John Coyne - Chief Executive Officer, President, Executive Director and Chairman of Executive Committee Timothy Leyden - Chief Operating Officer Wolfgang Nickl - Chief Financial Officer and Senior Vice President Bob Blair -

Richard Kugele - Needham & Company, LLC Keith Bachman - BMO Capital Markets U.S. Aaron Rakers - Stifel, Nicolaus & Co., Inc. Robert Cihra - Caris & Company Jayson Noland - Robert W. Baird & Co. Incorporated Sherri Scribner - Deutsche Bank AG Kaushik Roy - Wedbush Securities Inc. Scott Craig Eric Sterling Katy Huberty - Morgan Stanley Joe Yoo - Citigroup Inc

Good afternoon and thank you for standing by. Welcome to Western Digital's Third Quarter Financial Results for Fiscal Year 2011. [Operator Instructions] As a reminder, this call is being recorded. Now I will turn the call over to Mr. Bob Blair. You may begin.

Thank you. I want to mention that we will be making forward-looking statements in our comments in response to your questions concerning benefits expected from our planned acquisition of Hitachi GST, industry conditions in the June quarter including the total available market for hard drives, customer demand, supply constraints, capacity mix, average selling price and cost of components, our presence in the traditional enterprise market, our expected capital expenditures and depreciation and amortization for fiscal 2011. The terms of and our ability to syndicate our new credit facility to be entered into in connection with our planned acquisition of HGST, and our financial results expectations for the June 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-Q filed with the SEC on January 28, 2011. 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. In addition, references will be made during this call to historical non-GAAP financial measures as well as forward-looking estimates of non-GAAP financial measures that give effect to our planned acquisition of HGST. Investors are encouraged to review the reconciliation of the differences between the historical non-GAAP measures to the comparable GAAP financial measures in our press release and investor summary, included as Exhibits 99.1 and 99.2, respectively for the Form 8-K, we have furnished to the SEC today. Copies of which can be found under the SEC filings link in the investors relations section of our website. The forward-looking estimates of non-GAAP financial measures that give effect to our planned acquisition of Hitachi GST exclude acquisition-related expenses that we expect to incur in connection with the transaction. And following the closing of the transaction. Because these acquisition related items will not be known to us until on or after the closing of the transaction, we are unable to provide information about or reconciliation to the most directly comparable GAAP financial measures. The impact of these excluded items may cause the estimated non-GAAP financial measures to differ materially from the comparable GAAP financial measures. Finally, as a reminder, until our acquisition of Hitachi GST closes, WD and HGST remain independent companies, so we will not be taking any questions about HGST's business nor its financial performance. I also want to note that copies of remarks from today's call will be available on the investors section of Western Digital's website immediately following the conclusion of this call. I will now turn the call over to President and Chief Executive Officer, John Coyne.

Thank you, Bob. Good afternoon, and thank you for joining us. With me on our Q3 call are Tim Leyden, our Chief Operating Officer; and Wolfgang Nickl, our Chief Financial Officer. First and foremost, we were pleased to determine in early March that Western Digital employees in Japan, as well as those of Hitachi GST were all safe after the tragic events of last month. Those personally affected by these events continue to be in our thoughts. Like many technology companies, we have been busy dealing with the disruptions resulting from the events in Japan. We are also proceeding on plan with our acquisition of HGST and have made significant progress on that front. We are in the approval process with all required regulatory agencies. Our integration planning is well underway and we have successfully syndicated the loan financing associated with the transaction. We remain very excited about the potential of this acquisition. Industry shipments came in at 160 million units for the March quarter, slightly above our original expectation of 155 million units. As customers accelerated product purchases in the last 3 weeks the quarter due to supply concerns as a result of the Japanese earthquake. Analyzing the effects of the events in Japan, on the technology industry generally, there were, and remain a number of supply chain challenges, which are impacting both demand and supply visibility in the June quarter and beyond. Tim will describe these in more detail. But I am pleased that the WD team with strong support from our suppliers, has mitigated the initial impact on our ability to support pre-earthquake customer share awards for the June quarter. We have now turned our attention to responding to customer upside requests for this quarter, which we believe are driven by unresolved supply chain issues at competitors and to fully supporting customer needs in the September quarter. We believe end customer demand for the June quarter in all markets for HDDs is tracking to seasonally normal patterns. However, there is uncertainty around the ability of our customers and the HDD industry to fully satisfy this demand due to supply chain challenges. In uncertain times like these, we believe a highly flexible and responsive WD business model is especially well-equipped to perform and deliver value to our customers and shareholders. I will now turn the call over to COO, Tim Leyden, who will describe the operational challenges and highlights in the March quarter in greater detail. Tim?

