quarter What

value, question trying where necessarily more I predict that. so, we price your going our around it And do properly we differences see is is adjust to to the have stated. otherwise inventory we guess don't typically and is where

one than you. question David, then the at more for just quarter. Thank longer-term And Okay. looking

this I How think view demand going there impact do have impact created. how to is These HDD? new working some SSD, AI unknown confusion expensive demand you versus stations. of would how it for any HDD or is factor are type versus SSD incremental

to go data. would stored of even We're Mehdi. doing What I'll This little me on the is, just picture. longer-term, that, reinforces value – analysis say I bigger a

that seems constant use all think out there's I figure productive do just data people And it it. this think stored these for how AI engines. like training latest the things to to ways they've can very the is with I

And just storage another enterprise secular a we it's data tailwind it's think of just long-term and HDD for so, and the element business the the of business. SSD value big

data mean, monetize And center, future. that have in TAMs I they're they're we will in it again, you data because can is – and ways both the is think different both in another reason why both more they this know big people the they growing. store

guess light some Is share lift any TAM would types different us? that the thoughts as HDD CAGR for of the same shed can you would with at to don't how stores the is But I think this I to hoping you was I rate. going change? each there

I the is think cloud. – the of will it share storage lion's HDD in

bigger two So, would technologies. that's those across lift you where the expect be would

you. thank Okay,

you It’s to Mehdi. always. as Thanks talk to good

go question Cross from ahead. comes Suisse. next Please The Credit from Shannon

making my OpEx in the – how for first very think is, are you we as at – decisions? look Thank follow-up. holding cost, how And think investing? on to a how you impact then And about And you're have taking doing do projects where about terms what My of you you're I questions. at this potential you. point? in should you're much Thank you how future those

we're is – the to market over years Yes. the several proactively restructured been We've ability agility been things to been the respond in. very – one the we've last into more obviously, and the as business we've business of we've building the

went But I on agile that, think for a clearly, the we're hallmark a and business of dynamic. kind structure build that's to organization top is of unit reason. of to the we Shannon, trying

very, we it. leaders of our It's portfolio in the organizations because today. OpEx, two ROI the quite of constantly that have very have to we doing frankly, we where I And sophisticated put most focused out analysis the get that's very with think and is we led them

portfolio think And on had. goes best we've effort that's have we the ever constantly, an that continuously. I

of And so, what as down to is. market resize the OpEx we business continue realities draw to to the the

long-term the – we couple the get first built going get ROI We've of of that and last over return we're we're best that sure make that on making we make value a to we the right and we in OpEx – best of to sure to that we harm decision all, out we're month-by-month can the do where years week-by-week, a the actions the make it, day-by-day, way it, business capability taking basis. of don't the spend, the

to I So, we've three now we're make well the built in to not serving health capability long-term that the business. I really ways is of think are in right it's this sure years, last that going the impact cutting think and us a

step manufactured time the and incremental – a side, – maybe make on and underutilization Thank capacity learned HDD to you. was you can Thanks. do to as lemonade the you've done it's helpful. you've of the past things been trying charges, I'm you maybe lemons. a are kind I'm just you've things look it's what how in that future? in – these back are to ways just and take productivity? thinking of I'm had things unique terms I'm But of That have and out maybe drive how in cut how wondering, certainly curious there

suspect rescale Lighthouse Several How well. more year last our of of Economic Forum automate do on efficient, World a we few become for few comments there's do is more. awards have we our we factories the will do how employees? a won I how comments. in automation. have lot of this as – this mean So, a focus I'll Wissam make I been

driving we've HDD I the and do how I focused in driving And of business. we business well productivity, in – lowest base fixed our over think fixed been cost – automation, just level the been our costs lowering are think on don't know, a fixed they've asset just our in now a very And that I decade.

off margin to back So, business the in meet at as way we've starts generate in think then able basis. we'll the the to we're lower levels. got that I market what paying lower and to up, needs, do cost that's volume volume And I think pick capacity the at a much

platforms on course, come that on our efficiency mean products Yes. are in manufacturing better add back what development the drive in I the we the ability said, one the with I to that also, comes cost to are manufacturing David the into even some things of efficiency, to organizations activities a of addition forward. going would think increasing thing designed way that the manufacturing for of improve And about side and structure. terms taken

you very Thank much. Alright.

