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

Richard Kugele - Needham & Company Kevin Hunt - Hapolim Securities Sherri Scribner - Deutsche Bank David Bailey - Goldman Sachs Mark Moskowitz - J.P. Morgan Bill Fearnley - FTN Equity Capital Aaron Rakers - Stifel Nicolaus Ananda Baruah - Brean Murray, Carret & Co. Katy Huberty - Morgan Stanley Robert Stivy - Equity AFS Capital Analyst for Keith Bachman - BMO Capital Markets Arun Sharma - UBS Doug Reid - Thomas Weisel Partners

Good afternoon and thank you for standing by. Welcome to Western Digital's first quarter financial results for fiscal year 2010. (Operator Instructions) Now I will turn the call over to Mr. Bob Blair. You may begin.

Thank you. I want to remind you that we will be making forward-looking statements in our comments and in response to your questions concerning: macroeconomic and industry conditions, including industry pricing and demand; our response to changes in demand; our growth opportunities; our share repurchase plans; our expected capital expenditures, depreciation and amortization and tax rate for fiscal 2010; and our financial results expectations for the December quarter, including revenue, gross margin, expenses, tax rate, share count, and earnings per share. 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-K filed with the SEC on August 14, 2009, 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 also want to note that copies of remarks from today’s call will be available on the investor section of Western Digital's website immediately following the conclusion of this call. I will now turn the call over to John Coyne, President and CEO of Western Digital. John F. Coyne: Thanks, Bob. Good afternoon and thank you for joining us today. For the second consecutive quarter, demand for hard drives was stronger than we expected as the positive industry conditions that first materialized in the June quarter continued throughout the September quarter. The demand strength is primarily consumer driven, and we believe it is underpinned by the growing social media phenomenon. This is creating strong demand in mobile and desktop PCs, near-line enterprise and external storage markets. We believe that overall hard drive industry shipments totaled 152 million units in the quarter, flat with the year-ago quarter and up 15% sequentially from 132 million units in the June quarter. Inventory of ATA drives in distribution was down from 33 to 30 days quarter-on-quarter, while drive manufacturer’s inventory was further reduced from a historically low 7 days of sales ending the June quarter to just under 6 days at the end of September, reflecting both the unexpectedly strong demand and continued industry discipline in managing the vitally important supply/demand dynamic. We are very pleased with our progress in Fiscal Q1 in addressing our primary objective of sustained profitable growth. For the second consecutive quarter, we increased our weekly production rate by over 18 percent in a supply constrained environment, providing strong support of our customers’ growth opportunities. Continued customer preference for WD products, upside in overall market demand and outstanding execution by the WD team generated record revenue on record unit shipments. A moderate pricing environment, combined with our passionate focus on cost and efficiency, enabled gross margin above the high end of our model range. We contained operating expenses under the low end of our model, while growing our R&D investment 7% year-on-year and 8% sequentially. We continue to realize tangible benefit from the substantial investments we have made in technology, products, processes and capacity over the last several years. We continue to lead the industry in time-to–market volume shipments of leading capacity points in all segments of the ATA drive market. In Q1 we began shipping our WD Scorpio Blue 1TB, 750GB and 640GB hard drives utilizing 333 GB-per platter technology. Additionally we led the market with shipment of our 2TB 3.5-inch hard drives to the Near-Line Enterprise, External Storage, Desktop, and CE markets. In Branded Products, we continued to grow our business in Q1, even as we simultaneously refreshed our entire External Storage product line-up. Our stylish, new offerings include smaller, smarter, more portable and secure MyPassport and MyBook solutions that feature new WD SmartWare backup, synchronization and content visualization software, hardware encryption and our innovative E-Label display -- all delivering additional value and ease of use to the consumer. This product-refresh positions us well for continued growth as we enter the holiday season and the year ahead. We also expanded our line of media players with the introduction of the WD TV Mini, with support for the RealVideo format, providing an affordable and convenient way for consumers to play their stored digital content and the WD TV Live, featuring network connectivity and 1080p resolution. Before I pass the call to Tim Leyden, I want to thank the WD team and our supply partners for outstanding execution in seizing the upside opportunities that emerged throughout the quarter. Once again we have further strengthened WD in our long-term mission of generating sustained profitable growth. Tim.