Thank you, John. Entering the March quarter, we aligned our business with the 155 million unit TAM that we have forecasted in the January earnings call. Responding to the unexpected increase in TAM, triggered by the series of uncertain supply in the last few weeks of the quarter, our adaptable model enabled us to react rapidly to the upturn in demand and satisfy the actual TAM of 160 million units. Price declines for the quarter were broadly as we had expected. Overall product capacity mix was relatively flat with tight cost management enabled us to come in at the high-end of our implied gross margin guidance. We shipped 49.8 million units in the March quarter, down 4.6% sequentially and 2.5% from the year ago period. While the overall market declined by 4.8%, and 2.3%, respectively. Revenues totaled $2.25 billion. Gross margin was at 18.2% and we remain solidly profitable with net income of $146 million. We generated strong cash flow from operations of $313 million. Now turning to the overall market. In the compute space, units decreased sequentially from 116 million to 112 million. And decreased year-on-year from 119 million. We believe that the softer demand in the March quarter was driven to some extent by the late supply of CPUs to PC ODMs. Commercial demand strength continued, while consumer demand remained subdued. Against this backdrop, WD shipped 36.3 million units into the compute space in the March quarter, compared to 37.8 million units in the December quarter, and 38.5 million units in the year ago quarter, as we maintained essentially flat market share in all three periods. And the airline enterprise market was up sequentially from 5.4 million to 5.6 million units, and up from 5.2 million units year-on-year. Driven by the expansion of cloud computing, this market continues to offer further growth opportunity. The traditional enterprise market at 8.3 million units remained flat with the December quarter, and was up year-on-year from 7.4 million units, reflecting the continued strength of the commercial market. The shift to 2.5-inch SaaS continued, as a percentage of total market represented by this platform has now advanced to around 54% of the TAM. WD shipped 2.3 million units into the combined enterprise markets in the March quarter. Essentially flat with the December and year ago quarters. We continue to put the building blocks in place to increase our presence in the traditional enterprise space, and we're shipping out second-generation SaaS product to a limited customer set, and we continue to work on our third generation product. The HDD manufacturers TAM in the branded product segment came in at 13 million units. Seasonally down from 14.7 million units in the December quarter and up from 10.7 million units in the year ago quarter, presenting continued evidence of strong demand for personal storage. The seasonal cadence of this market is such that sell-in exceeds sell-through during the December quarter. In order to have adequate inventory in place for the holiday and post-holiday sales, whereas sell-through exceeds sell-in during the March quarter as distributors and retailers lighten up on inventory in preparation for the seasonally weaker June quarter. WD shipped 6.4 million units into this market in the March quarter, down from 7.4 million units in the December quarter and up from 5.6 million units in the year ago quarter. We continue to compete strongly in this market segment where our brand equity, product lineup and differentiating features have earned us the leading position. In the DDR market segment, the TAM was 13.5 million units, down sequentially from 14.3 million, and up from 12.1 million in the year ago quarter. WD shipped 4.7 million units into this market in the March quarter, essentially flat with the December quarter and up slightly from 4.6 million in the year ago quarter. WD's product capabilities resonates with customers in this segment, and we continue to see growth opportunities as HDDs offer the best value proposition to store and enjoy video content. The remaining balance of the TAM is represented by gaming, automotive and 1.8 in strides. Inventories in the HDD supply-chain exiting the quarter were below historical run rate levels in each segment. Now turning to the June quarter. We believe that in an environment absent the impact of the Japanese earthquake, that the true demand for HDDs in the compute space would follow a seasonal demand patterns, and would be flat to down from the March quarter. However, given the likely impacts, we believe that HDD TAM in the June quarter will be supply constrained. Shortages at this point appear to be more acute in 2.5-inch drives but we expect the product will also be short in the 3.5-inch form factor. Assuming that customer demand is not impacted by an inability to get other components that they need to build their systems. There are multiple levels of the supply chain at which availability problems may occur, from base chemicals up to final district components. And issues at each levels are still being worked by us, our suppliers, and our customers. In the meantime, our customers are ordering what they can in order to reduce the number of their individual supply concerns. We are planning around a normal June quarter demand, and we have underpinned supply to satisfy that level of unit volume. We are now looking to support our customers with upside supply in response to their request as they try to bridge shortages from other HDD suppliers. As John indicated, it is in uncertain times like these that WD's flexible and responsive models and our consistency and execution enable us to serve our customers well. In our other served markets, we expect volumes in DDR to be up seasonally, branded products to be down, and enterprise segments to be flat. Now turning to our product line-up. We introduced new capacities for users of consumer network storage and high speed direct detach storage. We began populating our industry-leading My Book external drives with our 3 terabyte hard drives. Creative PC professionals and MAC enthusiasts, now can utilize the 6 terabyte My Book Studio Edition II storage systems to support their ever increasing production of HD content. This 2 drive storage system has 4 interfaces, including eSATA and FireWire 800 for the fastest transfer speeds, rate capability, and Apple Time Machine compatibility. Our fast My Book Live network drive with a total capacity of 3 terabytes now centralizes more media than ever before in consumers' homes. We also added functionality to our WD TV Live media players, including CinemaNow, which provides users access to new release movies and TV episodes. New Netflix features, including the ability to search for movies and get recommendations directly on users' HDTV, as well as support for enhanced audio with Dolby Digital Plus. I will now turn the call over to Wolfgang Nickl for a review of our Q3 financial performance, and our outlook for the fourth quarter.

