威騰電子 (WDC) 2003 Q1 法說會逐字稿

Welcome to Western Digital's first quarter financial results for fiscal year 2003.

Presently, all participants are in a listen-only mode.

Later we will conduct a question and answer session.

As a reminder, this call is being recorded.

Now, I will turn the call over to Mr.

.

You may begin, sir.

Thank you.

As we begin, I'd like to remind you that during the course of this call, we will be making forward looking statements in our comments and our responses to your questions concerning conditions in the hard drive industry, our business model, our expectations of growth in the desktop PC and consumer electronics markets, and our business and financial outlooks for the next quarter.

These forward looking statements are based on current expectations and actual results could differ materially as a result of several factors, including: the company's ability to execute future production ramps, uncertainties related to the development and introduction of products based on new technologies, overall supply and customer demand in the hard drive industry, pricing trends and other competitive factors, changes in product and customer mix, business conditions and growth in the PC industry, availability of product components, overall economic conditions, and other factors listed in our recent SEC filings, and in our first quarter press release issued earlier this morning.

We undertake no obligation to update our forward looking statements to reflect subsequent events or circumstances.

I would now like to turn the call over to Chairman and CEO, Matt Massengill.

Matt?

Thanks, Bob, and good morning, everyone.

With me are Arif Shakeel, President and Chief Operating Officer, and Scott Mercer, Chief Financial Officer.

We will be happy to answer your questions following our remarks.

As reflected in the press release issued earlier this morning, the first fiscal quarter was a very good one for Western Digital, and the tone of business and conditions in the hard drive industry remained encouraging.

We continue to see strong market volumes as we move into the December quarter, and industry inventory levels are extremely lean.

These positive conditions are related primarily to decent underlying demands for desktop PCs, and improved supply, demand, and inventory practices by the hard drive suppliers.

In the context of a challenging overall IT environment, it is easy to lose sight of the fact that our primary market, PCs, is huge and still growing.

When total industry drive shipments are tallied for the September quarter, we believe these numbers will show a continuation of the healthy industry growth in the first six months of calendar 2002.

Turning to our September quarter results, we recorded revenues of 583 million on shipments of approximately 8.6 million units, and net income of $22 million, or 11 cents per share.

This represents revenue growth of 32 percent and unit volume expansion of 59 percent from the year earlier quarter.

This is the third consecutive quarter in which we have posted year-over-year revenue growth in excess of 15 percent.

Our gross margin was over 14 percent for the first time in five years, reflecting strong execution by our operating team, good customer alignment, reasonable demand for PCs, and the industry's improved supply/demand inventory management.

In summarizing the key factors behind our Q1 performance, I would point to our management of technology transition, our quick response to changes in market demand, and our ability to meet changing customer roadmap requirements -- all while keeping delivery commitments.

The efforts of our operations teams in achieving exceptional quality, strong yields, and lower costs was especially noteworthy.

While taking our measured approach to technology deployment, we also retained our time to market leadership with shipments of the new 200-gigabite, 7200-RPM

, representing the fourth consecutive generation of Western Digital delivering the industry's highest capacity, highest performance desktop hard drive.

Our ability to consistently generate cash and solid profit demonstrates the efficiency of the Western Digital business model.

We've been communicating for some time the leverage in our model to produce incremental revenue, without corresponding growth in our expense structure.

And the last few quarters are evidence of this.

It is also worth emphasizing that this model protects the company on the downside, and enables it to remain healthy in a slower environment.

Given the positive

so far in the December quarter, our outlook is good for sequential growth off the September quarter.

Coupled with strong demand from the PC market, we are seeing a healthy seasonal up-tick in our consumer electronics markets, principally for hard drives going into Microsoft's Xbox.

Scott Mercer will now review our Q1 performance in more detail, and provide our guidance for the second quarter.

Scott?

Thanks, Matt, and good morning, everyone.

During the first quarter of fiscal 2003, our financial results clearly reflected the earnings leverage inherent in Western Digital's business model, particularly when augmented by a stable pricing environment.

and revenue both grew eight percent sequentially from June.

While improving margins and good control of expenses and asset management, allowed us to increase operating income by 47 percent, and cash flow from operations by over 300 percent.

For the first quarter, we earned 22.2 million, or 11 cents per share, and generated 45 million in cash from operations.

Our revenue of 583 million was up 32 percent from the prior year, and eight percent from the June quarter.

Our gross margin was over 14 percent for the first time in almost five years, and total operating expenses stayed well in control with 10 percent of revenue.