Thank you, John. Throughout the September quarter, hard drive industry demand exceeded supply. We again leveraged our agility in response to this unexpectedly robust demand. As we enter the December quarter, demand remains strong and our product line-up, availability and low cost profile position us to benefit from the continuing growth opportunity. As I discuss our quarter-on-quarter sequential changes, I would like to remind you that our September quarter consisted of 13 weeks, while the June quarter consisted of 14 weeks. Revenue for our first fiscal quarter was $2.2 billion, up 5% from the prior year and 15% sequentially. Hard drive shipments totaled 44.1 million units, up 12% from the prior-year period and 10% sequentially. Non-hard drive revenue, including sales of WD TV Media Players, solid-state drives, media and substrates totaled approximately $36 million compared to $5 million in the prior year and $27 million in the June quarter. Average hard drive selling price was approximately $49 per unit, down $4 from the year-ago quarter, but up $1 from the June quarter. Our Q1 ASP reflects a stable pricing environment, driven largely by the favorable market conditions. Demand for our HDD products in the September quarter was stronger sequentially than we would have expected based on historical seasonal-norms, and particularly so when compared to what we had perceived was an already strong June quarter. We believe the total number of hard drives sold was 152 million compared to our original assumption of 135 million to 140 million units. We shipped 19.2 million mobile drives in the September quarter, compared to 14.6 million in the year-ago quarter and 16.9 million in the June quarter. During the September quarter, we shipped 3.1 million drives into the DVR market compared to 3.9 million in the year-ago quarter and 3.7 million in the June quarter. Revenue from sales of our branded products, including WD TV, was $382 million, flat with the year-ago quarter and up 20% sequentially from $318 million in the June quarter. Industry pricing was more rational in this market during the quarter as supply and demand became more balanced. Moving on to our sales channel and geographic results, revenue by channel was 52% OEM, 31% distribution, and 17% branded products in the September quarter, compared with 56%, 26% and 18% in the year-ago quarter and 54%, 29% and 17% in the June quarter, respectively. There were two customers, Dell and HP, that each comprised more than 10% of our total revenue. The geographic split of our revenue was 22% Americas, 22% Europe, and 56% Asia, as compared to 23%, 29% and 48% in the year-ago quarter and 24%, 22% and 54% in the June quarter. Our gross margin percentage for the quarter was 23.3% up from 20.1% in the year-ago quarter and 19.2% in the June quarter. This improvement in gross margin was driven by stronger than anticipated demand leading to moderate price reductions, better factory and supply chain utilization, and favorable product mix. Total R&D and SG&A spending was $195 million, or 8.8% of revenue. This compares with $190 million, or 9% of revenue in the year-ago quarter, and $184 million, or 9.5% of revenue in the June quarter. Our current spending reflects increased investments in technological advancements, new products and programs, and includes our recently acquired SSD business. Operating income was $319 million, or 14.4% of revenue. This compares with $234 million, or 11.1% of revenue in the year-ago quarter, and $209 million, or 10.8% of revenue in the June quarter. Interest and other non-operating expenses were approximately $2 million. Tax expense for the September quarter was $29 million, or 9.1% of pretax income. For fiscal 2010, we expect our book effective tax rate to range between 7% and 10% as we take into account our expected continuing profitability and the global mix of income by region. Our cash tax rate is expected to be between 1% and 2% for the fiscal year. Our net income totaled $288 million, or $1.25 per share. This compares with $211 million, or $0.93 per share, and $196 million, or $0.86 per share in the year-ago and June quarters respectively. Turning to the balance sheet, for the September quarter our cash conversion cycle was a negative 4 days. This consisted of 47 days of receivables outstanding, 21 days of inventory, or 17 turns, and 72 days of payables. We generated $434 million in cash flow from operations. Capital expenditures were $176 million and depreciation and amortization totaled $121 million. We also made our second quarterly debt-repayment installment of $19 million. Cash and cash equivalents increased by $262 million, ending at $2.056 billion. We are carrying a healthy cash balance as we monitor the continuing macroeconomic uncertainty. The 44.1 million hard drives we shipped in the September quarter represent a new output record for the company. Consequently, in order to support continued customer demand for WD products and thereby maintain the pace of our profitable growth, we now expect capital expenditures for fiscal 2010 to be $650 million, compared with our original projection of $600 million. Depreciation and amortization for fiscal 2010 is now expected to be about $540 million. Over the medium term, we believe that the HDD market offers us substantial profitable growth opportunities in the existing markets we serve as well as in market segments yet to be addressed and in new applications for storage. Over the longer term, we will also evaluate investments in product line expansion both internally and externally to develop further growth opportunities. We have $466 million remaining in our stock repurchase authorization and we continue to weigh the merits of further repurchases against internal and external investment alternatives. Now I will discuss our expectations for the second quarter of our fiscal year 2010. First, let me outline the market situation as we see it. With the notable exception of last year, the December quarter has historically been the industry’s strongest demand period, driven by consumer spending during the annual holiday season. We are encouraged by the positive PC and consumer electronics demand commentary from related industry bellwethers and the continuing industry supply/demand discipline. However, we expect that global macroeconomic conditions will remain challenging for both the consumer and the corporate buyer as unemployment remains high and credit availability remains tight in all major economic regions. Taking these various factors into account, we are modeling market volumes in a range of 152 million to 160 million units. We remain focused on supply/demand equilibrium and we expect to use our flexible and agile business model to respond quickly to demand changes. We anticipate that pricing will be rational based on supply/demand balance in all markets. As a result, we expect current quarter revenue for WD to be in a range from $2.25 billion to $2.35 billion. We are modeling gross margins of 23.3%, flat with our September quarter. R&D and SG&A are expected to total approximately $200 million. Our net interest expense is projected to be about $2 million. We anticipate our tax rate to be about 9% of pretax income. We anticipate our share count to be approximately 232 million. Accordingly, we estimate earnings per share of between $1.26 and $1.36 for the December quarter. Operator, we are now ready to open the call for questions.

