威騰電子 (WDC) 2009 Q1 法說會逐字稿

Good afternoon, and thank you for standing by.

Welcome to Western Digital's first quarter financial results for fiscal year 2009.

Later, we will conduct a question-and-answer session.

(OPERATOR INSTRUCTIONS) As a reminder, this call is being recorded.

Now, I will turn the call over to Mr.

Bob Blair, you may begin.

Thank you, I would like to mention as we begin that we will be making forward-looking statements in response to your questions concerning our business model, our ongoing research and development investments, our potential extension and for the gaming market and hard drive industry for the December quarter, and cost improvements from our media operations, fiscal 2009 capital expenditures, use of our cash, seasonality of the hard drive industry and the financial outlook for the December quarter.

Including our revenue, gross margin, operating expenses, net interest expense.

Tax rate share count and earnings per share expectations.

These forward-looking statements are based on management's current expectations and are subject to risks and uncertainties and could cause actual results to differ materially, including those listed on our 10-K, followed by the SEC of August 20, 2008.

As well as the additional risk factors in the press release as reported as exhibit 99.1 to the form 8-K we furnished to the SEC today.

We take no obligation to undertake to update the forward-looking statements to reflect new information or events, and you should not assume that comments we make are still valid.

I also want to note copies of today's call will be on the investor relations section of Western Digital's website at the conclusion of the call.

I would like to turn the call over to President and CEO, John Coyne.

Thank you, Bob.

And good afternoon and thank you for joining us today.

I am pleased to report that WD again delivered profitable growth in the 1st quarter in an environment of subdued demand.

Looking at the WD served markets for 2.5 inch and 3.5 inch ATA hard drives in the September quarter and including the fourth week, the market grew 15% both year on year and sequentially.

However, we believe that a comparison based on 13 weeks is more useful in trying to understand the impact of current macroeconomic conditions on seasonal market demand.

On the 13 week basis, our served markets grew by 10%.

Both sequentially and year-over-year to 131 million units.

While this is substantially below the average 20% year on year growth rate of the last three years, it is worth noting that HDD storage remains one of the few markets overall that is demonstrating significant year-over-year growth in the face of current macroeconomic conditions.

The 2.5-inch market continues to grow strongly, up 22% sequentially to 61 million units.

The 3.5-inch market contracted by 7% year on year and grew 2 percent sequentially to 69 million units.

In this environment, WD continued to out perform the market.

Our unit sales for the quarter were up 34% year on year and 12% sequentially to 39.4 million units.

We grew 2.5 inch shipments by 147% year on year and 25% sequentially to 14.6 million units.

We grew our 3.5-inch shipments 6% both year on year and sequentially to 28.4 million.

WD's hard drive revenue was up 22% year on year and 7% sequentially at $2.1 billion.

By presenting customers with a compelling product set, being selective in product market mix and being responsive in availability and by maintaining focus on quality, efficiency, cost and execution, we again grew profitably in Q1 demonstrating the strength of the WD business model and the WD's team and execution.

In challenging conditions, we delivered gross margins in excess of 20%.

An increase of 180 basis points year on year.

Controlled operating expense to 9% of revenue and generated earnings per share of $0.93.

Continued close attention to working capital management produced inventory returns of 14 and generated an ending cash balance of $1.2 billion.

Finished goods inventory was maintained flat as a percent of sales both year on year and sequentially.

While we controlled inventory in the component distribution channel in the low end of the normal four to six week range.

We continued to realize return on our ongoing targeted R&Dinvestments with new product shipments in the 1st quarter including the second generation WD caviar green hard drives with significantly improved power, efficiency and performance.

The WD share space, high speed network storage system that provides cost effective system storage of up to four TERA bytes for small home and office networks.

An expanded enterprise product line, with the addition of high capacity, high performance WD RE3, 750 gigabytes and one TERAbyte 3.5 inch SATA hard drives, and the new 3.5-inch and 3.5-inch compatible VelociRaptor hard drives, the latest additions to the 10,000 RPM SATA drive series.

The WD Scorpio blue, 2.5 inch notebook hard drive family with capacities of up to 150 gigabytes and extending the leadership position and most aerial density products in mass production today.

Off the same platform, we also introduced the 500 gigabyte My Passport portable USB drives for easy storage and portability of music, photos, videos and data files.