I'll now summarize the rest of the first quarter for you, and then I'll give you an outlook on our second quarter of fiscal 2003.

Revenues for the quarter were 583 million -- a sequential increase of 42 million from the June quarter, and an increase of 142 million, or 32 percent, from the prior year.

The Q1 2003 quarter marks the first sequential increase from a June to September quarter in four years.

Our unit shipments of 8.6 million were up eight percent on a sequential basis, and up 59 percent year-over-year.

Average selling prices were about $68, the same as the June quarter.

Our September ASP -- or September quarter ASP stability -- is the result of an improved pricing environment for our desktop products, and a somewhat lower mix of Xbox shipments.

Xbox unit shipments were approximately seven percent of our unit volume for the quarter.

Revenue by channel was 52 percent OEM, 45 percent distribution, and seven percent retail.

This compares to 48 percent OEM, 45 percent distribution, and seven percent retail for the June quarter.

We had two greater than 10 percent customers during the quarter -- Dell and HP.

Q1 geographic split of the business was 48 percent North America, 33 percent Europe, and 19 percent Asia -- as compared to 54 percent, 29 percent, and 17 percent in the June quarter.

Our gross margin was 14.3 percent, up six tenths of a point from June, and up 1.6 points from the prior year.

Excluding Xbox, our desktop gross margin was nearly 15 percent.

Improvement in gross margin is a result from an improved pricing environment, and continued strong execution by our factory, and the entire business operations group.

Total operating expenses remained under excellent control, and was 58.4 million -- up only 1.6 million from the June quarter, due to higher pay per performance plan expenses.

As compared to the year ago period, operating expenses were up only 2.1 million, as increases in hard drive R&D spending were mostly offset by the elimination of all new venture spending in late fiscal 2002.

Operating income was 25.3 million for the quarter -- up 8.1 million from June, and up 25.5 million from the prior year.

Net interest taxes and other items totaled 3.1 million.

Net income was 22.2 million, or 11 cents per share, compared with income from continuing operations at 16.2 million, or eight cents per share for the June quarter, and a loss from continuing operations of about $600,000 for the year ago quarter.

Fully diluted shares outstanding were about 197 million, which was about the same as the June quarter.

Turning to the balance sheet -- our cash balance at quarter end was 244 million -- up 21 million from the June quarter.

Cash generated from operations was 45 million of the quarter -- up 34 million from June as a result of our improved profitability and solid asset management execution.

Capital expenditures were about 12 million for the quarter, and our non-cash charges for depreciation, amortization and interest totaled about 13 million.

Proceeds from option exercises in our employee stock purchase plan generated about three million, and repurchases of convertible debt used about 14.5 million.

As of quarter end, we had about 73 million in convertible bonds outstanding.

Our cash conversion cycle for the quarter was a negative 10 days -- two days better than the June quarter.

The current period conversion cycle consists of 36 days outstanding receivables, 17 days of inventory, or 22

, and 63 days payables outstanding.

That was a look back at our first quarter.

Now I'll move on to our expectations for the December quarter.

We enter Q2 coming off a stronger September than we originally anticipated and thus far, October demand appears to be following suit.

Accordingly, we expect our December shipments to be solidly higher due to seasonal factors and a more complete product line than we had last holiday season.

We expect revenue of between 620 and 640 million, on shipments of between 9.3 and 9.6 million units.

Our gross margin is again expected to be in the low 14 percent range.

Our operating expenses should move up slightly for additional R&D program related spending, resulting in total op ex of about 61 million.

Operating income is expected to be between 27 and $30 million.

Net interest expense and taxes are expected to total about two million.

Accordingly we expect net income of between 25 and $28 million and earnings per share of 13 to 14 cents.

Our share count is expected to remain around 200 million for the December quarter with a modest increase for options that are exercised.

Thanks for joining us on this early morning call, and I'll turn the call back over to

to open up for questions.

Thank you

.

Operator, could you please open it up for questions?

Thank you.

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

If you have a question, please press star-one on your touch-tone phone and questions will be answered in the order they are received.

If you would like to withdraw your question, you may press star-two.

One moment please for the first question.

Our first question comes from

.

Please state your company name.

Prudential Securities.

First congratulations on a great quarter.

Thank you

.

I wanted to ask you a couple things.