Thank you, Tim. A summary of financial information has been posted to the Investor Relations section of our website, which will be updated with our Q4 guidance after this call. Our Q3 actual results was slightly above the upper end of the guidance range we provided during our January investor call. Revenue for the third fiscal quarter was $2.25 billion, down 15% from the prior year and 9% sequentially. Authorized shipments totaled 49.8 million units, down 3% from the prior year period and 5% sequentially. Revenue from sales of WD TV media players, WD Life Wire Network kits and solid state drives totaled approximately $50 million, up 8% from the prior year, and down 12% from the December quarter. Average hard drive selling price was approximately $45 per unit, down $6 from the year ago quarter, and $2 from the December quarter. Revenue from sales of our branded products, including WD TV and WD LiveWire products, was $441 million, down 6% from the year ago quarter and 19% sequentially. There was no single customer that comprised 10% or more of our total revenue. Geographically the regions contributed roughly the same relative percentage of revenue as in the December quarter, with Asia's sales continuing to represent the majority of our revenue. From a channel perspective, retails percentage of revenue declined along seasonal expectations, while our OEM percentage increased slightly. Our gross margin for the quarter was 18.2%, down from 25.2% in the year ago quarter, and 19.2% in the December quarter. The quarter-over-quarter reduction of gross margin by 100 basis points is a function of a seasonal decline in our branded products business and some cost of under absorption of our manufacturing assets due to a reduced build plan. Total R&D and SG&A spending was $252 million, including $10 million of expenses related to the planned acquisition of HGST. Excluding these acquisition-related expenses, R&D and SG&A would have totaled $242 million or 10.7% of revenue. This compares with $224 million or 8.5% of revenue in the year ago quarter, and $235 million or 9.5% of revenue in the December quarter. The quarter-over-quarter increase is primarily a function of increased investments in new product development and higher incentive accruals. Operating income was $158 million or 7% of revenue, including $10 million of acquisition-related expenses. Non-GAAP operating income was $168 million or 7.5% of revenue. This compares with $441 million or 16.7% of revenue in the year ago quarter and $240 million or 9.7% of revenue in the December quarter. Net interest and other nonoperating income was $1 million. Tax expense for the March quarter was $13 million or 8.2% of pretax income. Our net income totaled $146 million or $0.62 per share, including $10 million of acquisition-related expenses. Non-GAAP net income totaled $156 million or $0.66 per share. This compares with $400 million or $1.71 per share and $225 million or $0.96 per share in the year ago and December quarters respectively. Turning to the balance sheet. Our cash conversion cycle for the March quarter was a positive 2 days. This consisted of 47 days of receivables, 28 days of inventory, or 13 terms, and 73 days of payables. We generated $313 million in cash flow from operations during the March quarter, and our free cash flow totaled $138 million. Capital expenditures for the March quarter totaled $175 million. Depreciation and amortization expense for the third quarter totaled $151 million. We have lowered our forecast for capital expenditures and depreciation. We now expect our capital spending for the current fiscal year to be between $775 million and $800 million, including approximately $100 million for our 6- to 8-inch wafer conversion and some smaller expenditure to optimize the output from our Singapore media facility we acquired last year. Depreciation and amortization is now expected to be about $610 million for the current fiscal year. For fiscal year 2012, we are planning carryover spending of up to $100 million for 6- to 8-inch wafer conversion in Singapore media facility optimization. We made $25 million of debt repayment installments during the third quarter and thereby reduced our debt balance to $325 million. We exited fiscal Q3 with cash and cash equivalents of $3.2 billion, an increase of $120 million from the December quarter. Before I talk about our Q4 guidance, let me update you on the progress we made on the debt financing related to our planned acquisition of HGST. The cash portion of the purchase price will come from available offshore cash and new debt. Our existing term loan will be repaid from available cash balances. The new debt will not be rated but will have terms similar to investment rate debt and covenants that are very similar to what we have now. The new credit facility will consist of a term loan of up to $2.5 billion, and a $500 million revolving line of credit. We've fully negotiated the definitive loan documents with the Syndicate members and subject to customary closing conditions, including completion of the acquisition in accordance with its terms, we fully expect all of the Syndicate members to be part of the final lender group. The term loan and any amount drawn under the line of credit will carry an interest rate of LIBOR plus a margin that is based on our leverage ratio. We currently expect that margin to be 200 basis points. Undrawn amounts on the revolver will carry a commitment fee of about 35 basis points, which will also vary according to our leverage ratio. The debt will not be funded until the acquisition closes. But we will be paying ticking fees on the $3 billion commitment at an annualized rate of 35 basis points between now and then. The loan will have a 5-year term with half of the principal being paid quarterly over that period and the other half being paid at maturity. Let me now turn to our expectation for fiscal Q4. Absent the impact from the earthquake in Japan, we believe demand would have been flat to slightly down in line with historical seasonality. However, there are several factors that could alter that pattern, including our belief that hard drive suppliers will struggle to meet customer demand. Customers are still in discovery mode to establish which components may limit their ability to service their system-level customers. If hard drives prove to be the bottleneck, we will be able to ship everything we can build. We estimate significant progress stabilizing our supply, and are confident that we can supply our customers what we committed to them prior to March '11. We expect better than seasonal capacity mix-up, moderate price declines and some cost increases for parts substitution and expedite charges. Despite the fact that we're currently above our OpEx model, we continue to invest in our branded products portfolio, solid-state initiatives and fundamental technology capabilities. Our guidance does not include acquisition and financing related costs. Based on these assumptions, our guidance for fiscal Q4 is as follows: We expect revenue to be in the range from $2.2 billion to $2.25 billion; R&D and SG&A spending of approximately $245 million, excluding acquisition-related expenses; we expect our tax rate to be in the middle of our business model range of 6% to 9%; we anticipate our share count to be approximately 238 million; we estimate non-GAAP earnings per share of between $0.60 and $0.65 for the June quarter, which excludes acquisition-related expenses. Operator, we are now ready to open the call for questions.