Our strategic initiative to focus on the 2.5-inch business is enabling us to participate strongly in this, the fastest growing market segment for hard drives for high performance, and mainstream notebook PCs to external storage devices to the emerging notebook market, an incremental opportunity for hard drives.

We continue to assess the appropriate timing to extends our 2.5-inch expertise and value proposition to the gaming market.

Now, let me briefly address our view of the hard drive industry in the context of the current macroeconomic environment.

The deterioration in the economy has led to a slowdown in both business and consumer spending.

Most noticeably in big ticket items such as housing and automobiles.

To a lesser degree as we look at products with significantly lower price points.

We have seen dampening of demands in the September quarter and expect conditions of subdued demands to continue into the December quarter.

With the industries strongest season.

At this point in the quarter, we have limited visibility as customers are unwilling to commit to the usual demand profile early in the quarter as they focus on reducing inventories and preserving cash, in light of broad concerns on both demand and credit availability.

Having said that, the WD business model is very adaptable due to our focus on high velocity and low cost.

We watch demands very closely in each of the markets and adapt accordingly.

When we see pockets of weakness we shift focus and adjust bill plans and mix quickly.

We continue to plan strategically for the long term and optimize tactically in response to short term conditions.

Accordingly, we have already lowered the build plans to meet the adjusted profile for the December quarter to ensure we don't build unnecessary inventory as we enter the seasonably slower calendar 2009.

If we exceed the demands in the week ahead we will chase the volume and do our best to meet customer requirements.

Thus far in the quarter, the overall industry build seems well aligned with demands.

Tim Leyden will provide the detailed report on the September quarter and review the outlook for the second fiscal quarter.

Tim?

Thank you, John.

The WD team once again delivered strong results in the September quarter.

As we continued to pay attention to the business fundamentals of the supply demands balance, cost management, fixed asset efficiency and conservative cash and working capital management.

The macroeconomic conditions during the quarter resulted in a more subdued growth uptake in September than what we have seen in previous years.

Revenue for the quarter was $2.1 billion up 19% from the prior year, hard drive revenue was up 22% from the prior year and 7% sequentially.

And hard drive shipments totaled 39.4 million units, up 34% from the prior year and 12% sequentially.

Average hard drive selling price was approximately $53, down $3 from the June quarter, and $6 from a year ago quarter.

Our Q1 ASP reflects the ready availability of comparable products from most competitors across the product range compounded by the continuing competitive pricing environment.

We shipped 14.6 million, 2.5inchdrive in the September quarter as compared to 11.7 in the June quarter, and 5.9 million in the year ago quarter.

These increases were driven by continued strength in PC and external storage demands.

In consumer electronics we shipped 3.9 million 3.5-inch drives for use in digital recorders for the September quarter.

4.1 million in the June quarter and 3.7 million in the year ago quarter.

Sequentially, desktop showed sustained growth and branded revenues were flat and sales of our enterprise products were in line with our expectation.

Hard drive revenue channel was 56% OEM, 26% distribution, and 18% branded products in the September quarter.

Compared with 57%, 24% and 19% in the June quarter.

And 50%, 31% and 19% in the year ago quarter respectively.

There was one customer namely Dell, that comprised more than 10% of total revenue.

The Q4 geographics of our hard drive revenue was 22% Americas, 29% Europe and 48% Asia.

As compared to 29%, 25% and 46% in the June quarter.

And 34%, 33%, and 33% in the year ago quarter.

Our continuing strength in Asia is driven by our increasing 2.5-inch shipment and this is the region where the product is requested and integrated by our customers, many of these drives are incorporated in computer project that are marketed and sold as and unfold in other regions.

Our growth margin percentage for the quarter was 21.1% versus 21.3% in the June quarter and 18.3% in the year ago quarter.

This gross margin was achieved despite the competitive pricing through excellent team execution of improvements in cost, resource utilization and product mix, together with increased volume.

Our media operation continued to perform in line with our expectation and we are on track to achieve the 300 basis points cost improvement that we anticipated by the end of the December quarter.

Operating expenses totaled $190 million or 9% of revenue.

Up slightly from the June quarter.

As a result of increased R&D spending.

As compared to the prior year, R&D is higher due to the integration of media operation and the additional of in-house hard disk controller and activities as well as expansion and product capability.

SG&A increases reflect investment in our sales and marketing infostruction in support of our expanding product line and customer base.

Prior year's operating expenses including $49 million of then processed R&D related to the acquisition of Komag: Operating income was $234 million, or 11.1% of revenue.