(Operator Instructions) Our first question comes from Richard Kugele with Needham & Company. Richard Kugele - Needham & Company: A couple of questions, I guess first obviously on the CapEx side, can you talk about just from an industry perspective how linearly you can add the capacity as you see the demand situation unfold in 2010? I think that that’s one of the areas that is of primary concern to investors, just to make sure the industry doesn’t over-expand but at the same time can adjust to upside as it sees it. Any color on that? John F. Coyne: I think we need to bear in mind the background in the industry. Essentially since calendar Q4 of ’07, the industry has had an installed demonstrated capacity in excess of 155 million units per quarter. Since that time, on a quarterly basis, I think the industry has reacted very well to the actual demand in the marketplace and adjusted utilization of installed capacity to address demand as demand emerged, particularly so since Q4 of ’08 and through the first couple of quarters of this calendar year. So I think the concerns about installed capacity are a little overblown. Secondly, from a Western Digital perspective, we have been adding capacity on a just-in-time basis to address real demand from our customers as it has emerged. We, as Tim mentioned, our 44.1 million units last quarter was a record for the company, an all-time record for the company. We continue to see strong demand from our customers. We continue to be very encouraged by the demonstration through the last six months in terms of the recovery of demand once an inventory adjustment had been made, says to me that that PCs and the ability to store and distribute digitized content is becoming a necessity to today’s lifestyle rather than an extra. And so I believe there is very strong underlying demand that will continue. As we look at the -- we don’t know what the industry plans are for investment going forward. When we look at Western Digital CapEx plans, our investments in heads and media tend to be on a six to 12-month outbound decision-making, so that we need to decide now what we think the market is going to look like a year from now in terms of our investments in our wafer fab and our slider fab from a head perspective, and in our media substrate and sputtering operations. In our assembly operations, both the assembly of our heads into a GAs and headstacks and the assembly of our drives, our lead times are much shorter horizon than that and tend to be in the three month to six month time horizon. So we’re making decisions in relation to assembly capacity essentially on a three-month lead of our view of the market. Richard Kugele - Needham & Company: Okay, that’s very helpful. Just switching gears a little to margins, obviously the model was able to generate higher than your traditional target range. What is your view now as we head into next calendar year, even for the potential for a PC refresh and such for what the margins can be going forward?

