Bill Watkins - CEO Charles Pope - EVP and CFO Dave Wickersham - President and COO Brian Dexheimer - EVP and Chief Sales and Marketing Officer

Aaron Rakers -A. G. Edwards Harry Blount - Lehman Brothers David Bailey - Goldman Sachs Rich Kugele - Needham & Company Mark Miller - Brean Murray Christian Schwab - Craig Hallum Capital Group Mark Moskowitz - J.P. Morgan Katie Huberty - Morgan Stanley Steven Fox - Merrill Lynch Jeff Brickman - UBS Daniel Renouard - Robert Baird Kevin Hunt - Thomas Weisel Partners Keith Beckmann - Bank of Montreal

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to Seagate Technology's Fiscal Fourth Quarter and year-end 2007 Financial Results Conference Call. At this time, all lines are in a listen-only mode. Later, there will be an opportunity for questions, and instructions will be given at that time. (Operator Instructions). This conference is being recorded. This conference call contains forward-looking statements including, but not limited to, statements related to the company's future financial performance. These forward-looking statements are based on information available to Seagate as of the date of this conference call, but are subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated by these forward-looking statements. Information concerning the risks and uncertainties that could cause results to differ materially from those projected in these forward-looking statements is contained in the company's annual report on Form 10-K, as filed with the U.S. Securities and Exchange Commission on September 11, 2006, and the company's quarterly report on Form 10-Q, as filed with the U.S. Securities and Exchange Commission on May 3, 2007, and in the company's Form 8-K, as filed with the U.S. Securities and Exchange Commission on July 19, 2007. These forward-looking statements should not be relied upon as representing the company's views as of any subsequent date, and Seagate undertakes no obligation to update forward-looking statements to reflect events or circumstances after the date they were made. I would now like to turn the conference over to our host, Mr. Bill Watkins, CEO. Please go ahead, sir.

Thank you, Janice. Welcome everyone and thank you for joining us. On the phone with me today are Dave Wickersham, President and Chief Operating Officer, Charles Pope, Executive Vice President and Chief Financial Officer, and Brian Dexheimer, Executive Vice President and Chief Sales and Marketing Officer. I'll focus my comments on the overall highlights of the 2007 fiscal year, as well as the fourth quarter specifically. Following that I'll turn to our outlook for fiscal 2008 and share with you our review of the key factors that will enforce our performance in the year ahead. I'll then turn it over to Brian, Dave and Charles to discuss details of our market, operating and financial results respectively. Fiscal 2007 was a year in which we clearly demonstrated and further extended our industry leaders. Our operating performance or results reflect success of our very deliberate efforts to execute against the number of important objectives, including completing the Maxtor renovation, continuing to advance our technology in cost leadership positions, maintaining our leadership in key markets and introducing new products in core markets while developing the additional values streams in new and emerging markets. On an annual basis, Seagate reported $11.4 billion in revenue, a 23% increase year-over-year. We shipped a total of 159 million units and captured a significant portion of the total available market with a 35% share. We are pleased with these results as our revenue and shipment numbers are unmatched by any other disc drive company in the industry. In the fourth quarter specifically, while maintaining our leadership position at desktop and consumer electronic markets. We also greatly increased an already strong position in the notebook market, and further advanced our substantial lead in the enterprise market. Our product program progress to plan during the quarter, and we are particularly pleased with the continued advancement of our transition to perpendicular recording. We are ahead of our announced transition schedule with outstanding yields, quality, and reliability across the board. I'll like to comment now on some of the highlights for the year. From a financial perspective, we continue to take a disciplined approach to efficiently deploying capital, and maintaining our technology and product leadership. Consequently we sustain and continue to invest in infrastructure and capital equipment needed to support and grow the business. In fiscal year 2007 we increased unit shipments by 34% to 159 million from 119 million in the prior year. We continued to improve our cost structure, lowering our breakeven point to 12 to 13 points of gross margin. This compares to breakeven points of 16 to 17 points three years ago. We continue to expand our market coverage, and realize new revenue stream from investments in technologies such as full disk encryption, products such as our feature rich FreeAgent line, and adjacencies such as our services business. Additionally, we completed shares repurchases totaling over $200 million during the current quarter, for a total of over $1.5 billion for the fiscal year. Our commitment to repurchasing Seagate stock demonstrates our confidence in the company's strategic plan as well as the long-term liability of the industry. The fundamentals of Seagate business have remained consistently strong. We deliver solid revenue growth and generate the cash flow necessary for investments that will support both future product development and overall business group. As an industry leader, our scale and expertise have allowed us to continue introducing innovative products in the market place while simultaneously reducing cost in the company's breakeven point, plus combating the pricing pressures. This flexibility allows us to respond quickly to market changes, and enhances our ability to remain focused on growing the company and generating value for our shareholders over the long-term. One significant effect of what we have seen in the recent environment and the environment in neither ahead is how we will handle guidance moving forward. We've determined as pricing volatility continues to challenge the industry, providing annual guidance on revenue and earnings is not particularly valuable. We have decided to only provide quarterly estimates going forward. We will, however, continue providing annual information on certain aspects of the business that will help you analyze the company's performance. Further, annual information will be provided at our Analyst Meeting in September. In summary, this fiscal year was one in which Seagate made great strides on the product and technology front, maintained an impressive overall market share, and advanced or retained our leadership position within key arenas. Looking ahead to fiscal 2008, we see market trends are continuing to drive robust demand for storage and significant opportunities for growth. I am confident that we will be able to capitalize on those opportunities given our position within the industry, while consistently delivering sound financials and operating performance. We will continue our commitment to growing the business, executing our strategy, and generating meaningful value for our shareholders. Now, I would like to turn the call over to Brian to provide more details on our performance in the market during the quarter.