[Operator Instructions] And our first question comes from Rich Kugele with Needham & Company. Richard Kugele - Needham & Company, LLC: Thank you. Good afternoon, gentlemen. So just a couple of questions for me. I guess first, when it comes to the Hitachi acquisition, I haven't been able to find a signed purchase agreement. Is that out there today? Is it something that we need to wait for, or am I just missing it?

It will be in the 10-Q, Rich. Richard Kugele - Needham & Company, LLC: Okay, that's helpful. Thank you. And then, in terms of obviously Seagate's announcement about Samsung, do you expect this in any way to change how you talk about the deal with regulators? Or any comments on that?

Basically, no. We developed our transaction based on our belief that it will enhance our ability to provide value to customers through enhancement of the basic technology that's required to continue to deliver a high-quality, high reliability product portfolio, enables us to expand that product portfolio. The scale of the combined operations generates cost leverage and efficiencies, which we intend to share with our customers, and so we continue to be convinced that the acquisition of HGST is a very positive thing for WD's customers, for WD's employees, suppliers, and shareholders. Richard Kugele - Needham & Company, LLC: Okay and then the last question for me, just on Intel. Intel talked last night, continuing to refute some of the industry analysts' forecast on PCs. Saying that they still expect low double-digit growth for the entire industry. Do you have any revised color on what you're seeing or your discussions with the OEMs relative to that?