it. Appreciate Shannon. Thanks,

comes Sankar ahead. question Krish from next Our from Please Cowen. TD go

recovery year have first question. going that's drive supply-demand any mentioned follow-up. later baking help it in you had. balance you the I'm June? versus And my your March, specific to in talking on kind your shipment same seems than be March this then And think a Are to to you talk curious, you bit of competitors the question a growing. about your competition for mobile for and takes flash about I what in that? path, is thanks just some, Hi, better puts kind if in and decline pricing of David, quarter, how along ASP NAND

Yes.

best We've it's is lot upmarket, have return. the which the our portfolio. get a a it's pricing, we kind where that market, the on business, channel retail the from places very about become the just And market, the that part big putting OEMs, part gaming it's of been across right, just down right? of a has the And PC this supply all where think obviously, of nice story SSD – and can I and in part really a same growing a we portfolio. mid-cycle it's our is diverse portfolio of the get our Whether enterprise mixing time, return, to portfolio. bits best mobile, talked

that I between. of return is companies we ability that, of strong is everything mix in that And go kind strong do across reach a just good to and in a brands in our can set well, position in portfolio from that – markets that that to WD_BLACK, SanDisk a with single consumer to the to best the puts go-to-market every of world technology breadth the think supply. as the – literally and SanDisk, on a us get Professional, largest

is, Next basis quarter, then on We've we'll really say how an that to pricing I pricing. we on in mix don't and is quarter. want individual It's we're we're individual market-by-market next guide. going in the into future all What think would the markets. to comment or about do talked putting what we

than it. to grow? we How Got is terabyte that impact kind see a And dividend. the then what XX Thanks HDD follow-up it. CMR side, gross the its Got XX of is volume. terms expect bigger nice it's in as of margin? for terabytes should to on the And on now

that's our ahead a that's focused think I and our CMR above XX. focus of on it's – capacity point significantly other drives drive, CMR

So XX above – the terabyte drive. or

different that the our the for be have a product – business. CMR next until in premier expect part that We we drive to of

from It a of be appropriate margin lot provides of that our lot and value. about that of it contributes – perspective a as customers. to TCO provides of very that good And talked lot we So, growth an a drive for we've we expect value amount engine, a – it well.

Thanks it. Got David.

you. Thank

of Bank from from Mohan comes go Wamsi question next Our America. Please ahead.

Wamsi questions. David, my taking think for pricing It's maybe I you. another thanks question [indiscernible] for today. in for Hi, filling

want like on in or likes exactly Could again in your the because do what And inventory HDD? I elasticity. elongation could there's tighter? it pricing? they from get question on So, built you be favorable lot little of a elasticity? price related market, talked a you of might to might this thoughts exactly that? Flash in Apple recovery think you're bit lead bit in memory that even just the think maybe you quarter further though that just to component OEMs seeing seeing some elaborate to about little So, you this a in the worry near-term either maximize of is, a a some their are And price what the

the on year-over-year we're talking seeing mainly mid-XXs about. elasticity capacity. think was is I OEM what in I NAND PC I mean, up

which – devices per to number year-over-year I a think third that really is a we me our in hundreds consumer sell tens capacity up interesting of channel the a is elasticity millions unit. on franchise, across of year

Gaming up than more than that, even more mobile that. up and

So, we're work. – in, see to Even to of second great kick question, great well, starting that expect part especially a the downturn, across to midst of in start the the I the are seeing elasticity What you see downturn, portfolio. market you think midst of was the in the and expect again? a we

It [indiscernible]. was about a customer

Prebuying. Yes.

where the I well. it's it's the And we think customers I wouldn't are instances you think I it pervasive, maybe sign a it. say that. – see of do of instances I think we cycle think I as are in we but see seeing think of –

it. Got

your just cash to to are you about this I – follow-up, at free thinking my I year? I for one positive what forward? possible to free cash free is looking and thinking that happen thoughts a flow So, calendar can to working quick are capital get needs how it flow? Wissam, on flow? that? how you. mean, ask is So, going if about you And Thank cash in mean

Yes, [ph]. [real close]

free on flow. focused totally are cash we So,

reducing As not on the preserve a CapEx, manage well year, as we've beginning underutilization you've inventory. as since our quite cash taking proactive very to that bit and OpEx, on the been seen us of build and

And very this so, to is us. important

we year, improvements. you fact, down approximately spending mean, last XX% look bit. gone below In continue even to make it's more our if not a quite CapEx we'll than trend, be I probably at year. if This

and is quarters, a as navigate a the typically guide could is the for to focus, priority environment. I what cash next as But imagine, would I said, not say With free respect dynamic big you us for this we as top we that flow. few is, do

detail. the Thank all you for Appreciate.

you. Thank

Thank you.