Thanks, Bill. Demand in fiscal 2007 was again very strong and led to record shipments for the industry and Seagate. Seagate shipped a record 159 million units during the year, representing the continued growth of storage applications in client/server environments, as well as clearly underlying this explosive growth in digital content, particularly in the home. In fact, we believe that in the past year more terabytes of storage were shifted into homes than businesses, as consumers continue to aggressively create, share, and collect digital content. Evidence of this can be seen in the tripling of users in the past year of services such as YouTube, MySpace and iTunes. The more than 120,000 new blogs created globally each day and the more than 250 billion digital pictures taken in the past year. We view these trends as extremely positive for the industry and Seagate for the next few years to come. Moving on to the June quarter, we are pleased that we were able to execute through our plans. In general, industry demand was in line with our expectations and we believe the overall total available market was slightly more than 110 million units, up 11% year-over-year. In the quarter, Seagate retained its overall leadership, shipping 35% of the industry's volume as well as the number one position in Enterprise, Desktop, and CE shipments. Looking towards the September quarter, we expect seasonal growth to bring the overall TAM up about 15% quarter-over-quarter to 125 million to 128 million units, representing year-over-year growth of 10% to 11%. Now just some detail on the individual markets. The Mobile Compute market demand was a bright spot during the quarter as the TAM came in flat to the March quarter, which is slightly higher than our expectation was at the beginning of the quarter. Seagate shipped a record 6.1 million units, an increase of 80% year-over-year and 30% sequentially. A strong trend to our higher capacity products continued as nearly 50% of the industry shipments were in capacity 120 gigabytes or greater. Seagate's average capacity climbed to 100 gigabytes during the quarter. Also, we began initial shipments of our first hybrid network product, as well as our second generation industry leading security product featuring full disk encryption. In the September quarter, we expect strong seasonal uplift in the Mobile Compute TAM. As expected, the TAM and the Consumer Electronics market were slightly down in the June quarter. Seagate maintained its leadership position during the quarter shipping 5 million units, driven primarily by shipments in gaming applications and DVR. During the quarter, we completed a number of successful qualifications of our newest generation of DDR products and experienced the rebound in demand from the more middle levels that characterize the March quarter. We also completed several successful qualifications of the one disc, 60 gigabyte, 1.8 inch product, during the quarter. However due to a shift in market demands for higher capacity platforms in the near term, we've reduced forward-line expectations for these phases. We remain excited about these platforms and view the shift for higher capacity as yet another signal for a strong demand is highly mobile applications, and as a results we remain committed to future generations of products in these categories. We believe the overall stand for the CE market in the September quarter will be seasonally higher, as CE manufacturers prepare for the holiday season. The enterprise market stand and mission-critical applications were slightly lower than expected; demand in the US commercial enterprise markets seems to be the driver of the minor deviation, though the current view for the September quarter indicates a rebalance in more normal demand patterns. Overall we believe the industry shipped 6.9 million units in the June quarter and Seagate maintained its clear leadership in these market shipping 4.3 million units. Additionally the adoption of small form factor drives continued to accelerate during the quarter. As shipments reach 1.6 million units now at 36% of our enterprise business, we also believe first-to-market qualifications and volume rent of our Cheetah 15K 300 gigabyte and small form factor 10K 146 gigabytes products have led to some incremental share gains. Looking forward we expect the enterprise stands in the September quarter to be flat to slightly up. One final note regarding enterprise market, over longer time periods we do observe that the explosive growth of high capacity enterprise class SATA products is likely shifting some demand from traditional machine critical class drives; we view this trend positively and this emerging space has added dramatically to the net-growth profile of the enterprise business, and