Well, 18% to 23% is our long-term margin model and there’s always room for margin expansion in the short-term. We can get that on the cost side through factory utilization, through efficiency, and through product mix. And of course on the revenue side, we can get it from capacity mix, segment mix, better linearity, et cetera. We can be tactical with that in the near term but over the longer term, what we’ve learned from history is that it gravitates towards the high-end of our margin model in seasonally stronger quarters and in seasonally weaker quarters, it’s below the midpoint of our margin model range. So I mean, there is -- I think bottom line is there is room for margin expansion very much depends on market conditions, inventory, supply/demand balance and of course, behavior of the competition. Richard Kugele - Needham & Company: Thank you very much.

Your next question comes from Kevin Hunt with [Hapolim] Securities. Kevin Hunt - Hapolim Securities: Two questions, actually -- these are just to follow-up on that question -- is there any thought that your long-term gross margin sort of modeling range is going to be permanently up from where it’s been?

We’ve indicated that we are going to be entering the traditional enterprise market during the course of the year and when that happens, we will review our model but I think if you look at our model right now and match it up with the model that our peers have, or Seagate specifically, we believe that we are aligned rather well with that margin model because we have primarily and pretty much exclusively HEA product and segment mix and Seagate has the benefit of the traditional enterprise, and I think if you do the math, I think that you will see that the models align rather well. Kevin Hunt - Hapolim Securities: Okay, and then you just queued up my second follow-up question, which was maybe you could discuss longer term what you really think your opportunity is in the enterprise space, given that historically you haven’t really been there in the traditional sense, but you know, we had EMC this morning talking a lot about the solid state drives penetrating that space. You’ve indicated you were going to have something else sometime in the next year on that front. Can you maybe just give us an update on sort of competitively where you think you can go there? John F. Coyne: I think our objective is to be as competitive and as significant in that market over time as we have become in every other market segment that we have developed products for and provided availability, quality, reliability, and service to. Kevin Hunt - Hapolim Securities: Okay. Thank you very much.

Your next question comes from Sherri Scribner with Deutsche Bank. Sherri Scribner - Deutsche Bank: I was hoping to get a little more detail on the limitations you are seeing in the industry. Some people have talked about component shortages and I was curious to see what you guys saw this quarter in terms of component shortages and what you see for the December quarter. John F. Coyne: I think the industry as a whole, the entire supply chain is tight pretty much across the board, and I believe that’s primarily an outcome of the strength of demand that significantly exceeded expectations, the expectations of our customers as communicated to us, our expectations as communicated to our supply base. And I think the industry has been ratcheting up the -- our view of opportunity and consequently trying to ramp production to support that and that has stretched the supply chain. There are -- so everything is pretty tight. There’s been some spotty shortages in that chain, primarily in substrates, class substrates for 2.5-inch media, is probably the tightest. But overall, I think the industry has performed pretty well in stepping up to the opportunities and satisfying the majority but not all of the demand. And I think it’s very important to continue to do that because if we fail our customers in terms of ability to supply to their needs for them to satisfy their growth opportunities, then they will find alternatives. So it behooves us to ensure that we are finding a way to address the temporary tightness and shortages in the supply chain to take advantage of and to support the opportunities that our customers are providing. Sherri Scribner - Deutsche Bank: Okay, that’s helpful. And then in terms of your visibility into the channel and into your OEM customers, I know some people have some concerns that there’s been some over-building, possibly some double ordering, maybe we have too many PCs out there in anticipation for a build-up related to the new Windows 7 operating system and the holiday season. What are you guys seeing in terms of your business and what do you think about those concerns? John F. Coyne: Well, I mentioned the -- I mean, the inventory situation in the drive business is extremely lean. It’s at the lowest levels that we’ve seen in over three years. So if we then move on to the -- what visibility we have into our customer base and the pipelines between them and the end consumer, it’s our belief looking at all of the available data that the back-to-school builds were pretty much correctly targeted at the market demand that emerged during a back-to-school season. We are now kind of based off that positive, we are looking at the builds that are in transit to the market for the holiday season. And the kind of seasonal indicators seem to be lining up very well for a positive holiday season. Sherri Scribner - Deutsche Bank: Okay, great. That’s helpful. Thank you.