Interest in other nonincome operating expenses was approximately $4 million.

This includes $3 million of unrealized losses in our previous undisclosed statements in auction rate securities.

These investments totaled $25 million at the end the quarter.

Tax expense for the September quarter was $19 million.

Or approximately 8% of income before taxes.

For fiscal 2009 we expect the effective tax rate to rank between 7% and 10% as we take into account our respective continuing profitability and the global mix of income by geographic location.

Fiscal 2009 cash tax rate is expected to be between 1% and 2%.

The net income totaled $211 million or $0.93 per share.

Turning to the balance sheet, our cash and cash equivalents at the end of the quarter totaled $1.2 billion as compared to $1.1 billion at the end of June.

We generated $301 million in cash flow from operations during the September quarter.

Capital expenditures of the September quarter were $162 million and the noncash charges for the appreciation and amortization expense totaled $117 million.

We now expect fiscal 2009 capital expenditures to be about $750 million including about $150 million for the ongoing eight inch wafer conversion.

And this is down from the $800 million that we anticipated in the July call as we take into account the uncertain demands environment.

The depreciation and amortization for fiscal 2009 is expected to be about $475 million.

We repurchased 1.2 million shares of stock at a total cost of $35.6 million during the September quarter.

Since May 2004, we have repurchased 17.8 million shares at a total cost of $284 million.

For an average price of $16 per share.

A total of $466 million remains on the stock repurchase authorization.

We believe that in times of economic uncertainty and tightness of credit, that a robust cash balance is an important strength.

Going forward and against this backgrounds of prevailing market and credit conditions, we will be selective with the cash usage as we weigh opportunities between the growth of the current business, new market interest, strategic investments, share repurchases and prepayments of the outstanding debt.

As of the ends of September, we had 47 days of receivables outstanding, 26 days of inventory and 14 terms and 66 days.

And this resulted in the cash conversion cycle of seven days.

Before I address Q2 earnings guidance, I want to remind you WD will have a 14 week quarter and we will include the extra week in our fourth fiscal quarter that will end on July 3rd, 2009.

Now I will discuss the expectations for the 2nd quarter of the fiscal year, 2009.

First let me outline the market situation as we see it.

Historically, the December quarter sequential unit growth is 6% to 9%.

However, in light of the current uncertain macroeconomic environment, the tightening of credit worldwide, and the impact of the September quarter on current quarter demand, we have modest demands of market demand growth of approximately 5% for the December quarter.

We also expect an average setting price on an absolute basis, which show some degradation, contrary to historical trends.

And you should also note for year on year competitive purposes, our fiscal 22 revenue numbers last year included approximately $120 million of revenue for external media sales as we fulfilled Komac's preacquisition contractual obligation.

While we have continued our leadership in 2.5-inch hard drives with the September launch of our 500 gigabyte WD Caviar Blue hard drive, and My Passport mobile stores solution, most HDD competitors are in a position to provide other mainstream capacities along the 2.5-inch and 3.5-inch product lines in this quarter.

Taking this into account, we expect current quarter revenue for WD to be essentially flat quarter to quarter.

Consequently we are forecasting total revenues for the current quarter to be between it $2.025 billion and $2.51 billions.

We are moderning growth margins 19.3% operating expenses are projected to be approximately $190 million.

Our net interest expense is projected to be about $6 million.

We anticipate our tax rate to be 7% of pretax income and our share to be approximately flat with the September quarter.

Accordingly, we estimate earnings per share of between $0.80 to $0.90 for the December quarter.

Operator, we are now ready to open the call to questions.

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

(OPERATOR INSTRUCTIONS).

Our first question comes from David Bailey with Goldman Sachs.

Thank you very much.

Could you let us know which segments saw the biggest drop in bill plan versus the prior expectation it is for the December quarter?

I think the, if I look at demand, David, we continue to project pretty robust demands for the 2.5 inch segment and subdued demand in the 3.5-inch areas.

For the December quarter, on the CapEx side, can you talk about your priorities for CapEx and whether it is front end or back end loaded?

Our focus as far as CapEx is concerned, David, is to focus on flexibility.

So that we can build what we need to build as close as possible to the demand requirement, and we believe that's a better choice rather than building inventory linearly in advance.

Thank you.

Rich Kugele with Needham & Co., your line is open.

Just a few questions.