that market requirements match well with Seagate's technology leadership in customer access- to that end some products in this space, namely our 750 gigabyte drive, in the June quarter we saw a 28% sequential increase in shipments. Now on the desktop compute market, we maintained our leadership positioned by shipping 23.8 million units and a TAM that was expectedly below that of the March quarter. We continue to see average capacity points increase in this market, which we believe favors Seagate's strength in technology and cost leadership. In the June quarter, 35% of the desktop TAM with drives at 250 gigabytes and greater. Seagate once again led the industry and delivered in volume the industry's first 250 gigabyte pro-disc product. In addition two-thirds of our desktop-class drives shipped during the quarter were based on perpendicular recording, and we expect to raise that percentage to more than 90% in the current quarter. We are pricing in general slightly more aggressively than expected, particularly in mid to high cap products early in the quarter. We believe general inventory exceeding the June quarter for Seagate and the industry was under five weeks. We expect the TAM and desktop compute to be seasonally up in the September quarter. Finally in our brands solution business revenue and execution improved sequentially. Consistent with last quarter market dynamics, pricing and competition remains aggressive. This market followed the growth and average capacity of all other markets, where Seagate averaged 3.5 inch shipments reaching over 360 gigabytes. We strongly believe there is additional head room for growth in this space and expect strong seasonal back half of the calendar year. Now, I would like to turn the call over to Dave to run an update on our operation.

Thanks, Brian. I'll start with a few comments regarding Seagate's supply of media given Western Digital acquisition of Komag, and then provide some information related to how Seagate executed during the June quarter, and conclude with the discussion of our expected capital investments for fiscal 2008. First and foremost Seagate anticipated adequate supply of finished media and substrates, notwithstanding WDs plans acquisition of Komag. The volume purchase agreement in place with Komag provided Seagate the flexibility and adequate time to address our media and substrate source in needs. In regards to industries supply of finish media and substrate, assuming industry capacity is added as anticipated and the transition to perpendicular media is executed without disruption. We believe the industry has and will continue to have adequate supply of finished media and substrate. Inventory in the June quarter decreased by $38 million, from $832 million to $794 million. Inventory turnover improved slightly to 10.8 turns primarily due to a reduction of $55 million in finished goods. These reductions more than offset an increase in the precious metal inventory required to support our conversion to perpendicular based products. Looking forward to the September quarter, while we will continue to focus on optimizing our supply chain, the impact of precious metal use associated with the volume ramp for perpendicular products will continue to pressure our turnover. Consequently, churns are expected to be approximately 10 in the September quarter. We continue to be very pleased with the successful ramp of our perpendicular products and processes. Perpendicular component and product deals are meeting plans and already exceed the legacy longitudinal products they replaced. Customer qualification continued to progress as expected and in the June quarter we shipped over 28 million drives with perpendicular recording up, from the 17 million shipped in the March quarter. In addition to the successful introduction and ramp of perpendicular based products, we are very pleased that the field reliability of these products is significantly better than that of the longitudinal-based products. We expect to exit calendar year 2007 with a convergent to perpendicular recording largely complete. A significant accomplishment that reflects the product and technology leadership Seagate has consistently demonstrated. As always we aggressively manage the company’s capital investments to align with customer demand and to improve the utilization of capital equipment. Consequently, we further reduced our capital expenditures in fiscal year 2007 to approximately $900 million. Based on the current customer requirements and the planned equipment utilization we expect fiscal year 2008 capital investments to be flat year-over-year. This includes the investment necessary to expand our media and substrate capacity in Asia. Now I would like to turn the call over to Charles.