Your next question comes from David Bailey with Goldman Sachs. David Bailey - Goldman Sachs: A question on your internal inventory -- are the current turns sustainable or do you need to add more internal inventory to meet demand as you go forward? John F. Coyne: 17 is probably a bit sporty from a turns perspective and I think we had indicated our model is in the 14-ish kind of range, 14 to 16. David Bailey - Goldman Sachs: Thank you, and then you were very constructive on the consumer. Have you seen any signs of improvement in the corporate space? John F. Coyne: We’ve seen a little up-tick in the enterprise side of the corporate space. We’ve not seen much in the way of tick-up in the commercial PC environment. David Bailey - Goldman Sachs: Okay, great. Thank you.

Your next question comes from Mark Moskowitz with J.P. Morgan. Mark Moskowitz - J.P. Morgan: Earlier in your prepared remarks you talked about how in the September quarter, demand outpaced supply -- can you talk about set against that backdrop, how WD [inaudible] maybe to pick and choose revenues in terms of winning placements at higher margin business? Any change there and could you talk about some of the underlying factors there in terms of either OEM decisions or maybe your competitors having trouble, particularly over in Asia?

As far as competitors are concerned, we really don’t have any insight into that. I mean, we always execute our business by balancing customer support and tactically optimizing margins so you saw that there was a slight swing towards Asia in terms of regional and I think there was maybe a 2% switch from OEMs to distribution in the channel, and we were strong pretty much across all business units. Mark Moskowitz - J.P. Morgan: And then as far as the refresh of the external backup passport and mybook, just kind of curious, [inaudible] sort of channel fill or that be kind of a measured outreach to your customers in terms of that new product placement? John F. Coyne: Well, I mean, we pretty much end of life the existing product line and positioned the new product lines during the course of the month of September and early October, so we now pretty well positioned across all regions, all channels with the refreshed products, both in the mobile 2.5-inch passport and in the 3.5-inch mybook product line, so we are feeling very good about the management of that transition, the fact that while typically you tend to get a kind of pause in sales in those while you are trying to take out the old and restock the new. We’ve actually maintained and grown very significantly quarter over quarter while we were accomplishing that. Mark Moskowitz - J.P. Morgan: And then just lastly if I could, building off of the earlier questions related to the enterprise and the potential margins uptake, how should investors think about any sort of OpEx one-time hit in terms of maybe a quarter or two where as you rammed your enterprise business and you have maybe a little more hand-holding from the customers and from maybe some [inaudible] rewrites, what have you -- will there be anything like that in terms of OpEx maybe taking off maybe more than you expected as you first bring out the enterprise drives or --

We’ve bee spending in order to make our entry into that marketplace for quite some time because it takes quite a while in order to be able to design the product and then work through the particular issues with the customers, the qualification issues. So we anticipate that there will be maybe a small up-tick in customer support but other than that, it will be very, very minimal and we expect to stay within our margin, our OpEx model range, which is 9% to 10%. John F. Coyne: To amplify that, the vast bulk of the OpEx related to our enterprise business is already embedded in our current spending. Mark Moskowitz - J.P. Morgan: Okay, thanks, gentlemen.