O'Malley from comes The next ahead. question from Barclays. Please go Tom

thanks My HDD is of the first good business. the to question. my and guys afternoon one Hi, for side taking related

obviously to Your pushed December give of and Is was competitor HDD way now expect the year half calendar business You're it business to Could that frame that back you you the the of that? recently out but the guiding on in a you're about you be kind thinking any with talked June the color just could is the initially to quarter. recover? about expected when recovery down, that in-line recovery? about

Yes.

these would I better. that very levels think, Tom, I half is say just the lumpy. we the and as it's it issue The year, revenue will get unit – go it's through second of levels, these

customers not large that impact way. have very buy, buy if the You significant very or and in they a the TAM available it can market

So we're that's quarter. experiencing what – and next

space, We'll thought the I see capacity and go new And scale lot I this expect at on to as mean, to that, year. this through little enterprise this of PC the with as half lumpy the inventory go up expecting than decline shipments. in in were in quarter, But digestion, a a go customers zero. business just it a sequential has saw we back better we we lot on to we're then a an like second just be we completely are focused things which saw inventory is of impact. kind this, we of purchases that OEM customers digestion because go basically

a So, I in activity about We're have of optimism over I year. the second a China there. to of seeing half do better the quarters. the next see lumpiness level expect several

half that year the we second business. should which expect the the in well, also help see to of And as improve so,

then And side. follow-up a Flash Helpful. just is the on

through I this You inventory guys across specific here period and earnings to then talked where about behavior, various this you a in still are on particularly of to right, aggressively heard there customer spend. of a the consuming customers, purchasing are want terms we've others where don't ecosystem, is more mix discrepancy some degrees. speak but

here? helpful where really spend? working with of are Is customer or heard be random Just frame in just companies you're that? maybe multiple help than any would there that levels where certain certain and guys you more seeing inventory there is came color it through from as Could a that's point just that really others type data we've spending

say inventory making – of more inventory have that I now own the but shipping want would through where cycle. lean less different I strategic they cases to now are market they those – some got are their to they're or of their it, the that on customers buys instances of are doing where their of own view segments people guess that in that their being digestion demand in end There inventory. are they've

in in customer, say. can data That's And market. a the level small especially at number, that the center – just are other their so impact – it is variability big of inventory just I and a the there's the entire each – very of where one they're would customers at they're then

that an So I said, heavy aggressive have inventory – like that working in down ones are and basically way.

going it for And think quarters through said, lumpy get will – I so, like be that. I a we couple think it's to until I of

Thank you.

Thanks, Tom.

from next Please comes Goldman go question Our Sachs. from Hari ahead. Toshiya

afternoon. utilization in ZIP business? good XX%. NAND you would so that the up of production Thank months has taking cutting in changed of forward, if code, the to materially? David, going were curious mentioned kind are, by Flash today to cuts And need the three anything business taking see ago, that magnitude your you for your question. the rates in start what you if you I'm Hi, much

ZIP in say at a country, to it's keeping the relatively sure you're I way you of away demand point to it's make get be if about we're fair the we where pretty doesn't the managing depending but kind I But check. see us. can to somewhat, on our think think – it inventory probably from in ZIP where really want up big we Code and guess. We codes going is the live, probably where We're Yes. – same it's I know

fab that. use in the So, we'll

signals – we're our I is as just mean, demand we're for going simple customers to just that. have to as see

of lot markets we're where wide And with can customers the the channel lot every We're have a world. see transactional, these companies of biggest business biggest the consumer them. day. We swath. single obviously, and the the we in more close in are – to course, A across in talking then, very relationship a technology of market a

ready. we'll demand So, their inventory the get of pretty a we'll product where to sure the – right position we set have we and when keep is, appropriately good the fab and have that we make they're a idea

be And Got free annual of then on but side the basis, it. you. Wissam Thank be basis follow-up That's you curious dollars generate know June on one be capital of quarter or capital? can do into that days, the working inventory, Is the and or a going whether for helpful. balance just should we thinking about things. how cash quarter June working it to overall. from guide flow consumer I think sheet you. don't cash a cash you or you some Thank going quarterly in

anticipate dollar, from to, of I Sure, we said, very, Toshiya. we would I David regular the of respect manage basis closely. continue terms should very on a say, days, in current here. to very inventory, terms a is, downtick in see Well, but as it projection With flattish

the that I terms working what guide would the And I capital. be good inventory capital cash so to be the want look. That's would of wouldn't the comments number indicator biggest so, probably Again, a free around make But answer don't working that's the flow, moving more to the capital. will working we the in think on most. any