The first question I had was related to your commentary about, you know, when we average the industry, we'll probably look at Q3 and there's healthy levels of growth, you know, when you step back and you look at what's happened so far with Seagate up, you know, over 20 percent on desktop, you guys over, you know, eight percent,

obviously not reported yet, and you know, try to assume there could be some weakness there, but even if you account for you know, a down sequential quarter for say a max store, it seems that industry unit growth is, you know, perhaps significantly better than we had anticipated.

And I'm just curious about your comments on that, because obviously in light of Intel and the guidance for Q4 and some of the other PC names, like Apple last night, there's seems to be a bit of a mixed message still, you know, throughout the supply chain as to what really happened in Q3 and the outlook for Q4 and obviously maybe you could just talk about some of your competitors product transitions and how that might be, you know, affecting in your growth and what you really think industry growth was and what it will be in December.

And then if you could also sort of look back on, in previous cycles, if I remember right, we had peak met margins maybe over eight percent for you guys when we had an allocated environment, and just curious as to see, you know, with an almost four percent net margin here this quarter and continued expectations for strength into December, you know.

Where do you think peak margins could return to if you really do see an environment that ends up being an allocated environment, you know, going into, you know, the next six months let's say.

All right.

I'll take the industry growth one and

will handle the margin question.

First of all, you know, I've thought for some time that the, while we're not as happy perhaps with PC market volumes that we'd like to see and they certainly aren't as high as they have been historically, I think that folks are buying a fair number of PCs.

Number one.

Number two, I think that, and I've said this for a long time, the white box manufacturers are consistently and continually underreported.

I also believe that while Intel talked about some revenue softness, certainly some margin softness, I think if you get down under that, I think they shipped a lot of processors.

And perhaps they shipped processors at lower price points than they would have hoped, and that may explain some of the margin and revenue issues that they've gotten to.

I don't think we have a unit volume problem.

I think that clearly, calendar Q3 was a stronger demand quarter than anybody anticipated.

It was certainly stronger than we had anticipated.

And I think it has far more to do within market demand than it has to do with any one of us not being able to supply product.

I do believe that the, you know, the sort of the, there have been some issues with supply, by some suppliers, but that is relatively muted, I think, compared to the demand profile.

Our inventories are very lean.

Our competitor's inventories appear to be very lean.

Demand is very strong, and I think that owes to folks building and buying personal computers.

How big of a growth rate that will translate to is hard to determine.

We're expecting somewhere between five and 10 percent growth going into calendar Q4, which is more modest than years in the past, but let's be honest.

This is a very large market and I think to expect 15 to 20 percent growth rates quarter-over-quarter now would be fairly difficult.

So yes, that's pretty good growth.

And I think that compared, in connection with the supply/demand equation is painting a fairly favorable picture for all of us.

I would also say that, you know, as we all wrestle with the 80-gigabyte transition that's coming, I'm not so sure that this condition doesn't continue for a while.

And so this may or may not just be a one-quarter event.

I would think that, you know, from where we sit today, calendar Q1 could be reasonable as well.

Just a quick follow-up on that, just related to the strengths.

It seems like it was reasonably broad-based, although, you know, looking at your mix, obviously you're up and particular was strong in our comments about white box, would probably support that.

When you look into Q4, is your expectation of sort of a broad-based type of strength across those OEM and distribution, or are there any sort trends that you've seen here exiting Q3, entering Q4 that would suggest any kind of mix shift?

No I think it's a broad-based strength.

Clearly, you know, Asia's been a very strong place for all of us.

That is tough to say whether that's, you know, consumer or commercial.

I would assume more commercial than consumer, although in calendar Q4, that could change.

But I'd say that, it looks like pretty much across the board, there's fairly good demand.

Thanks.

, this is

.

With respect to your question regarding operating margin, you know, from our guidance you'll note that, you know, we're anticipating an up tick sequentially in operating margins from the September quarter.

And you know, if the industry conditions would continue in the way that you've described with a continuing favorable environment, I don't see any reason why we couldn't continue to grow beyond that, perhaps even to those high signal digits operating margins.

Is there anything, I mean is that really heavily dependent on demand and pricing, or is there really, like you've done so much on the cost structure, and you know, you've gotten great leverage out of it.

I mean is that really the driver here than at this point, is the volume or is there anything else on the calm in terms of you know, other cost reduction initiatives or other sorts of offsets that would, you know, potentially lower the cost structure another notch?

Well, you know, clearly this is an industry that will always try to find ways and I think effectively find ways to cost reduce.

And so I wouldn't say that we, by any stretch of the imagination, are done on a cost-reduction side.

