Bob Blair - Investor Relations John F. Coyne - President, Chief Executive Officer, Director Tim Leyden - Chief Financial Officer, Executive Vice President - Finance

Mark Miller - Brean Murray, Carret & Co. Richard Kugele - Needham & Company Richard Kaiser - Sanford C. Bernstein David Bailey - Goldman Sachs Steven Fox - Merrill Lynch Sherri Scribner - Deutsche Bank Anthony Lescrit - JP Morgan Aaron Rakers - Wachovia Jeff Brickman - UBS Keith Bachman - BMO Capital Markets Joel Inman - Robert W. Baird Jayhin Garani - Standard & Poor’s

Good afternoon and thank you for standing by. Welcome to Western Digital's second quarter financial results for fiscal year 2008. (Operator Instructions) Now I will turn the call over to Mr. Bob Blair. You may begin.

Thank you. As we begin, I would like to remind you that we will be making forward-looking statements in our comments and in response to your questions concerning: supply and demand conditions in the hard drive industry; growth opportunities and WD’s strategies to address these opportunities; the planned volume ramp of our 250-gigabit per square inch technology; beliefs regarding our future capital expenditures as a vertically integrated hard drive manufacturer; our growth and pricing expectations; expectations regarding our bridge financing facility and future longer-term financing; and our current financial outlook for the March quarter. These forward-looking statements are based on management’s current expectations and are subject to risks and uncertainties that could cause actual results to differ materially, including those listed in our 10-Q filed with the SEC on November 6, 2007, as well as the additional risk factors reported in the press release included as Exhibit 99.1 to the Form 8-K we furnished to the SEC today. We undertake no obligation to update our forward-looking statements to reflect new information or events, and you should not assume later in the quarter that the comments we make today are still valid. I will now turn the call over to Western Digital President and CEO, John Coyne. John F. Coyne: Thanks, Bob. Good afternoon, everyone. After my remarks, Tim Leyden will review our December quarter performance in detail and address our outlook for the March quarter. A year ago I spoke to you for the first time as CEO and outlined my commitment to continue the pursuit of profitable growth. I am happy to report that our December quarter results complete a calendar year of tremendous achievement by the WD team, a year in which we delivered industry-leading growth and financial performance, and during which we significantly strengthened our technology position and the fundamental WD business model. In calendar 2007, we increased revenues by 38% and earnings per share by 56% compared with calendar 2006. More importantly, we have built momentum throughout the year and we exit the December quarter with revenue up 54% and earnings per share up 137% compared to the same quarter last year. Additionally, we maintained the financial asset management discipline which is a hallmark of WD, applying our expertise to the newly acquired WD media operation cycle times, and inventories, while also continuing to improve in head and drive operations, resulting in a sequential increase in inventory turns from 12.6 to 14.8. Hard drive finished goods inventory at the end of December was down 2% year-over-year, while we still achieved 54% revenue growth with consistent and responsive customer support. Capital spending at $332 million year to date is also disciplined and tracking in line with the previously announced reduction to our annual capital plan. I want to take this opportunity to acknowledge the outstanding contribution of the entire WD team, the tremendous support of our supply partners, and the increasing preference of our customers for WD’s value proposition. Our high quality, high reliability products, our flexible and responsive service, our efficient large-scale operations, our investments in technology, capacity and capability, and our commitment to continuous improvement all contributed to these superb 2007 and December quarter results. WD’s performance reflects that of a highly-motivated team operating with passion, taking appropriate and rapid action, focused on productivity, demonstrating relentless perseverance and innovation in technology, products and process, and balancing the needs of our customers, suppliers, shareholders, employees and the communities in which we operate with integrity. Opportunity is being created by a continuing surge in demand for traditional computing-related storage, further enhanced by emerging storage demand driven by rich content distributed over the Internet and personal content arising from the conversion of photography, audio and video from analog to digital technologies. For calendar 2007, demand for hard drives grew over 15% on a unit basis and 67% in total HDD storage capacity for a total of approximately 88 billion gigabytes of HDD storage. In the December quarter alone, units grew 20% and total HDD storage capacity expanded 70% versus the year ago period. This strong growth in units and total HDD storage capacity is expected to continue for the next several years. WD is capitalizing on growth opportunities through thoughtful strategies which we have executed very effectively in recent years. I would like to briefly highlight a few of these key strategies. Five years ago, we identified that the market for 2.5-inch hard drives would become an increasingly important segment of the overall market. We invested consistently and patiently in people, technology staging, product and process development and entered the market in September 2004. Step-by-step, we began to build applications knowledge, business understanding and customer acceptance. We maintained focus on our technology and reached a point in May of 2007 where we began volume shipments of the 250-gigabyte capacity, the industry’s highest capacity two-disk 2.5-inch drive at that time. In late October, we followed up with our 320-gigabyte capacity, again leading the industry to volume with advanced technology and capacity. This technology and product leadership is underpinned by high yielding, high quality, low cost design and manufacturing. In the last year, we have tripled our output of mobile drives, shipping 8.7 million 2.5-inch hard drives in the December quarter. Our technology and product momentum in this space, allied to our acknowledged reputation for quality, reliability, availability and responsiveness, bodes well for continued growth in this, the fastest-growing segment of the storage industry. For many years, Branded Products was a successful but small element of our total product mix, consisting mostly of internal drive upgrade kits for desktop computers. About three years ago, demand in this category began to expand dramatically, driven by Internet content and the conversion of audio, video and photography from analog to digital, allowing consumers to process and store this content on computers and similar devices. Again, we made timely and appropriate investments in people to understand the emerging market, to design appropriate products, to establish the right channels and partners, and to lead and inspire our teams. Two years ago, Branded accounted for just 5% of sales. Today, Branded represents 18% of our hard drive revenues and WD is the leading storage appliance brand. Adding to our presence in the Enterprise SATA market, we launched our Green Power line of drives mid-year and this product concept is finding significant acceptance in the enterprise customer base, addressing the need to reduce the power demands of large commercial storage farms. During 2007 we made three very important, long-term, strategic investments. The first, with the acquisition of Komag, provides the ability to design and manufacture our own media. Just like our head acquisition in 2003, WD Media is playing a key role in driving our future technologies, as well as further improving our cost model and our supply security and flexibility. The second was an asset purchase of Senvid, a software company, to enable the further broadening and enhancement of our Branded product offerings. The third involved the opening of a design center in Longmont, Colorado adding a significant new talent pool to the WD engineering team to fuel future growth. We enter 2008 with strong positions and momentum in all our served business segments. We are ramping production of our industry-leading 250-gigabit per square inch technology, first deployed on our 2.5-inch products last October, and now on our 3.5-inch product platforms, creating a common, highly leveraged, efficient, high-volume technology platform for our component and drive operations for the year ahead. We will also see the full impact of our internal media operations as we move through the year. We continue to explore opportunities to broaden our product portfolio in existing markets and to enter new and adjacent market segments as it makes business sense. We are making appropriate investments to stage for these opportunities. Consistent with WD tradition, we will make specific product announcements only when these products are available and shipping in volume. The future for our industry looks bright. Demand for storage capacity is forecast to continue growing at some 60% annually which, when addressed with areal density growth of 40% plus, translates into HDD unit growth in the high teens. This demand is strong and broad based, with many new applications for our technology. With an appropriate business model, good execution, aggressive cost management, great products and a rational approach to pricing, tremendous value can be created by addressing this surging demand for high capacity storage. While there may be concern about the impact of macro economic conditions on demand for storage, we have yet to see any effect on actual usage or order rates or on forecasts from our customers. The availability of weekly industry information on inventories, sell-in and sell-thru to all channels enables us and the other industry participants to act swiftly whenever we see an imbalance between demand and supply. With WD’s high velocity, low inventory supply chain and manufacturing model, we have historically demonstrated an ability to react to both upside opportunities and downside challenges. With our lean, efficient OpEx model and our low cost operations, we have the lowest relative breakeven point among major players in the industry. As an efficient, vertically integrated company, WD has been able to consistently attain high levels of profitability and return on capital, which has allowed substantial investment in future technologies, products and capacity. We expect to continue to grow profitably and we will continue to price our products with all customers and in all market segments so as to enable continued investment and the long-term sustainability of our business. We have the passion, the people, technology, product breadth, manufacturing scale, quality, reliability and customer relationships in place and 2008 offers an unprecedented opportunity for profitable growth in all the business segments which we address. WD’s positioning has never been better. However, as in the past, our success depends largely on our own execution against the opportunities and challenges that emerge in an ever-changing market. Tim will now provide details of our December quarter performance and our outlook for the March quarter. Tim.