First, when you look at your branded share relative to what the market is doing, can you just comment on what you think the branding may do here in the quarter and how you are positioning yourself for that.

Sure, rich.

I think think we had a very good quarter from a last quarter and share and volume perspective, we grew significantly.

We did grow rapidly in our 2.5 inch segment which accounts for the flat quarter over quarter revenue which reflects the lower ASPs of 2.5 inch in general in the environment.

As we look forward into the coming quarter, again, we continue to see good traction; and external storage market.

So, now, as I said many times on these calls, we see this as one the younger appreciated areas for total storage demands and so far, it is exhibiting good strength in current macro environment.

And when you were talking about inventories being closely managed, were you referring to this space or broader than that to other OEMs.

We've managed every piece of inventory, whether it is raw material, a work in process, our own finished goods, the level in the channel, or retail.

We manage it all.

Okay.

Then, secondly on the overall plans and you are now number 1 in notebook share.

I believe you are number 1 in retail as well.

Where do you see, given the current environment.

WD's greatest opportunities for growth for the next 12 months?

Well, being number one in the two fastest growing market in the industry is a good positioning and continuing to roll out leadership products in those spaces which we absolutely intend to do.

And currently have a good position.

I am feeling very good about that.

As we look at the rest of the current product portfolio, the fundamentals of quality and availability, and high value, low cost capability give us strength in continuing to address those existing markets for which we have product lines.

And we then have opportunity in unserved markets today.

And the traditional enterprise market which we've indicated that we are well along the process of investing in the underlying technologies and portfolio to address that market in the future.

We look at opportunity as I mentioned in my remarks and looking at the opportunity in the gaming market given our leading industry cost position.

We see it as competitive but attractive market space and likewise, in the notebook market as it unfolds, and is clearly demonstrating a preference for the incorporating of hard drives into the system.

When the dust settles through the December quarter, we are going to be somewhere in the 70% to 80% being shifted with hard drives.

We see that also, as an attractive market incremental market to the core markets.

Okay.

Lastly, just quickly on the overall market, do you think that the December quarter is the cross over point for when notebook HDDs are shipped more than desk top 3.5 inch?

Or do you think there is enough branded consumption of 3.5-inch to maybe stall that for a little bit in.

It will be, it will be in the current fiscal year.

And whether it is by the end of December, who knows.

We don't much care.

And that our fundamental investments in technology are addressed all markets.

And our investments in manufacturing.

Our investments in infrastructure and supply base are highly leveraged in terms of their ability to be used for either form factor.

So, we are very comfortable about being able to respond to whatever rate of change there is as they cross over.

Okay.

Great.

Thank you very much and well done.

Thanks.

Mark Moskowitz with JPMC, your line is open.

Two questions please.

Can you just help us out.

It's loaded question and I am trying to reconcile your comments relative to your peer's comments yesterday.

They said they stepped into the fog and they are concerned about the macro and yet October is exhibiting the usual buzz.

And you are saying you have already seen subdued demand and weakness.

Can you help us understand that?

Sure, Mark.

In September, we saw demand not stepping up to meet the same seasonal up tick that was typical of a September in a Q1.

That's probably the first large manifestation of the impact of the current macroeconomic environment.

We see that carrying over to a degree into the October and our expectations for out bound and that people are managing their inventories more closely, right throughout the chain and people are recognizing that in these kind of environments cash is king.

And utilizing their cash on their credit lines to support velocity rather than to support inventory is the right use of their resources.

So we are seeing lead times coming in.

Shortening.

People leaving the decision making on what to buy and when to buy it until they look at the demand side of of the equation.

And good, you have seen our guidance.

We are looking at flat to the revenues which implies volume increase, I think Tim said 5% on a sequential basis and we are expecting market growth, one of the few markets to exhibit growth in these times.

So I don't think we are inconsistent at all.

Thank you.

The second question, they have done a great job and flexing the model and consistency with respect to the operating metrics.

I want to get a sense of how flexible are you if we do see a really subdued demand environment over the next couple quarters.

And from the external suppliers out there will have some difficulties.

Will you be more apt to leverage TDK in term of them being stuck in a position to try to move volume, or you would source your head's up more externally if you get good price breaks there?

I think the question is more about or the answer.

Is more about how we closely manage inventories.

That is not just in our own shop and then in finished goods.

It is into the supply chains.

And the signals we are giving the supply train and the level we are getting them dressed up to go to the party.