I think, Rich -- I think I mentioned in the last call my belief that the drive industry got a little ahead of itself in calendar year 2010 and shipped more product than the actual end demand consumer and commercial user level justified. And that likewise the PC industry also put a little too much inventory into the channel, particularly in consumer in the latter half of 2010. And that consequently, while the drive industry had 18% growth in 2010, over 2009, that I expected mid single-digit to high single-digit growth in the current year. And if you balance those two numbers, you would get a 2-year growth rate in the 10% to 12% level. I think that commentary is still valid. We believe that true end consumer demand, whether commercial or personal, continues to be in the range that Intel are reflecting in their commentary. Richard Kugele - Needham & Company, LLC: Okay, thank you very much.

Your next question comes from Katy Huberty with Morgan Stanley. Katy Huberty - Morgan Stanley: Thanks. Good afternoon. Your OEM customers have obviously seen the news of the HGST asset purchase. What insights, if any, have you garnered from the conversations you've had with your customers about being able to maintain market share of the combined business once the deal is done? Obviously you maintained compute shares this quarter, so it doesn't seem like there's been a disruption to date.

Yes, generally, our customer reaction in our conversations with customers immediately after we announced the acquisition of HGST has been very positive. I believe that the compelling value that they see in the deal is our ability to underpin the technology on a go-forward basis. Our ability to continue to innovate in terms of products useful to their future directions and the increased scale that will allow us to generate further cost benefits, and our willingness that we've exhibited over the last 10 years and will continue to do so to share those cost reductions with our customers to enable them to grow their markets. So very positive reaction. Katy Huberty - Morgan Stanley: Just one follow-up on your commentary about March and June, given your customers are already coming to you and asking for upside, can you help us understand what WD's typical strategy is in those discussions? Do you plan to offer that incremental product at a higher price? Do you ask them for guaranteed orders for the back half of the year? Are there any concessions that you can get from your customers given your ability to supply them the upside this quarter?

Obviously, we have been working with customers over many, many years to develop strong partnership relationships and a significant and key value that WD has brought to that table is our flexible and responsive model, and the consistency of our ability to overcome challenges and consistently deliver a high-quality product in a timely manner. That is one of the key values that has driven the WD share growth over the last 10 years. And our posture is to continue to deliver that value. Obviously, where that requires incremental cost, like all good partnerships, we want that to be a 2-way thing. Continuous price reduction in the marketplace is an ability we have to reduce prices is driven by an ability to consistently reduce cost. So where cost reduction takes a backseat to securing availability such as securing more expensive components, being involved in more expensive transport costs to expedite, paying expedite fees, those kinds of things we share with our customers typically. And they value our ability to deliver the product. And are therefore, willing to address those cost issues. Katy Huberty - Morgan Stanley: Okay. Thank you very much.

That's as much color as I can give you.

Keith Bachman with Bank of Montreal. Keith Bachman - BMO Capital Markets U.S.: Hi guys, thanks very much. I had a question on inventories and the implications. What do you think the OEM inventory status is of hard drives at present? And if you mention that folks are trying to catch up here, what do you think it implies for sequential growth patterns as supplies free up presumably in the September quarter? But how should we be thinking about a little further out in the June quarter in terms of the TAM growth as we look at September. Thanks.

Okay, Keith, this is Tim. When we exited on the December quarter, we estimated that the OEMs had about 8 million to 10 million units in their inventory. Then during the course of the quarter, as we went through the CPU shortage, we think that they had reduction down to around 6 million to 8 million units. And then as we got into the March portion of the quarter, we believe that they built that back up to around 8 million to 10 million units as they got a bit concerned about supply. So we think that they finished up pretty much where they started at the beginning of the quarter. And then, when we look at the profile for the balance of the year, we believe there will be a supply constraint in both June quarter and in the September quarter. We think that in the December quarter, we'll be able to supply pretty much what the industry -- what the customers demand. So we think that the comfort level as far as inventory in the pipeline will not be able to be reached again until this quarter next year, the March quarter of next year. Keith Bachman - BMO Capital Markets U.S.: So you think you'll be supply-constrained all the way to the end of December?