Thanks, John. We are very pleased with the results for our December quarter. They reflect crisp and timely execution by the WD team, strong demand for hard drives, and a rational competitive pricing environment. Our operational flexibility enabled us to quickly react to a number of attractive market and product mix opportunities throughout the quarter. These opportunities continued to arise after our revised guidance in early December, resulting in additional upside. Coupled with continued progress on the integration of our media operations and our ongoing focus on asset efficiency and cash management, these factors led to exceptionally strong revenue, earnings and cash flows in the December quarter. Revenue for our second fiscal quarter was $2.2 billion. This includes $120 million from external sales of media and substrates. Hard drive revenue was up 46% from the prior year, and hard drive shipments totaled 34.2 million units, up 40% from the prior year. Average hard drive selling prices were approximately $61 per unit, up $2 from the September quarter and up $3 from the year-ago quarter as a result of firmer pricing, due to the strong demand for hard drives coupled with an improved segment and product mix. The percentage of our hard drive revenue coming from non-desktop PC applications increased to 54% in the December quarter, as compared to 53% in the September quarter and 42% for the year-ago quarter. We shipped 8.7 million 2.5-inch mobile drives in the December quarter, as compared to 5.9 million in the September quarter and 2.7 million in the year-ago quarter. Demand for mobile storage continues to increase and our quality, technology leadership, product offerings, operational flexibility, and responsiveness have solidified our position as a valued partner to PC manufacturers, major distributors and retailers. In consumer electronics, we shipped 4.1 million 3.5-inch drives for use in digital video recorders in the December quarter versus 3.7 million in the September quarter and 2.7 million in the year-ago quarter. This market continues to offer long-term growth opportunities and demonstrates the potential of non-PC based consumer electronics systems incorporating hard drives. However, pricing in the DVR market does not currently provide adequate returns to justify incremental capacity expansion to fully support these growth opportunities. Desktop product shipments were better than expected. Unit shipments were up 10% from the September quarter as compared to 5% for the market as a whole. During the quarter, while we honored our pre-existing OEM commitments, we focused on satisfying upside demand from the distribution channel first, as desktop OEM margins, like DVR, are less attractive than other market areas. Sales into the enterprise market, our highest margin segment, were in line with our expectations. Continued growth in shipments of hard drives for non-desktop PC applications has led to a substantial improvement in the diversification of our revenue and customer base. Hard drive channel revenue was 48% OEM, 34% distribution and 18% branded products versus 50% OEM, 31% distribution and 19% branded in the September quarter; and it was 46% OEM, 37% distribution and 17% branded in the year-ago quarter. These percentages exclude external sales of media and substrates, which totaled $120 million in the December quarter, or 5% of revenue, and $40 million in the September quarter, or 2% of revenue. Revenue for each of our top five customers increased from the September quarter. However, because of the increased diversification of our revenue base, again no single customer comprised more than 10% of the total. The Q2 geographic split of our hard drive revenue was 32% Americas, 32% Europe and 36% Asia, as compared to 34% Americas, 33% Europe and 33% Asia in the September quarter; and it was 38% Americas, 32% Europe and 30% Asia in the year-ago quarter. These percentages also exclude external sales of media and substrates. Our gross margin percentage for the quarter was 23.3% versus 18.3% in the September quarter and 17.9% in the year-ago quarter. This increase was a function of the favorable industry conditions I referred to earlier and our ability to quickly react to the opportunities for volume increase, pricing and mix optimization presented by this stronger demand. Our manufacturing throughput and costs also improved through operational efficiencies, higher utilization and a higher mix of products based on newer, more cost-effective technologies and the contribution of media operations. I am pleased to report that the media acquisition was accretive to the December quarter, our first full quarter of operations. This is two quarters earlier than we originally forecast and is due to higher internal usage, higher external sales and more rapid progress in yield and utilization than originally contemplated. Operating expenses totaled $181 million, or 8.2% of revenue. This includes a full quarter of media operating expenses, continued investments in product and technology improvements, and higher incentive compensation associated with the more favorable financial results for the quarter. Operating income was $332 million, or 15% of revenue. Net interest and other non-operating costs netted to an expense of approximately $16 million. This includes about $8 million of losses on our investments in auction-rate securities, which I will discuss later. Income tax expense was $11 million for the December quarter, or approximately 3.5% of income before taxes. This includes the benefit of adjusting our year-to-date rate down to approximately 4.5%, excluding the Q1 non-recurring items. We now expect our rate for the full year will be in the 4% to 6% range. Net income totaled $305 million, or $1.35 per share. Turning to the balance sheet, our cash, cash equivalents and short-term investments at the end of the quarter totaled $967 million as compared to $851 million at the end of September. Cash generated from operations during the quarter totaled $519 million. Capital expenditures for the quarter were $169 million, and non-cash charges for depreciation