And so we manage the entire supply chain footprint.

Both well and closely.

So, I think our supply chain partners are all pretty much aligned with our plan.

And our supply chain, because it is routinely exercised along that model, tends to respond faster to the environment once they get our signals.

As to moving our sourcing model, no, we have a pretty well established long term strategic sourcing model that addresses particularly technology partners for the value they bring to us in assurance of execution on the introduction of new products and new aerial density points.

That's the value they bring to the party.

The internal manufacturing and bringing the fundamental low cost.

Thank you.

Christian Schwab with Craig-Hallum Capital Group.

Great.

Thanks.

Great Quarter.

Our recent checks have suggested that Sea gate, who is very aggressive in pricing the last few quarters became a little more reasonable with pricing towards the end of the September quarter and so far in the quarter has continued to be a little more reasonable than they say they were, 10, 12 weeks ago.

Would you say that you have seen that as well?

Current price levels of the industry, we have seen pretty significant takedowns over the last three quarters on a quarter by quarter basis.

And there sure is a question of how long can our competitors continue to make such poor returns on their investments.

By limiting those returns through very aggressive pricing.

I don't know the answer to that question.

I do know that in the environment over the last three quarters and the environment we anticipate for the quarter, Western Digital will continue to deliver the kind of industry lading results we have demonstrated today.

Fabulous.

And just on, could you give us any thoughts on all the rumors regarding consolidation in the industry and what your thoughts are there.

Well, you know our long-standing policy is not to comment on such rumors.

We do believe that the history of the industry suggests that in times like these, where demand falls below the traditional demand curve for a period of time, that puts pressure on the weaker participants and tends to result in consolidation.

Again, we don't believe that consolidation is necessary.

We make a very nice living in this business with the business model that we developed and it could be beneficial.

Great.

One last question.

Just on the component side.

And running very lean inventories in the prepared comments.

You said you were running raw materials and components at very lean at four weeks rather than six weeks.

Did I hear that correctly?

Not quite.

The comment I made on inventory was that our finished goods inventory is flat both sequentially and year-over-year as a percent of sales, our channel inventories of the distribution channel is in the low end of the four to six week range.

If you take the Tim's comments on overall inventory at 14 turns, that's as we are consistently, we carry the lowest inventory in the industry at the highest velocity and therefore, the highest ability to respond to change and opportunity.

Fabulous.

Thank you.

Our next call comes from Sherri Scribner with Deutsche Bank.

Thank you.

I wanted to dig a little into the declines this quarter if you could tell us a little about where pricing was most aggressive?

Was it 2.5-inch that we have seen for awhile or did you see pricing get more aggressive in 3.5-inch?

And in the December quarter, you expected to see some degradation in ASPs.

Would you expect similar levels down 5% or 6% and Sea Gate suggested we would see similar, and some color would be helpful.

We pretty much saw competitive pricing right across the board.

And 3.5, a little more than 2.5.

And we anticipate that in the December quarter.

Because all competitors at this stage have ready availability almost right across the the line up and expect it to be competitive and at the high end of what we normally see.

Above the high end.

Then, just quickly, are you seeing a negative mix in your product profile in terms of drives that are dressing the net book market.

Are you seeing a shift down and how is demand for high capacity drives right now?

Demands for high capacity is good.

Certainly, the netbook is kind of by definition a low capacity play although in this context and the range of low capacities is from 80 to 160 gigabytes.

And so, we are seeing pretty good mix across the entire business.

As we continue to grow the business, we have been mixing down, because of our initial strength in the very high capacities when we have them and no one else could produce them.

So, as the other folks have come to the table, with the 250 gig capacity points and then the 350 capacity points, our overall mix has become more reflective of the total market demand.

Again, we anticipate that will richen up a little bit as we go into the December quarter shifting the 500 gigabyte.

Thank you very much.

Scott Craig with Banc of America, your line is up.

With the gross margin guidance for the December quarter, can you give us the pushes and pulls on it on a quarter over quarter basis.

How you see it playing out and in the 2.5-inch notebook space.

Do you feel there is opportunities on a sequential basis over the next couple of quarters to gain share or do you think they'll be feeding share there as they have some more competitive products coming out in that space, thanks.

As far as the December gross margin is concerned, I think the big push will be on supply demand balance.

So, consequently, I think there is enough supply out there.

And people have comparable product cross the range.

And so, we expect that it will be pretty competitive pricing.