Your next question comes from Bill Fearnley with FTN Equity Capital. Bill Fearnley - FTN Equity Capital: I had a question for you on the competitive environment -- have you seen any benefits in terms of pricing from the recent competitor consolidation? In addition, have you been given any additional consideration from OEMs as a primary source or a secondary source here as a result of the recent combination and does that have any effect on your near-term guidance? And then I just had a quick follow-up. John F. Coyne: Well, I think as you’ve seen over the past couple of quarters, since the announcement of the latest combination in the industry and very typical of all previous combinations in the industry, there were some significant share shifts during the two quarters immediately following the announcement. And we were beneficiaries of some of that. The real -- what we are observing in the market today is the primary attribute is availability and if you look at WD's performance over the last two quarters, compared with the rest of the industry, WD has stepped up and supplied the majority of the incremental product that was demanded by the market within short lead time. So we feel very good about the business model which we have honed over the years that is highly focused on speed and agility and responsiveness and we believe that one of the critical factors that has driven our success is that not only do we provide -- offer great products to our customers but that we make them available in a timely manner relative to their desires. And that has allowed us to consistently over the past five to seven years demonstrate market leading share growth and margins to match. So being consistently profitable is a reflection of the value that our customers place in our business model. Bill Fearnley - FTN Equity Capital: Okay, that’s helpful. Thank you. And then a follow-up question on margins, if I could, kind of looking at almost a perfect situation here, a perfect storm so to speak -- is there -- what other things should we be thinking about from a gross margin standpoint as the utilization rates decline as you add in capacity and inventories grow from these levels? What other levers should we be thinking about outside of mix and the enterprise here in the next few quarters? John F. Coyne: Well, I think our utilization rates don’t change as we add capacity because we add capacity in line with demand. Certainly our utilizations were lower during the period from October through March last year, October ’08 to March ’09, because we had not predicted the huge drop in demand that was a result of the economic meltdown and you can't shed capacity quite as rapidly as you can build it, but you can stop using it, which is what we did. But as we add capacity, we add capacity in very relatively small increments to match our market opportunity and our aim is to keep our utilizations high at all times. Bill Fearnley - FTN Equity Capital: Thank you.

Your next question comes from Aaron Rakers with Stifel Nicolaus. Aaron Rakers - Stifel Nicolaus: I guess the first question, I believe last quarter you had alluded to a more Western Digital like mix of business as a driver to the gross margin. I’d just like to understand -- did we see that more normalized mix of WD business or should we expect that to happen here still going forward as we see the commercial market start to improve?

I think what we alluded to last quarter was that we were tactically selective in how we pursued the business and in this quarter, obviously with the supply chasing demand, we have actually pursued the business that is most beneficial to us and our customers. So we are more in line, what I would say, at market mix at this stage but we still have -- we still have opportunity to be able to deploy more recent technology. As a matter of fact, in the last quarter we were deploying more older technology because of the fact that we were being tactical in the markets that we chose to pursue. Aaron Rakers - Stifel Nicolaus: And a follow-up question, if I can -- on the share repurchase front, obviously you guys have a decent authorization still at hand. Any color on what you are looking for, either be it market dynamics or other things in order to become more active on the share repurchase? Do you have any gauge on what -- you know, when or maybe how we might expect you guys to start to become active on the share repurchase front?

When we are weighing the opportunities for the cash balance, our long-term goal obviously is to create shareholder value and we’ve got lots of factors to weigh. We’ve got to weigh near-term versus long-term objectives. We’ve got to weigh the prepare for opportunities versus what the macro risk is. We’ve got to look at the opportunity cost of replacement capital, if we have opportunities after we’ve actually purchased shares. And we are weighing all that on an ongoing basis but we are satisfied with what our choices are at this particular point in time. We are also cautious as we approach the market because what we have learned from the lessons of history is that when there’s a significant change in market factors that the velocity of the departure of liquidity can be fairly astounding. Aaron Rakers - Stifel Nicolaus: Great, thanks, guys.

Your next question comes from the line of Ananda Baruah with Brean Murray, Carret & Co. Ananda Baruah - Brean Murray, Carret & Co.: Could you comment or give us some sense of what your capacity is currently? John F. Coyne: I guess it would be 44.11 million units. Ananda Baruah - Brean Murray, Carret & Co.: Or maybe 44.2. John F. Coyne: No, I mean -- so we were -- very high rates of utilization and we are adding capacity to support the guidance that Tim just gave a few moments ago. Ananda Baruah - Brean Murray, Carret & Co.: Got it, and I guess of the incremental CapEx spend, is there any way to sort of parse out how much you think will go towards capacity of -- expanding capacity of the different components -- drives versus media versus [heads]?