We think we'll be supply-constrained in June and September, and then we think we'll be pretty much on equilibrium basis relative to what the customers want and what we can supply in the December quarter. Keith Bachman - BMO Capital Markets U.S.: Fair enough. And then I'll sneak one more and if I can, against that -- you had some discussions about what you thought the TAM would be for calendar year '11 as we exited calendar year '10, I was just wondering if you might update us on thoughts there about what you think the TAM then looks like for calendar year '11?

Yes, I think given what I just said. We had 160 pretty much 160 in the current quarter. I think the next two quarters will be somewhere around 155 each. And then we think that probably around 185 or so in the December quarter, so we think that given that profile, it'll be a supply constrained TAM and it'll be about 655 versus what the 650 in the last calendar year. Keith Bachman - BMO Capital Markets U.S.: Okay, I will see the floor. Many thanks, guys. I appreciate it.

Rob Cihra with Caris & Company. Robert Cihra - Caris & Company: Thanks very much. Two quick questions, if that's all right. The first, just that $10 million non-GAAP expense in the quarter, was that all in SG&A or was that in any of that in R&D?

Yes, it was all in SG&A. Robert Cihra - Caris & Company: All SG&A. Okay, thanks. The other question would be just if you look at your, without getting into specifics of timing or anything, but to look at your sort of call it 1 terabyte per product [ph] desktop and 500 gig notebook and your cycles or industry cycles this year, is there any reason to think that those roadmaps change or impacted by either Japan and/or your HGST deal? Thanks.

Given the information that we have right now, we don't believe so. Robert Cihra - Caris & Company: Okay, great. Thank you.

Scott Craig with Bank of America Merrill Lynch.

Yes, thanks, good afternoon. A couple of questions. Wolfgang, maybe can you talk a little bit about the gross margin for the quarter. When you look at it on a quarter-to-quarter basis, I know you guys don't provide official guidance but if we backed into it for last quarter, you come out with a midpoint you upside a surprise versus your guidance essentially so maybe talk about the moving parts there. And the second part of my question is, as you're looking at the CapEx priorities and you've taken it down a little bit, what are the odds of that having to come a little bit lower, and where are you taking CapEx out of specifically, it's obviously not on the 6- and 8-inch wafers or the Singapore media, but maybe a little bit of color around that?

Yes, Scott. The sequential decline of gross margins from 19.2 to 18.2 are indeed a little bit better than what we had implied in our guidance. We pretty much saw the decline exactly how we had forecasted them, and again, mainly came from a segment mix, the branded businesses seasonally a bit down. And we had some absorption cost to deal with because we built fewer units in the March quarter than we did in the December quarter. And pricing overall probably came in a little bit better than we expected. I think we said on the call that we had like-for-like price declines in the model of 5%, and I would say they came in closer to 4.5%, so that's probably where the pickup came from. In terms of the CapEx, our priorities have not changed. Our capital is geared first and foremost towards ensuring our flexibility to service the market, our technology advancement, risk mitigation, and then we sold for incremental capacity. And we try to do the latter in as much as a just-in-time fashion as we can. And since volumes have come down a little bit, we're trying to be very prudent and try to invest as realtime as possible in capacity as we can.

Jayson Noland with Robert Baird. Jayson Noland - Robert W. Baird & Co. Incorporated: Yes, thank you. Two questions. First Wolfgang, the guidance seems soft relative to the commentary about your ability to supply current OEM demand strength. Is there something I'm missing there?

Historically, gross margin is down quarter-over-quarter in the June quarter over the March quarter. Like we said, we believe that we have underpinned the volume that we have committed. We believe that the pricing potentially driven by the swap markets is a little bit better. Price climbs are a little bit more benign than we have historically seen. So our implied margin is flat to slightly up, so we believe that is better than what we've historically seen, and our cost decline are somewhat limited because we have some increase cost due to the part substitutions that we have to do and expedite charges that we have to pay. Jayson Noland - Robert W. Baird & Co. Incorporated: Okay, thank you. And last question, John, a question on Toshiba. In your opinion, are they willing and able to make significant investments?