and amortization expense totaled $111 million. For the first six months of 2008, our capital expenditures totaled $332 million, approximately $100 million of which relates to our 8-inch wafer fab conversion. We still expect capital expenditures for fiscal 2008 to be around $700 million, which is consistent with the reduced capital plan that we communicated to you during our first quarter earnings call on November 1st, despite significant increases in our volume. As previously indicated, this includes about $200 million for conversion of our head wafer fabrication facility and $100 million to upgrade our media technology. Depreciation and amortization expense for fiscal 2008 is expected to be about $400 million, including about $100 million for media operations. During the quarter, we retired the $250 million convertible debt assumed in the Komag acquisition through cash payments of $240 million and a further draw on our bridge financing facility of $10 million. As of the end of December, we had $760 million outstanding under our bridge financing facility. We are in the process of obtaining longer-term, unsecured financing that we expect will consist of a 5-year term loan and a revolving line of credit totaling $500 million to $750 million. As of today, we have received non-binding commitments totaling in excess of $700 million. We expect to pay off the $760 million outstanding under the bridge financing facility through a combination of these loan proceeds and existing cash balances. This refinancing transaction is being led by JPMorgan and Citibank. Our cash and cash equivalents of $917 million are invested primarily in readily accessible, AAA rated institutional money-market funds, the majority of which are backed by the U.S. government. As of the end of December, our short-term investments of $50 million included $43 million of AAA rated auction-rate securities. During the December quarter, the market values of some of the auction-rate securities we owned as of the beginning of the quarter were impacted by the macroeconomic credit market conditions. We reduced our investments in auction-rate securities from $197 million at the beginning of the quarter to $43 million as of the end of the quarter. As a result of these market value changes, we realized $3 million in losses on sales and $5 million of unrealized losses to mark the remaining investments to market. Since quarter-end, we have sold an additional $10 million at par, bringing our current net balance of auction-rate securities down to $33 million. These securities will likely be held for some period of time, until secondary markets become available. These investments are currently accounted for as available-for-sale securities. The market values of these investments are subject to fluctuation. At the end of each quarter, we will evaluate any changes in value to determine if they are temporary or permanent. Temporary changes are recorded in equity, while changes believed to be permanent are booked to the income statement. We did not repurchase any common stock during the December quarter. Since May 2004, we have repurchased 15.1 million shares at a total cost of $204 million, for an average price of $13.53 per share; $46 million remains under our existing stock repurchase authorization. Our cash conversion cycle was a positive four days, consisting of 45 days of receivables, 25 days of inventory, or 15 turns, and 66 days of payables outstanding. Now, I will move on to our expectations for the third quarter of 2008. We expect total revenues of between $1.925 billion and $2 billion. This represents an increase of between 37% and 42% over the prior year period. This revenue range includes $50 million from sales of media and substrates to external customers, down from $120 million in the December quarter as we complete our obligations to supply external customers. Historically, drive demand goes down sequentially from December to March by from 3% to 5%. However, demand for the December quarter was unusually strong for the industry. We grew volume, mix and pricing as a result of our ability to quickly react to this demand strength, our leadership position in certain markets, and significant productivity improvements achieved in the quarter. We view this combination of circumstances as extraordinary and unlikely to fully repeat in the March quarter. Accordingly, we are currently modeling a sequential decrease in the range of 6% to 10% in our hard disk drive revenue for the March quarter. As a consequence of the strength of demand and rational behavior in the second half of calendar 2007, the hard drive industry appears to have achieved an overall uplift in margins by all major participants. Our results demonstrate the profit potential for those companies with an effective cost structure who execute well, where all industry participants focus on profitability, cash generation and demand/supply management. Also, we continue to believe that our blended internal and external media supply model will deliver cost improvements at the gross margin line of up to 300 basis points by the end of calendar 2008. The accelerated progress of our media integration, our changing segment mix, and an expectation of continued rational market behavior now enables us to reset our gross margin model from our historical 15% to 20% range up to the 18% to 23% range. Gross margin for the March quarter is anticipated to be in the middle of our revised model, at approximately 20%. While this is down from the December quarter, it is up significantly from the 15.8% gross margin we reported for the March quarter of 2007. Operating expenses are projected to be approximately $175 million as we continue to invest in expanding our product and technology portfolio. Net interest expense is projected to be about $8 million, assuming no further investment losses. We anticipate our tax rate to be in the range of 4% to 6% of pretax income and our share count will be about 227 million. Accordingly, we estimate earnings per share of between $0.85 and $0.91 for the March quarter. Operator, we are now ready to open the call for questions.