There's no doubt that it's important to have a reasonable demand profile to ship into, and we have to continue to see folks managing the bill plans properly, so that we don't get into periods of oversupply.

I think the last year has demonstrated that this industry can do that.

And so I think that, you know, with an appropriate demand profile and the continued cost reduction, I think that there's opportunity for margin expansion.

Thank you.

Thanks.

Thank you.

Our next question comes from

, and please state your company name, sir.

, your line is open for questions.

Let's go to the next question operator.

Thank you.

, you may ask your question and state your company name.

This is

for

at JP Morgan.

I have several questions if I may.

Could you talk a little bit more about pricing, I guess future pricing really and opportunity to raise prices if supply is constrained?

Can you also provide some more color on the 60 and 80-gigabyte ramp during the quarter?

You bought a

facility a few quarters back to raise capacity levels with units, you know, your unit forecast at being 9.3 to 9.6 million.

Is that something you're going to have to consider to search out and find additional capacity as we go forward?

And then my final question is regarding component shortages.

What is the potential for component shortages in Q4?

OK

, on the future pricing side, obviously, that's very, very difficult for us to predict, but I will tell you that this industry has shown a very capable proficiency in matching prices to demand and supply.

And so if there are continued shortages, there's no question in my mind, prices will continue to rise, if demand exceeds supply, if supply exceeds demand, that's going to go the other way.

I think that the efficiency of the business to do that in a timely fashion is greatly improved, especially when you consider the fact there isn't any inventory out there.

I mean, inventory is as low as I have seen it in the business from a week's on hand perspective in the channel.

And so I think that bodes well.

What happens to demand, what happens to future supply, I mean all those are questions we don't know the answer to, but there's no doubt the practices are in place to manage this business appropriately.

And

, do you want to comment on the 60, 80 and the

?

As you know, we announced a 67 gigabyte for this product a couple of months ago.

So that transition has taken place.

Eighty gigabytes at this particular moment, technically there's no reason why we couldn't ramp it from a, again, cost effective, it is not the appropriate time to go do so, and I think it's going to be a little bit longer before the industry moves a large portion of their build to 80 gigabyte.

You last question as far as the

was concerned, no at this moment, between our

facility and our Malaysia facility, we have enough capacity to take care of the needs for the next several quarters.

And component shortages?

Component shortages, I do not see any at this particular moment this quarter, but again, I think it will depend a lot on what a company's mix is from a technology perspective.

I guess, then and being more specific, the, regarding heads, that's not an issue, I guess that's kind of more a specific really in the component shortage, that's fine for now.

Well, I think again, even heads, it will depend on the mix when it's right to produce.

With our mix, we feel comfortable that we'll be able to produce the number of drives that our customers want.

OK, thank you very much.

Thank you.

, you may ask your question and please state your company name.

I'm with

, another great quarter guys.

Just a follow-up on that last question, be a little more specific.

You're saying it depends on next year.

Are you specifically mean there's a little concern that if you're heavy on the 80 gig product there might be a shortage of heads this quarter on that?

Yes, yes, absolutely. 80 gig per platter heads, and Arif would concur, are short in the industry.

If you are completely and totally dependent upon that for your build plan.

I think it's going to take some time, quarters, before the 80 gigabyte per platter yield from head suppliers is equivalent to where the 40 gig is today.

At the component level.

At the component level.

The yield is more at the component level, not the drive level.

Seagate, as noted by a previous question, Seagate's picked up a lot of units also this quarter, along with Western Digital.

Do you attribute that not just to market growth but perhaps to the early exit of Maxtor on the 40?

Did you see any signs of that?

Yes, there may be some influence of that.

You know, we don't know what's Maxtor is going to report -- Maxtor's going to report.

I think these guys ship a lot of drives.

And so while that may have been some part of it, I think that the market grew a lot more than people think.

OK, just a final question.

I noticed the XBox, it seems like the units are a little down, but it sounded like they're going to come back up this quarter.

Did Seagate pick up some units from you last quarter on the XBox, you know, one thing that's a little surprising is, while Seagate doesn't provide ASP data, it looked like their revenues tracked down about seven percent, which was worse than I thought the industry -- but you guys were flat and I'm expecting that's more or less going to be the picture at Maxtor.

I'm just wondering what went on with XBox and why -- if you have any insights why Seagate might have tracked down.

Is that enterprise directive

.

Well, specific to your question regarding XBox, we don't believe we had any share shifts with XBox, but we don't really know that for sure.