Well, I can only refer you to their public utterances and they did put out a press release immediately after our announcement of the HGST acquisition, which indicated their belief that, that offered them significant opportunity to grow and expressed their willingness and desire to invest to accomplish that. Jayson Noland - Robert W. Baird & Co. Incorporated: Thank you.

Aaron Rakers with Stifel, Nicolaus. Aaron Rakers - Stifel, Nicolaus & Co., Inc.: Yes, thanks. Couple of questions, so going back to your TAM assumptions for the full year, now it's 655, I think you were previously at 700 million, can you bridge the difference in those two numbers between the effects of Japan relative to be it a slowing PC environment or any other metrics that are in that?

Well since it's all supply constrained as I indicated, I indicated that we were thinking we would be supply constrained or the industry would be supply constrained, in June and September. And then only able to satisfy pretty much what the demand was in December with no inventory pipeline filling, and that indicates that it's all Japan related. Aaron Rakers - Stifel, Nicolaus & Co., Inc.: Okay, thank you. And then the second question, I know last quarter you guys talked about or you've been reiterating 7% to 8% of revenue for CapEx spend. Now you're saying 775 to 800, can you tell us how much of a reduction that looks to be and I guess on top of what looks to be a $100 million push-out in the spending related to the wafer upgrade?

Yes, I think again in the 775 to 800 million units, you will have 100 million included for the 6 to 8-inch wafer conversion and for the upgrade of our Singapore facility to optimize the output there. If you would roughly take this over a Street consensus revenue, excluding the onetime wafer, we're probably more towards the 7%, which is a function of the lower volume output and our just-in-time investments there. And then part of the 6-to 8-inch investments are moving into next year and it could be up to 100 million there. Aaron Rakers - Stifel, Nicolaus & Co., Inc.: And final question from me. I know we talked a little bit about where you though OEM levels where for inventory. Can you talk about the pull from a distribution perspective for the final few weeks of March? And compare that relative to what a historical trend has been, and where we've exited the March quarter as far as channel inventory levels?

General industry levels are below the 4- to 6-week target -- are bends that we normally talk about. And actually within that, both of the individual components of that, which is the distribution and the retail are well below their individual metrics. So in very good shape. Aaron Rakers - Stifel, Nicolaus & Co., Inc.: And can you talk about demand pull at the final couple of weeks for the quarter relative to what normally the demand looks like?

They were very strong. I mean, and there were two things that drove that from an OEM viewpoint, there was when you looked at the information out of Taiwan for the ODMs they indicated that they had very strong March because the fact that the CPU, the lateness of the CPU delivery, enabled them or it required them to be able to catch up. And then we had the concern about the Japanese earthquake which drove very strong pulls from all channels in the last several weeks of the quarter. Aaron Rakers - Stifel, Nicolaus & Co., Inc.: Again not to push you, but I mean were we 20% higher than we typically are, 30% higher? I'm trying to just understand what "really strong" means.

Well, I think if you look at it, we believe that while February -- January tracked to the 155 guidance we gave in the last call for TAM. January tracked, February was weak. And we believe March, CPU delivery-driven demand would've delivered the quarter on track at 155. And we believe the incremental 5 million is response to the earthquake. Aaron Rakers - Stifel, Nicolaus & Co., Inc.: Okay, great. Thank you.

The next question comes from Ben Reitzes with Barclays.

Hey, good afternoon. This is actually Eric Sterling for Ben Reitzes. I just had a quick question on your pricing expectations, for the remainder of the year.

Again like we said, we're just providing color on the quarter that we've just started. We believe it is the price declines quarter-over-quarter are slightly below the historical norm. There are price declines because we had some pre-committed pricing in pre-3 '11 events and the swap markets have firmed up a bit as a function of supply demand, but it's way too early to tell what the pricing outlook would be for the remainder of the quarter. Our focus is on reducing our cost so that we continue to provide value to the marketplace.

Right. And just in terms of the pending acquisition, are the long-term gross margin targets I believe they were 19% to 24% are those still intact?

Yes.

Okay, thank you very much.

Sherri Scribner with Deutsche Bank. Sherri Scribner - Deutsche Bank AG: Thank you. You mentioned on the call that you think you'll be able to meet your commitments to the OEMs this quarter and now you're working on upside. So I'm curious, with other suppliers potentially having supply constraints this quarter, do you think you'll be able to gain share in the quarter? What is your expectation?