(Operator Instructions) Mark Miller. Mark Miller - Brean Murray, Carret & Co.: Congratulations on a wonderful job done. It’s very impressive to me. I just wanted to talk a little more about Komag, and you say there’s still more room for margin improvement as we go through to the end of the year. What are you estimate that Komag being accretive this quarter added to your margins? Was it around 75, 100 basis points?

About 80 basis points. Mark Miller - Brean Murray, Carret & Co.: Okay. Second question; was there any change -- did you do more heads internally this quarter or was that flat roughly quarter to quarter in terms of percentage of total heads you did internally versus externally? John F. Coyne: I think roughly on a percentage basis, roughly flat from the prior quarter. Mark Miller - Brean Murray, Carret & Co.: Okay. Could you just break down the inventory for me? I know it’s up somewhat. It’s not unusual but could you break it down? And maybe you did that and I missed it in terms of finished goods and raw materials and work in progress.

Actually, our inventory turns improved from 13 to 15 in the quarter and finished goods were up from 151 up to 157 million, but as we indicated, that’s actually down from the same period last year. Mark Miller - Brean Murray, Carret & Co.: All right. Again, wonderful job. Thank you.

Richard Kugele. Richard Kugele - Needham & Company: Thanks a lot and I guess first, since it will affect your gross margin and my model, is Komag actually able to help you on some of these newer areal densities you are announcing, at least in the desktop side? Or are you buying those parts on the outside and using Komag for more the mainstream? John F. Coyne: Rich, we’re both in the June or May and October 2.5-inch programs and in the 3.5-inch 320-gig per platter that we just announced, we have capability on both our internal heads and media, as well as capability from our external suppliers. So we use a blend of both. Richard Kugele - Needham & Company: Okay, and then from a capacity standpoint, how long -- I guess a lot of the $100 million you’ve spent to date has really been just on bringing the media business up to a greater percentage perpendicular, but how long do you think it will be before you actually have to add capacity on that side? John F. Coyne: Some time, given that we expect to -- and the 300 basis point full year contribution on the cost side is driven from an expectation of yield utilization and throughput, increased capability from focus on a much narrower set of products. And we experienced, if you’ll recall, in the 2003-2004 experience of ramping the internal head capability, that a very significant contribution on yield and throughput capability came from rationalizing the product mix. Richard Kugele - Needham & Company: Okay. Thank you very much and well done.