We will combat that true cost.

And efficiency and utilization.

And by being selective in how we approach the different pockets of weakness and pockets of strength.

And so, we think it will be pretty much as you were.

I think in your 2.5-inch question, the position there.

We believe share is a rule of customer activity and how the customer perceived the value that we are offering.

To date, our customers have been demonstrating that they are very happy with the value proposition that Western Digital brings whether it is in high capacity drives or availability on demand or superior quality.

Whether it be in our ability to continually reinvest in future technologies, future product breadth.

And significant high performance capacity and the development of the ongoing supply chain.

These are all things that our customer look at in deciding where to place their business.

Price is one element.

We believe we have a strong portfolio, right across the board and a particularly strong portfolio in the 2.5-inch environment where we have been very focused over the last five years in building our current position.

So, we would, but wait until the customers demonstrate the appeal of the value propositions.

Okay.

Thank you.

Thank you, Katey Huberty with Morgan Stanley.

Your line is open.

Can you help us reconcile the five point difference between your forecast of the market growth rate in the 3rd quarter versus Sea gate's.

It doesn't seem like one week would make that much of a difference.

That's a difference in growth rate.

If you are run the numbers, in our served market which is 2.5 inch and 3.5 inch ATA drives, the 14 week number was 136 million.

The 13 week number was 131 million.

Off a base of 119.

Okay.

You don't think anybody overshipped late in the quarter?

The difference is the one week.

Yes, I think the 13 week quarter profile was very traditional, very seasonal.

But a little softer right through September, than traditional, and but still, a similar shape.

Okay.

Thanks.

Mr.

Lamb with Intergrowth Capital Partners your line is open.

First question has to do with Circuit City.

Will that have an impact on your December quarter, given the problems at Circuit City?

And second question I have, have you seen an impact given your competitor.

And refresh their branded extend products.

Have you seen vacuum packed, Your passport.

and My Book business.

Okay.

As far as commenting on the customer, you called out, we don't comment on specific customers.

Well, would that have any impact on your business, if you know.

Well, theoretically, when demands is demand and customers want the product they will buy it wherever they can buy it.

So, it doesn't really matter whether there are specific customers out there getting the product.

There is demand for the product on an overall basis.

And customers will demand that product wherever.

And as far as the competition, impact on brand is concerned, we have a very competitive line up, and we actually, it is a very competitive space and we believe that our product line up is broad.

And is capable of continuing to be the demand for the customers.

No impact so far yet?

That's correct.

Not that we have seep.

Okay.

Great.

Thank you.

Rich Kugele with Needham Company, your line is open.

A couple of follow up questions.

On the CapEx side in particular, of the six hundred million that is not related to the wafer fab, can we break it down to understand where the spending is going.

Are you assuming some level of market growth that you need to have capacity for in that or is that, I mean, what is maintenance CapEx now?

Any granularity on what the 600 should be looked at as.

We have been pretty specific about what our CapEx model is.

It is in the 17% percentile region and we are continuing to execute our business.

We add capital.

And we take advantage of efficiencies and when we see there is a need to add capital.

And we continue as we have done for many years.

We continue to take those efficiencies and cut out capital as we see there isn't a need for it.

I think it is, we are being conservative relative to the future.

And it is more or less at this stage.

It is business as usual.

And we are as I said, we are paying attention to be inflexible.

With capital in order to build what the customer need.

Okay.

Lastly, on growth into '09.

Obviously not to give points to guidance or something, but 5% growth, even if the market does do that, it is materially below any type of normal seasonality.

Does that change the dynamics for the March quarter as well in your mind and do you think the approach of down and down again is different or how should we think about modeling this?

Well, at this stage.

We are operating with limited visibility.

And we will have to see what happens in the balance of the December.

And see what happens with inventory bills.

And what Christmas is like.

And I don't think there is any great visibility out there, that anybody has great visibility.

What we are seeing is that people are being cautious about showing their hand and their demand profiles.

And not giving the forecasts like they used to.

Thank you very much.

I think we have no more questions.

So in closing, I want to thank the WD team.

Our employees, our supply partners for delivering another excellent quarter.

We remain very encouraged by the long market capabilities for the growth in the years ahead and confident in our ability to make the WD business model work effectively in all market environments.

I would like to thank you for joining us today and I look forward to keep you informed of our progress.

Thank you, this does conclude today's conference.

You may disconnect at this time.