We had always anticipated the last quarter would be a softer for XBox and that this quarter would be a bigger quarter for XBox.

So to our knowledge, we're still right in that 50-50 band, and why Seagate's ASPs were down, you'd have to ask Seagate.

OK, thanks again, and great quarter.

Thanks, Mark.

Thank you.

, you may ask your question, and please state your company name.

Thank you very much, Salomon Smith Barney.

Could you talk a little bit about the strength in demand you're seeing.

Can you somehow rationalize it towards the end market, because relative to other -- whether it be Intel or other PC vendors with the exception Dell are saying it seems like it continues to be tough out there no the desktop market.

And you're citing strength in demand.

With regards to that, can you comment on any potential double ordering that could be going in light of the allocations that have been popping up on different capacities.

And then secondly, could you comment on what you expect pricing trends to look like going forward?

And then thirdly, could you comment on, do you expect to be impeded in any way in the fourth quarter due to supply constraints for components on the 40 gigabyte capacities.

And I'll end it there.

Thanks.

OK, sure, Clint.

As far as the market is concerned, again, I can't comment as to why other PC manufacturers may or may not see strength.

And again, as I said earlier in the call, I think a lot more PCs are being built than people realize.

Perhaps the ASPs are lower, and therefore revenue generated from it isn't as good as people like, but there's no doubt -- there is no doubt that there is strong unit demand for PC production today.

It is not double -- first of all, you have to remember in the drive business, we don't have orders, we have pulls.

OEMs do not store disk drives at inventory, we do that for them.

So there's no doubt in my mind it is

demand.

This is pure pull through.

When we get the order and we sell it, that drive gets installed in a system and shipped within a week.

And so this is end market demand, pure and simple.

There is no inventory in the channel.

Resellers don't buy and horde inventory.

They don't have the cash to do it and they don't have the wherewithal to do it.

They need them because they're building and supplying boxes.

So I think that -- again, it's hard for us to comment.

You look at how far up Seagate's numbers were.

You look at our numbers being up -- again, when Maxtor comes up, I don't know for sure.

But my guess is, if they're down, they're not down by a lot.

Something's going on here, and I think it's end market demand.

And I'll have a -- as far as pricing is concerned, again, if supply exceeds demand, the prices will go down.

If demand exceeds supply, the prices will go up.

There's no inventory in the channel right now.

Demand's pretty strong, so this looks like a fairly reasonable quarter from a price performance standpoint, and I think that's helping fueling our forecast that we provide for guidance in the quarter and if Arif you could talk about the impeded supply.

Again, from a supply constraint perspective, again, I can speak for Western Digital for the mix that we are producing this quarter, we do not see any component shortage.

Arif, could you give us a little detail on that mix, between 60, 80, and if you see any demand for 80 -- rather, 60.

Well, I won't give you the greatest detail that I'm sure you're looking for.

What I'll tell you is, you know, we've been very conservative in ramping, and very tactical in my mind, ramping new technologies.

You only ramp new technology when it's cost effective, because our customers are really looking for reliable products that meets the box capacity.

So give that, our mix of 40s, 60s, and by the way, we haven't even announced an 80 gigabyte drive yet for this.

So this quarter, you know, again for the mix that we're producing, we're very comfortable.

As an industry, I think that if people have similar mix to ours, I'm going to guess that that won't be a problem for them either.

Right, and are you really seeing demand for the 60s, or is that kind of a weird drive that's not really being pulled by the OEMs?

Yes, you know, 60 is what we call a weak cycle, 60 gigabyte as a box capacity is quite weak.

It always has been.

But we have utilized 60 GB technology to come up with the 200 GB Drivezilla that we are shipping today.

So, you're right.

The 60 is a weak cycle and 80 really is a strong cycle.

Great.

Thanks a lot.

You bet.

Thanks,

.

Thank you.

Richard Kugele, you may ask your question, and please state your company name.

Needham & Company - excellent quarter.

Arif, I was wondering if you could just bring us up to speed on Serial ATA and, you know, where you think that's going to come out in terms of volume and for shipments.

And, you know, what kind of segments you think now, as we get closer to crunch time, what segments you're really going to target and how you're going to go to market with that.

And then, secondly, I guess just kind of the

on the inventories.

I guess you're saying that - where do you see the weeks?

Are we at two or three weeks, or is it a little bit above that?

All right.

Let me address the Serial ATA.