We'll see when the quarter is done. Our focus is on ensuring that we give the best support we possibly can to our customer needs. Sherri Scribner - Deutsche Bank AG: Okay. And then for the second half of the calendar year, do you plan to add capacity to support additional volumes in the second half?

As Wolfgang indicated, in response to a CapEx question, typically, we track the market very closely and we do just-in-time investment into capacity. And to Tim's point, we think there's going to be a component supply constraint throughout the industry through the September quarter. We then see an uptick in December from a demand perspective. We will plan to support that, but not over support it. Sherri Scribner - Deutsche Bank AG: Okay, so based on -- I know you guys have a history of bringing on capacity just-in-time. Should I assume that you're not currently adding any capacity right now?

I think that's encompassed by the capital guidance we've given for the full year. Sherri Scribner - Deutsche Bank AG: Okay, thank you.

Joe Yoo with Citi Investment Research. Joe Yoo - Citigroup Inc: Thank you. My first question is on the Samsung, Seagate deal. Obviously it's looked upon as being positive for the over-all industry, from a pricing perspective, but one of the concerns coming out of this is that TDK's incentive to be in the drive business could wane over time if Toshiba does not execute. How big of a concern is this to your company given that they are a critical component supplier?

We think that the -- our primary focus of course is on our acquisition of HGST, which we believe provides value to our customers and shareholders through our ability to enhance our technology, product portfolio and scale. We did indicate in our go forward strategy that our external, critical technology suppliers would continue to be a substantial and very important part of our go forward strategy. We've not worked our way through all of the implications of the Seagate, Samsung deal as it may relate to Seagate's choices post-combination as to their external sourcing strategy. And if that were to change substantially what that impact might be on TDK. But our focus is on working with our critical technology suppliers to ensure that they have viable, underpinned, go forward strategies for technology, quality and availability and competitiveness. And we're certainly very focused on working with those suppliers to ensure that, that continues. Joe Yoo - Citigroup Inc: Thank you. The second question is on the gross margins towards the back half of this year. It doesn't seem like the new products will have a meaningful impact to margins in 2012. And obviously it seems to be that you'll have some supply issues as well. Based on these challenges, is it unreasonable to expect gross margins to get back to at least the midpoint of your normal target range?

Too early to tell. The model is 18% to 23% and typically in the latter half of the year you're in the upper end of this but it's really too early to tell. Joe Yoo - Citigroup Inc: And then my last question is on the PC food chain overall. You've put out there concerns about certain components for PCs potentially being a bottleneck. I mean how big of a concern is that relative to the ability of HDD suppliers to provide the drives in the second half?

Well, I think there's still some discovery in that area. I mean, it's a relatively multi-tiered supply chain with not only the components we normally think about like finished semiconductors, but all of the subcomponents and materials that go into that. We do know that there are some concerns in the semiconductor world about silicon wafers, about semiconductor packaging materials in the printed circuit board world about some of the chemicals and metals that go into making circuit boards. So there's -- then there's an issue of the continuing rolling blackouts in Japan, I mean there are a whole series of uncertainties. We're not fully convinced that they're fully understood yet. And you just need one thing that cannot be sourced that is essential to system build to alter the landscape. So I think there's going to be some uncertainty throughout the balance of this quarter because remember, most people are currently operating on parts in pipeline that were already in place prior to the earthquake. And so, the real true impact, I think, will begin to be much better framed as we get towards the end of May. Joe Yoo - Citigroup Inc: Great, thank you.

Kaushik Roy with Wedbush. Kaushik Roy - Wedbush Securities Inc.: Did you notice that distributers and OEMs started allocating more to your competitors specifically Seagate after the HGST announcement?

You were very faint, but I think the question is had we noticed any reallocation of business away from WD and the post acquisition announcement phase? Kaushik Roy - Wedbush Securities Inc.: Correct.

We have not. It's hard to tell whether that's driven by availability or whether we're continuing to do as good a job for customers as we've been doing up until now. That's certainly our objective. So I think that's all the questions we've time for. Operator, I'd just like, in closing, to thank all of you for joining us today. We appreciate your interest in the company and in the industry. And we look forward to seeing you again in another quarter. Thank you.

Thank you. This does conclude the conference. You may disconnect at this time. Have a great day.