Richard Kaiser. Richard Kaiser - Sanford C. Bernstein: I just wanted to inquire about a couple of comments you made pertaining to high velocity and high visibility. Historically in the storage disk drive markets, there have been a lot of volatility around pricing associated in part because of the distributor channel and I wanted to get your sense for if that has changed or not. You seemed in your comments to talk about more stability, more rational behavior, all major players. I just wondered if you could provide some color on that. John F. Coyne: Yes, I think over the years, the reporting from the distribution channel has been significantly improved in terms of its timeliness and overall encompassing of the entire distribution set worldwide. Recognize also at the same time the number of drive companies has reduced significantly and the concentration of product through large distributors has increased. So total visibility in the entire distribution channel has improved dramatically over the past several years. We now have visibility to sell in and point of sale data, as well as of course visibility to manufacturing inventories servicing the large OEMs on a weekly basis for the entire industry, and all industry participants have access to that data. I think our ability to manage demand and match with supply has been dramatically improved over the last several years. Richard Kaiser - Sanford C. Bernstein: Okay, great. And then just one follow-up; there was something I didn’t quite understand. It was a comment with respect to pricing, I think it was, of DVR and it did not warrant additional investment. Could you just clarify what you meant there? I’m sorry, I missed that.

That market is a bit below the set of returns that we would like to see and what we are doing about it is where it’s a two-sided proposition. We are obviously going to work on our costs in order to make it more attractive to the customers. We are also going to work with the customers in order to make sure that they are aware and value our value proposition that we bring to the table. So really what we are saying is that we are directing our capacity to the more profitable segments and parts of the business and that one is below what we would like to see. Richard Kaiser - Sanford C. Bernstein: Great. Just one final question, if I might, and that is now you’ve made a point about how the business model is much more diversified and this gives you more flexibility and I’m just wondering if, in the context of consumer spending, we should also see that as a greater risk here. John F. Coyne: I don’t believe so. I mean, if you look at the overall market data, typically most weight is given to the behavior of the IT and computing segment as it relates to potential hard drive sales. If you look at 2007 data, roughly 300 million PC systems shipped in 2007, while 500 million hard drives were shipped in 2007, so we’re getting an increase, a significant increase in the level of demand for large capacity storage devices that are not linked directly to the sales rate of PCs or industrial computing applications. Richard Kaiser - Sanford C. Bernstein: Great. Thank you. John F. Coyne: I think that augers very well for balance and opportunity as we look forward. Richard Kaiser - Sanford C. Bernstein: Thank you.

David Bailey. David Bailey - Goldman Sachs: A couple of questions, if I may; the first, could you comment on how much capacity you are adding this year? And do you have any idea what the expectations are for the industry versus that sort of mid- to high-teens unit growth that you are expecting? John F. Coyne: Well, I think our observations relative to industry capital, Seagate announced last week their intention to be very disciplined and frugal in relation to capacity investment. I think we’ve just reconfirmed that our capital plan, which we reduced by $50 million from 750 to 700 in our last call, that we’re sitting on the lower end, the 700 guide for our capital for the full year. So we are taking a very measured approach to capacity. The good thing is that the improved visibility we have into the demand and inventories in all channels gives us a much better informed base from which to make our capital decisions. We have also worked very hard in the past few years with our capital equipment suppliers, particularly as it relates to drive assembly capability and drive test capability, to shorten lead times so that we can react much closer to the visibility to true demand. And I think you’ve seen and the 2007 performance reflects all of those improvements in both visibility and execution of matching supply capacity to true demand. David Bailey - Goldman Sachs: And just to follow up on that on the visibility side, is your visibility longer range or is it more just a better idea of what’s going on in the short-term? John F. Coyne: I think it’s a combination of the two. I mean, on a long range basis, we’re looking at the fundamental underlying drivers that are generating the 67% demand profile that we’ve seen over the last couple of years for billions of gigabytes of storage. As we come closer in to customer forecasts, customer orders, inventory levels, we have the ability to look at how we should match against that emerging short to medium term demand profile. And the other element that has helped in this regard is that as the late 2006, early 2007 returns in the industry were inadequate to fund aggressive investment looking at capacity going forward. Our OEM customers are beginning to realize the need to be more longer term in their views, and so we’ve seen a number of our OEM customers entering into multi-quarter agreements with us now to secure that most critical of all items, which is availability, to support their business plans. David Bailey - Goldman Sachs: Great. Thank you.

Steven Fox. Steven Fox - Merrill Lynch: I was wondering, just looking at your outlook if you could talk about what you think happens to your branded sales as you go into the March quarter, since there’s not a lot of history there? What are your retail customers telling you? And then secondly, just getting back to that DVR comment, can you sort of quantify what that means in terms of your unit outlook going forward? Does it mean you hold steady at current levels or actually grow at a lower rate? I’m just trying to get a better feel for that. John F. Coyne: Let me deal with branded first. The first calendar quarter is typically a strong quarter for branded products, particularly January/February period where we get a gift certificate redemption kind of boost to the market after the Christmas shopping period. What we are hearing from our retailers right now is that although they have some challenges, storage and particularly WD-branded storage is a very bright spot for them in terms of their retail sales in the stores, so we’re very encouraged by what we see so far in the quarter. Steven Fox - Merrill Lynch: Thanks, and then on the -- John F. Coyne: The second part of the question was the CE space, the DVR. Again, the typical seasonality there is that it falls off significantly into the first calendar quarter, so typically volumes are down quarter to quarter. Our comment relative to margin contribution is more a question of what kind of capacity we put in place to support the July through December period next year, in 2008. Steven Fox - Merrill Lynch: Great. Thank you.