It’s probably a little bit weighted towards heads and 50-50 for the remainder, so it’s about 40% heads and then 30-30 for the other two. Ananda Baruah - Brean Murray, Carret & Co.: Okay, great, that’s helpful. And I guess just circling back on uses of cash, I guess away from potentially getting the buy-back going again, I mean, what should we think of in terms of I guess the core uses of the cash as we head into first half of 2010?

Our primary bias would be operational. I mean, we are still pretty cautious relative to the macro situation and we are also looking, as I indicated in my comments, we are also looking at longer term growth opportunities in related type markets so those are our primary biases. But it’s more operational bias than alternative. Ananda Baruah - Brean Murray, Carret & Co.: Got it, and I mean, with the levels you have, does that sort of increase -- I mean, you guys have always been a pretty active on the M&A front, you know, prudently but active -- does it increase your appetite at all, just knowing you have the kind of cash that you do on the balance sheet to go out and do something?

I mean, that specifically doesn’t increase our appetite. What increases our appetite is the -- is looking at the long-term creation of shareholder value and just paying attention to how do we best execute that in the near-term and in the long-term. Ananda Baruah - Brean Murray, Carret & Co.: Okay, thanks a lot. Appreciate it. John F. Coyne: I just want to circle back for a second on the -- give you a little more color on the capacity and CapEx question. In the last six months, we have been running our capacity close to 98%, 99% utilization. That’s very good for the short-term margin and absorption benefit. However, it inhibits our ability to provide one of the critical values that we provide to customers which is availability and responsiveness. So our target is to run at about a 90% utilization. And we will -- we are adding capacity in order to accomplish two things -- one, to keep up with the demands of our customers and two, to restore our flexibility in order to be enabled to meet their day-to-day, week-to-week changes and provide the right products at the right time. Ananda Baruah - Brean Murray, Carret & Co.: I appreciate that. That’s actually quite helpful commentary. So if I could just throw a quick follow-up in off of that one, understanding that you are going to add capacity, whatever you add, you are going to do it prudently. Given your outlook for kind of the December quarter TAM and then whatever your internal thinking is right now about [inaudible] into Q1, and given what you are thinking that your incremental add could be as we go through the December quarter, is there any reason to think -- this is really a gross margin question -- is there any reason to think in a stable ASP environment that the gross margin kind of ticked down in the March quarter would be anything more significant than what it has been over the years in a normalized environment, stable environment?

It’s hard to answer that question. There are so many variables -- I mean, there are various product segment mix. It’s the interaction of price, volume, mix, and cost and the most significant weighting factor is obviously supply demand balance and inventory management and -- but what we have seen historically as I mentioned earlier is that for our margin range in the weaker quarters, we tend to be below the midpoint of the 18% to 23% range, and stronger quarters, we tend to be above the midpoint. So that’s about as much color as we can probably figure out at this stage. Ananda Baruah - Brean Murray, Carret & Co.: Okay, thanks a lot. Much appreciated.

Your next question comes from Katy Huberty with Morgan Stanley. Katy Huberty - Morgan Stanley: You mentioned the channel inventory is at three-year lows. How much of that is a function of strong demand pull through the channel versus strong OEM sales and just not having enough product to ship into the channel? And then as a second question, how many quarters do you think it will take for those channel inventories to get back to more normal levels? John F. Coyne: I think what we are actually seeing in the channel is partly a result of the tightness in credit -- that has -- I believe has reset the model in the channel to -- and has leaned out inventories and is creating a much tighter link between sell-through and sell-in. So I think we are seeing an adjustment to the model and the distributors are finding a way to operate with much tighter inventories and I suspect they will like it, and so I suspect that as the economy recovers and credit loosens and so on, that the model will stay leaner than it was before the economic meltdown of last year. Katy Huberty - Morgan Stanley: Okay, so the volatility in channel inventory levels is probably less than it maybe was in the past and you wouldn’t expect a snap back but more of a gradual increase as the economy recovers? John F. Coyne: Right. Katy Huberty - Morgan Stanley: Okay, got it. Thank you.