As we discussed in the last conference call, Serial ATA, we are making very good progress.

We have programs in place for Serial ATA.

From our perspective, we are going to address the server market with a Serial ATA first and foremost.

And we believe the first half of next year is when we start the shipment of our Serial ATA drive into that particular marketplace.

I'll let Scott address the other part of the question.

Sure, Rich.

We ended the quarter with barely over three weeks in the channel, which is less than - or just about half of what we ended last quarter with.

And, I mean, sitting here today, according to our distributor reports, they

most of that through already.

And I guess, just finally, on your headcount expectations, do you think - I've seen that they've been increasing here steadily.

Part of that is the

plant.

But your expectations going forward, do you think that now you've got, for the next couple of quarters at least, sufficient capacity?

Do you think you need to continue to add headcount here, or are we kind of stable?

I think - remember the headcount increase, you've got to keep in mind we've also done, as we've talked about before, process vertical integration.

So we now do our own - we have been doing our own

forever, and we do a large portion of our own

.

So the increase was really more because we did some process integration, rather than people required just to build

.

And I think we're pretty close to achieving our entitlement and I don't see a large increase in our headcount as we move forward.

Great.

Thank you very much.

Thank you.

Thanks, Rich.

Thank you.

As a reminder, if you would like to ask a question, please press, star, one, on your touch-tone phone.

Our next question comes from

.

And please state your company name.

.

Nice quarter, guys.

And, Matt, thanks for the comments in

.

It's really

in the current conditions.

You're welcome.

And on that note, Matt, maybe you can talk about what you're expecting or planning for 2003 in the current conditions, at least, in terms of, should we expect a seasonal

from fourth quarter onwards?

And what do you see that can change it either way?

That's a very good question,

.

What we believe and have for a while is that next year will be a growth year, year over year, compared to 2002.

We've targeted that somewhere around the, you know, sort of mid single digit numbers of between five and 10 percent.

I think somewhere around eight.

I don't know what seasonal means anymore, to be frank.

I think that, you know a pattern that we're seeing emerging in sort of the now current market environment is that counter Q4 and counter Q1 are pretty strong.

Counter Q2 and counter Q3 are less strong.

And you know that could be offset some degree by, you know, accelerating growth in next year.

So you know our expectation would be that the year gets started off on a pretty decent note and that we see decent growth for the year.

You know, whether all that growth comes in Q1 and Q4 we don't know, and we'll have to kind of wait and see.

But it's very encouraging from our perspective that there are folks buying PCs.

Parts of the world that are industrializing are buying PCs at a very rapid rate.

That, meaning China in particular, most of Asia, and some parts of Eastern Europe.

And I think that that's very encouraging for all of us that are supplying into this chain.

Thanks.

And, Scott, do you have the cap ex expectations from

at this point?

I'm sorry,

, can you repeat the question?

Do you have the capital expenditure expectations 2003 that you can share at this point?

You know in our

we filed we anticipated spending about $55 million.

That's our current outlook also for the fiscal year.

Thanks, guys.

Nice quarter again.

Thank you.

Thank you.

Once again, if you would like to ask a question, please press, star, one, on your touch-tone phone.

One moment please.

Thank you.

you may ask your question.

And please state your company name.

Yes,

Securities.

I'm sorry, gentlemen, I was on late.

So I apologize if you already answered this question.

What kind of visibility - can you just briefly go over what kind of visibility do you have about Q4 PC demand and the demand for disk drives from either OEMs or your non-OEM channels?

You're right.

That question was asked and answered, but I'll answer it anyway.

Q4 PC demand we expect, from a drive demand perspective, again, somewhere in the five to 10 percent range, which is quarter-over-quarter growth, sequential growth.

And, again, that's a little more muted than a traditional Q4, but then again it's a pretty big market.

So from our perspective that's pretty reasonable growth.

OK.

Thanks.

Thank you.

At this time, I show no further questions.

I would now like to turn the call over to Mr. Matt Massengill.

Thank you.

And I appreciate you all joining us this morning.

In summary, we certainly believe that we've been able to consistently provide profitability in a large consolidating industry.

We have a strong balance sheet, as strong as it's been in a long time.

We're well aligned with high-performing customers.

I think an excellent business model leverage for future revenue growth, and a seasoned and stable management team.

And thanks to the entire Western Digital organization for a job well done.

Looking forward to updating you all next quarter.

Thank you.

This concludes the Western Digital conference.

Thank you for your participation, and you may disconnect at this time.