Sherri Scribner. Sherri Scribner - Deutsche Bank: I just wanted to explore a little bit more into your out-performance in the notebook side of the business. Do you feel like that’s OEMs coming to you because you have a superior areal density product or because you have a superior quality product? Can you maybe give a little detail there? John F. Coyne: All of the above, Sherri. I think the really interesting observation is that the vast majority of the notebook marketplace is still seeking increased storage capacity. Case in point -- the latest IDC preliminary data for the December quarter indicates that SSDs shipped in notebook computers reached some quantity short of 5,000 units for the entire quarter. Hard drive of capacities of 250-gigabytes and 320-gigabytes shipped over 3.25 million units, of which WD supplied the majority. Sherri Scribner - Deutsche Bank: Okay, great and then -- John F. Coyne: Technology is important in this marketplace -- good, high capacities are important in this marketplace and of course, you must deliver that leading edge technology with high reliability and high quality as a given. Sherri Scribner - Deutsche Bank: Okay. Thank you. And then in terms of if I look at your share now, I mean, you’ve gained significant share Q-over-Q, probably somewhere approaching 20% share of the notebook market. There’s a lot of players in that market. Do you think that you are tapped out in terms of future share gains? How much share do you really think you can get beyond where you are right now? John F. Coyne: Well, that will be an outcome for our customers to decide. All things being equal, you would think that with six players, there’d be one-sixth of the market for each. However, all things are never equal and our opportunity in that market is down to our ability to execute and to continue to delight customers with the right products that suit their product plans, and I believe we are very well-positioned to keep delighting our customers in that space. Sherri Scribner - Deutsche Bank: Okay, maybe just quickly, do you have any -- what do you think about these three-platter notebook drives that are coming out at 500-gigabytes capacity? Do you think there’s demand there? Do you think there’s any issues with those drives? John F. Coyne: Well, I think the -- as we do, I think it’s a strong endorsement of the view that there is a strong appetite for high-capacity solutions, both in the notebook and in the portable branded product space for 2.5-inch drives. So that’s the really good news. As I mentioned when I was talking about WD's future plans relative to markets, we announce products when we are shipping them in volume and we will continue to follow that practice. We will support our customers in meeting that currently insatiable appetite for large capacity drives for the notebook space. Sherri Scribner - Deutsche Bank: Okay, great. Thank you very much.

Mark Moskowitz. Anthony Lescrit - JP Morgan: This is Anthony [Lescrit] for Mark Moskowitz. Going back to the branded business, can you contrast the relative strength in the European versus the U.S. markets and what have you seen through January thus far? John F. Coyne: I think we are doing well in both geographies and consistent with our expectations relative to the seasonal patterns we have observed over the last couple of years. Anthony Lescrit - JP Morgan: Okay, and going forward, how much of the channel in OEM replenishment is supporting guidance for the March quarter, given the low base exiting December? John F. Coyne: We don’t really look at our replenishment in terms of -- we’re happy with where the inventories are today. If I look at the total industry inventories, and that would be manufacturers inventory that we have in our own facilities and in the customer OEM JIT hubs and in transit, and I look at the channel inventories that our distributors hold on an industry-wide statement, on a combination of 2.5 and 3.5 SATA and PATA drives, which is the served market for WD, the days of inventory for the entire industry supply chain were down 11% year over year as of the end of December, and as of the beginning of week three of the current quarter, we are down 13% on a year-over-year basis. So I think the industry is manufacturing at a rate that is in very good synchronization with the actual demand. I think the inventories are in a very good place and so WD is pretty happy with the environment right now from an inventory supply management perspective. Anthony Lescrit - JP Morgan: Okay, thanks and one last question -- what was your capacity utilization exiting the quarter and expectation for March? Thanks. John F. Coyne: Well, pretty full last quarter. We basically ran hot all quarter long and mixed to the best opportunities we could find in the demand space. We did not satisfy all available demand. Consequently, we expect to run pretty good utilizations through the March quarter. And understand under WD's model, we feel no compulsion to run our factories flat out. We run them efficiently. We take appropriate action to match hours worked and manning to demand levels but we do not need to run at 100% utilization to make money. In fact, we can run very significantly lower levels with that, so we match our supply to the demand that we see and we get visibility of that demand on a weekly basis and we’ll take appropriate actions. Anthony Lescrit - JP Morgan: Thank you.

Aaron Rakers. Aaron Rakers - Wachovia: Thanks for taking the questions and congratulations on the clean quarter. I would like to dive a little bit deeper into the gross margin line. You had said that 80 basis points from the Komag acquisition -- it would be very helpful to understand where the remaining sequential 420 basis points came from, be it mixed shift in terms of capacities. What I’m trying to get to is if I look at the mix of business towards mobile, are we starting to see mobile carry a better-than-average gross margin for the company?