Your next question comes from Robert Stivy from Equity AFS Capital. Robert Stivy - Equity AFS Capital: That 98% capacity number seems almost unsustainably high. When you think about the CapEx budget that you guys have going forward and what you guys expect total units to be produced, how long do you think it is going to take you to get more down to that 90% reasonable level of capacity? John F. Coyne: Well, it depends on demand. I mean, we are modeling our CapEx. Tim just gave you the uplift to our CapEx number for the full year of $50 million, which is designed to take us back to our normal operating model, which is kind of in the -- we like to operate in the 90% to 95% range and for the last two quarters, we’ve been -- in the first of June quarter, we were bringing idled capacity back into play and in the September quarter, we were stretching our previously installed capital to its maximum. And as we move into this quarter, we are bringing some new capital online in order to support the strength of demand that we have and hopefully in the early part of next year, we’ll begin to get back into our 90%, 95% where we can be even more responsive to our customers in terms of giving them the mix they want when they want it. Robert Stivy - Equity AFS Capital: In relation to the idle capacity, with bringing on that other [inaudible], like in Thailand, can you give us an understanding of how much incremental available capacity that gives you guys when it runs for a full quarter in Q2 that you guys didn’t have in Q1 and Q4 of last year? John F. Coyne: I think I’ve given you pretty much as much as I can give you. We were flat out last quarter. That facility was online last quarter. Robert Stivy - Equity AFS Capital: For the full quarter? John F. Coyne: Pretty much. Robert Stivy - Equity AFS Capital: And can you just give me an idea of the trend of demand through the quarter -- was it generally as -- like a normal Q1 or was it a little flatter, a little more steep than normal in relation to a ramp for the holiday season and for the Windows 7 release? John F. Coyne: It’s probably -- the last two quarters it’s probably been the most linear that we’ve had in the history of the company. Robert Stivy - Equity AFS Capital: Thank you so much, gentlemen.

Your next question comes from Keith Bachman with BMO Capital Markets. Analyst for Keith Bachman - BMO Capital Markets: Your headcount increased pretty significantly during the quarter. Can you provide more detail on the reason for this increase? John F. Coyne: 44.1 million drives, and associated components, heads, and media. Analyst for Keith Bachman - BMO Capital Markets: Okay. And for your consumer business, specifically the DVR business, it was much lower than your competitor’s results. Can you provide more color on what is going on there? John F. Coyne: I think -- well, our number relates to the DVR market. I believe the competitor number you are referring to relates to DVR, surveillance, and gaming. Analyst for Keith Bachman - BMO Capital Markets: Okay. Thank you very much.

Your next question comes from [Arun Sharma] with UBS. Arun Sharma - UBS: I just had a quick question -- you commented last quarter that the linearity for the June quarter was actually the most linear quarter you had had. How would you describe the linearity you saw during the September quarter, or a surprise September quarter? And thus far into October, if you can comment, any idea how December may play out in terms of linearity? Thanks.

John also mentioned that the September quarter was one of the most linear quarters that we encountered and in the December quarter, generally that tends to be a pretty linear quarter anyway and it’s because leading up to Christmas, we get the strength of demand in October and going into November as you go towards Black Friday. So we would characterize it as being pretty normal. John F. Coyne: You know, the fact that the strength of demand was relatively unforecasted tends to help linearity and that the -- you know, we’re building as much as we can build. Arun Sharma - UBS: Great, thanks.

Doug Reid with Thomas Weisel Partners, your line is open. Doug Reid - Thomas Weisel Partners: Thanks. You’ve acknowledged some tightness in components. I’m wondering what your assumptions are for component cost increases in the December quarter underpinning your gross margin guidance?

We have forecasts for what the costs are and those costs are rolled into our gross margin guidance, so I mean, we’ve taken them into account and we are -- we’ve got good relationships with our vendors and our suppliers and we [inaudible] all the time. Doug Reid - Thomas Weisel Partners: But are you expecting an increase relative to -- or rather are you expecting a slower rate of decline this quarter relative to September, given that tightness?

I’m hardly going to say that on the phone, Doug. Doug Reid - Thomas Weisel Partners: Sure, I’m looking for some color though. John F. Coyne: Okay, I want to thank all of you for joining us on today’s call. We look forward to keeping you informed of progress in the quarters ahead. Thank you.