Sur question next Please go ahead. comes JPMorgan. from from Our Harlan

and enterprise, guys sort guys afternoon. strong low for position client good sort number in X% percentage would this position, appropriate, numbers drove, for this right? it’s share Thanks SSD of are a of like you for strong The my out what sort hovered of in X market of year, sort to Hi, enterprise market I now, SSD, drive the share share taking is question. fast-growing X% of percentage last what year, try in a more you double-digit doing profile? single-digit drove market range last in and But team to while share share call double-digit its to

bit about over the for Harlan. Thanks channel. hear players, enterprise a last last customers. good the We've We some the qualifying SSD the year. of big this quite question, in this qualified biggest at talked qualified quarter on It's the to Yes. about BiCSX the just with from Always you. products

market is right forward the dynamic we very as moving So, map now. expected. road a It's just

So, it's to judge difficult share.

higher. I of some rates to big we'll that stabilizes out normal and that purchasing. Obviously, market have what their our back And every there is the goal we've put to is confidence do of get customers as drive these

James. from comes Please from Raymond question next Our ahead. Pajjuri Srini go

Yes, question have Wissam. side, a cost you. I thank on the

than do had growth. to need get of it's XX%, the I cost going to And about tracking then figure the out previously just it's I get the, to should given we've you BiCSX, just or I'm XX% guess, lower still, we XX% So, as tricky cost mid-teens, historically, wondering if little how you declines, talked guess, I believe, bit we mid-teens especially a the declines think declines to level? dynamic about if changes, charges. to XX% one-time And that wondering, you're kind if NAND you to forward, all that. cost to demand that that – we do in think go can

Sure.

So, question. thanks for the

In entry think income mid-teens. be with have reduced we or without QX, terms by and wouldn't you of down wouldn't to charges, it underutilization cost When the we – factor we cost of basically underutilization. in have

mid-teens that, However, if close to we exclude then in we're QX.

that's time. talk over with bit about Now, designed – to and BiCSX. much anticipated. continue BiCSX that reduction I comment when what it's previously in a pretty aiming BiCSX the starts to on mean of we're – mid-teens than way conceptually, works in question sort to a on little because the us want our exact your of map it premature terms wouldn't to earlier the But ramping, percentage is this and of to about cost so I I with road reduction this. way allow is the ramping think crossover slightly timing

next Our Karl comes ahead. BNP Please from from go Paribas. Ackerman question

there's question, recovery And below whether exabyte might discuss couple a customers Yes. you cloud? normalized address of quarters? assess public I you the as on-prem demand you. shipping of demand? a do whether the how divergence in you you of and And and next Thanks. across Thank guess that was your I be hoping replacement could cloud trajectory

the both the see soft cloud enterprise and we think market. I They're right now.

we So, got that huge at customers. the is, difference two. big idiosyncratic a Again, the behavior see don't really this you Karl, between difference

usually a hundreds a a buys of that of to dollars in customer So, drives millions goes quarter, of hard zero. significant amount

they're much buying under assume replacement pretty You can demand.

going more kind that's just of So, along customers to at. are according We other – again, where we're plan.

So, customers. the is big level a inventory distributed across bit

draw look But are the is and our – at like understand right production think your and now, growth and it's market conclusions given setting the of capabilities just quite do we long-term to we behind long-term of we lumpiness of a where is way little the of a – question, – the market. some all little difficult to exabyte that. just bit this the the So, bit some where a

from Rakesh The go Please Mizuho. next from ahead. Vijay question comes

Hi.

you talked strategies, talk I it. filings, progressing? can you I how had Just process a don't filed some they quick think and that if know don't question. to they I is wondering know Elliott some but just had – about if

Everybody is and we so forward I in say to anything when it active. Very about progressing. it, can't it talking under about we look reach It's conclusion. NDA, a

go Please last comes ahead. Capital. question Loop Our from from Baruah Ananda

if you Hey, in Wissam. but about to you're how due might I the have go XXXX? can thinking any it, thanks that? handle guys. February handling going there's How about wondering Thanks. it. missed Appreciate provide that, Maybe back just for debt context of you're

plan Yes, to couple the is Ananda. quarters. of over address next the billion X.X in of February With XXXX, convert to respect the it due

Jason, Okay. last the is one? that

was that last question. Yes, the

today. forward Take seeing to look through for care. us the quarter. All joining you right, Thanks everyone. We

you. Thank

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

disconnect. now may You