Yes, you are, Aaron. If you look at what we’ve already indicated, enterprise is our highest margin product. Branded products is our next highest margin product and notebook comes pretty closely after that. And then there’s a bit of a gap between desktop and consumer electronics. Aaron Rakers - Wachovia: And so with that being said, as we roll into this next quarter, that 20% guidance roughly, that is factoring -- correct me if I’m wrong, you’re saying 300 basis points by the end of the year from Komag split across these next two quarters. With that being said, are you being a little bit cautious and seeing that come back due to pricing or why are you seeing that come back a little bit?

Actually, the difference between the 80 basis points and the 300 basis points is actually spread over four quarters because it’s the end of calendar -- Aaron Rakers - Wachovia: Okay, that’s good. Thanks for the clarification. And I guess the other thing is on the channel inventory trends, where are you at in terms of weeks of channel inventory for yourself and relative to that to the industry? John F. Coyne: We are sitting above the midpoint of our four to six week range. Aaron Rakers - Wachovia: Okay. Thank you very much.

Actually, on the four to six week range there, we will -- as we look at that, we are currently combining in that number both the bulk distribution and the branded products pipeline. So as branded products becomes a large amount of business for the industry and for ourselves, it’s likely that we will have to split that out going forward because the pipeline for branded product is in the seven to nine week range and the distribution bulk is in the four to six weeks range. Aaron Rakers - Wachovia: A final question, if I can jump in real quick; given your comments earlier, are you implying that for your notebook business -- what’s your average capacity for your notebook drives right now relative -- I believe Seagate told us that it was somewhere around 135. I’m trying to understand how much you are benefiting from just the technology leadership in that space.

We don’t publish what the average mix is but I will tell you that we did have a rich mix for the quarter and as we go into the next quarter, we don’t anticipate that that mix will be as rich because it will probably gravitate more towards the industry mix as there will be more participants in that, providing the higher capacity drives. Aaron Rakers - Wachovia: Okay. Thank you, guys.

Jeff Brickman. Jeff Brickman - UBS: I just wanted to ask a little more on the branded business. What do you see out there from the competition? And I guess more specifically, what advantages do you think you have that clearly have led to this solid growth? And do you think going forward that you can maintain a share position similar to what you see out there today? John F. Coyne: Well, I think the advantages we have were an early start, very good industrial design, and very good ease of use software and product configuration, and very healthy relationships with our partners in the channels that take us to market. So we’ve got a very strong position, very well-recognized by the consumer and we’re going to continue to try to capitalize on those strengths as we move forward here. Jeff Brickman - UBS: And do you see anything from the competition, or anything new out there that makes you think that it might be more challenging to maintain what appears to be a very high level of market share going forward? John F. Coyne: Well, I mean, competition is always tough in this business but we’re frankly more focused on the opportunities and the kinds of products and the markets and geographies and partners that we need to be choosing in order to sustain growth in that market and accelerate growth in that market than we are looking in the rear-view mirror to see who’s behind us. Jeff Brickman - UBS: Understood. And then, over on the competitive side in general, did you see anything in the way of increased price aggression at all towards the end of the year, or so far in this quarter, in January?

What we are seeing really in January so far is normal, typical pricing behavior. I mean, it’s always a tougher quarter than the Q2 quarter and we’re seeing exactly what we expect at this particular point. Jeff Brickman - UBS: Okay, great. Thanks a lot, guys.

Keith Bachman. Keith Bachman - BMO Capital Markets: Tim, to follow the last question, what are your like-for-like pricing assumptions for the March quarter?

We don’t actually give out like-for-like pricing but as I indicated, we’re expecting typical seasonal type of price decline, and that’s what we are seeing so far. Keith Bachman - BMO Capital Markets: Okay. Seagate -- on the notebook side, Seagate has the 250-gig notebook that they are shipping now. As you guys, you wouldn’t answer the previous question on your capacity points on the 2.5-inch, but can you indicate whether off of such a high base that you anticipate maintaining share this quarter, losing a little share, gaining share on the 2.5-inch side on a sequential basis? John F. Coyne: Well, as I indicated, we’ve been shipping the 250-gigabyte capacity since May of last year and have a substantial share in the 250. And we do expect to have, as more people join with the capability to address that capacity point, we do expect to see some pressure there. However, we now have since October the 320-gigabyte capacity, which gives us the opportunity to satisfy our customers’ needs, to continue to increase the product offering in terms of the storage capacity that they can offer in their high-end product mix. And so we are baking into our numbers the expectation that there will be other competitors at the 250-gigabyte capacity point, but we are expecting that we will see a significant move up to 320. We’ve already begun to see that happen. Keith Bachman - BMO Capital Markets: Okay, so 320 is still at a competitive advantage in your eyes for Western Dig? John F. Coyne: Absolutely. Keith Bachman - BMO Capital Markets: Okay. Tim, one last one for me -- rich cash flow this quarter. Your debt level is at 770-something and change. I know you are refining everything but as you think about the next three quarters, how will you think about applying the cash to pay down the debt versus growing the cash balance? How should we be thinking about the debt balances as we roll forward?

Well, it’s a term loan which gives us -- we’ll have a mix of revolver and term loan, and we are obviously -- we haven’t figured out yet how much of the refinancing is going to be revolver. We are still in negotiations with the banks about that but I mean, it will be -- what we will do as always is we will figure out what the most appropriate structure is and continue to take advantage of opportunities. Maybe if the share price, we still have $46 million left in the share repurchase authorization and if the opportunity presents itself and the market continues to give the sort of opportunities -- the macroeconomic market, I’m talking about -- continues to give the opportunities there, we would be opportunistic relative to buying back shares. Keith Bachman - BMO Capital Markets: Interesting. Okay, thank you.

Joel Inman. Joel Inman - Robert W. Baird: Can you talk a little bit about opportunities for further expansion in the enterprise market, with maybe new protocols or new product offerings? John F. Coyne: We have indicated that we have strong growth opportunities in all the currently served markets and those opportunities arise through the growth of those markets, as well as the opportunity to out-execute on quality, reliability, and customer service and products. And we’ve also indicated that there are other parts of the market -- gaming, high performance enterprise -- where we don’t currently compete and that it is our intention over time to be a full line supplier to the industry. Outside of that, we’ll announce products as we ship them. Joel Inman - Robert W. Baird: Okay, thanks. And just one follow-up; can you give us some idea of the Komag revenue wind-down over the course of this year?

As we indicated, it will be -- we are forecasting it to be $50 million this quarter and after that, it will be so insignificant that we won’t be breaking it out. Joel Inman - Robert W. Baird: Okay. Thank you.

[Jayhin Garani]. Jayhin Garani - Standard & Poor’s: Just a couple of housekeeping I think I missed -- on the channel breakout for the December quarter, could you just tell me what the disti and the OEM was, please?

OEM was 48%, distributors was 34%, and retail was 18%. Jayhin Garani - Standard & Poor’s: Right, and then I just wanted to get your impression. You did mention SSDs and the units shipped, the IDC number. We also heard from EMC about incorporating an SSD drive, an enterprise SSD drive. What is your view on that and give me some color on what you think about that? John F. Coyne: I think the -- I think both of the areas where SSDs have shown up so far are valid niche markets. But they are niche markets and it’s a significant endorsement to see EMC bring out a product at the very high end of the performance spectrum. But recognize of the 8 million or so drives shipped into that enterprise space, less than 2 million are addressing high performance in that category of performance, and this SSD announcement is a small slice of that small slice. So it’s a niche application which offers some opportunity for system designers to tune performance. Jayhin Garani - Standard & Poor’s: Okay, but longer term, what would you have to see to even consider that technology to be something that you would address? John F. Coyne: As those niche applications grow, and I’m confident they will grow, we look at -- if you look at the characteristics, Flash is media. You have to then match that up with a controller and applications knowledge and knowledge of how to put that whole thing together in a reliable way to make it look and behave like a hard drive, which is the application. And so who better to take media and integrate it and ship it into a market where there is deep experience and knowledge of the application than the hard drive companies. So as we see that market becoming large enough to justify the engineering investments, it’s highly likely that you will see WD and other drive manufacturers address that market segment. Jayhin Garani - Standard & Poor’s: I guess what I was trying to determine, and maybe you did give me some hint about that, is how much of an engineering effort, if you will, does it take for you to get there versus the IP that you already have in-house? Or is it something you can go out and buy? John F. Coyne: Be aware that in 1989, Western Digital was shipping SSDs in partnership with SunDisk, which was a precursor to the current SanDisk, so there is a significant body of knowledge relative to how to take solid state media and incorporate it in a drive product. Jayhin Garani - Standard & Poor’s: Thank you very much.

Thank you and our last question comes from Richard Kugele. Richard Kugele - Needham & Company: Thanks for the quick follow-up here. Two quick ones; seasonality, what are your expectations for the industry in the first quarter? I know you are talking about if the December was an out-size quarter for you that perhaps your sequential will be a little bit greater. We’ll see if that plays out but in terms of the industry expectations, what are your thoughts there for the first quarter?

We’re anticipating 3% to 5% reduction in the TAM quarter-on-quarter. Richard Kugele - Needham & Company: Okay, and then lastly, since you brought it up about break-even being lowest in the industry, I know Seagate has made public comments that theirs is now down to 12% to 13% gross margin, that they would be able to break even. Do you have any comments on where we should be thinking yours is post Komag?

Not really, no. Richard Kugele - Needham & Company: Okay, fair enough. Thank you very much.

I would now like to turn the call over to Mr. John Coyne. John F. Coyne: Thank you, Operator. In closing, I want to thank you all for joining us today. I’d also like to thank again our employees, our suppliers, and our customers for an outstanding December quarter and we look forward to updating you on progress as we execute our strategies and address the vast opportunities we see ahead of us in the storage market. Thank you.

Thank you. This does conclude today’s conference call. You may disconnect at this time.