Thank you, Dave. You will find the company's press release, 8-K and additional financial information related to Seagate's financial performance, along with a reconciliation of GAAP to non-GAAP financial results and other supplemental information in the Investor Relations section of Seagate's website at seagate.com. Seagate reported June quarter revenue of $2.74 billion and unit shipments of 39.2 million. GAAP net income and diluted earnings per share are $541 million and $0.96 respectively. Included in the GAAP results are approximately $27 million of purchased intangible, amortization and other charges associated with the Maxtor and EVault acquisitions. Without these charges and the associated tax effects, non-GAAP net income and diluted earnings per share was $568 million and $1.01 respectively. At the beginning of the June quarter, we provided a non-GAAP earnings per share outlook of $0.34 to $0.38. However, the reported GAAP and non-GAAP net income per share for the June quarter include the certain non-operating items that were not factored into our original guidance. It is important to understand these non-operating items since the company believes that achieved results at the high end of the range originally provided. First, there is a $29 million restructuring charge which reflects cost associated with ongoing expense reduction activities across the company. Approximately $10 million of the restructuring charge is cash related and will be paid out in fiscal 2008. Second, we wrote off a $4 million equity investment which is reflected in other income and expense. And third, there was a significant favorable book tax rate adjustment that reflects the change to the valuation allowance for deferred tax assets that resulted in the benefit to the income statement of approximately $359 million. The adjustments to the valuation allowance will not impact our cash tax rate or cash taxes paid. It is clearly an accounting adjustment. A summary of these items can be found on page seven of the supplemental package on our website. GAAP gross margin for the June quarter was 21.6%. Excluding approximately $11 million of acquisition-related cost, non-GAAP gross margin was 22%. Non-GAAP gross margin was in line with our expectations and roughly flat sequentially when adjusting the March quarter for the favorable benefit of eliminating the fiscal year 2007 variable compensation. Consistent with the March quarter results, there are no costs associated with variable compensation included in cost of goods sold. GAAP, R&D and SG&A costs were $364 million for the June quarter. Excluding costs related to the Maxtor and EVault acquisitions, non-GAAP expenses were $361 million. During the June quarter, Seagate acquired storage-related intellectual property for approximately $9 million. Once again consistent with the March quarter results, there are no costs associated with variable compensation in R&D or SG&A. Slide six has the detail for the adjustments made to GAAP, R&D and SG&A for the June quarter. Cash, cash equivalents and marketable securities ended the quarter at $1.14 billion. During the 2007 fiscal year, Seagate made capital investments totaling $906 million, of which $218 million occurred in the June quarter. As Dave mentioned, we aggressively focus on aligning capital investments with customer demand, and at the same time continue to improve the utilization of our capital equipment. At our Analyst Day last year in June, we told you to expect $1.35 billion of capital investments for fiscal 2007. As the year progressed, we aligned our capital equipment expenditure to changes in customer demand, utilized the portion of the Maxtor test equipment and benefited from improved yields and utilization of the existing equipment. Cash flow from operations was $373 million for the June quarter. Days sales outstanding was 46, days payable outstanding was 55, both within the normal range. Depreciation and amortization for the June quarter was $201 million, a decrease of approximately $35 million from the March quarter. This decrease is due primarily to a reduction in intangible amortization related to the Maxtor acquisition. We have provided you with our estimated amortization of purchased intangible for fiscal year 2008 on slide 8 of the supplement on information package. During the June quarter, the company took delivery of approximately 9.7 million shares related to its share repurchase plan. The average price of the shares that were delivered was $20.76. For the fiscal year that ended in June, Seagate repurchased approximately 62 million shares at an average price of $24.62. Seagate has made significant progress in its desire to make the Maxtor acquisition a virtue on cash transaction. Since May of 2006, when Seagate closed the acquisition, the company has repurchased just over 78 million shares. The company has authorization to purchase approximately $975 million of additional shares under the current stock repurchase program. For the September quarter, we are expecting the industry to experience a nominal seasonal increase in units demand of approximately 15%, as compared to June. It is important to note that we began the fiscal year with the assumption that Seagate's financial would be sufficient to reinstate the annual variable compensation plan. For the September quarter, revenue is expected to be between $2.9 billion and $3 billion. GAAP diluted earnings per share is expected to be $0.35 to $0.39 and includes approximately $27 million of purchased intangible to amortization and other charges associated with Maxtor and EVault acquisitions. Accordingly, non-GAAP diluted earnings per share, excluding the acquisition-related costs, is expected to be $0.40 to $0.44. GAAP, R&D and SG&A expenses are expected to be approximately $384 million for the September quarter on a non-GAAP basis, excluding approximately $4 million of acquisition-related costs. R&D and SG&A costs are expected to be approximately $380 million. Additionally, other income and expenses are expected to be a net expense of approximately $17 million, and the tax rate is expected to be between 5% and 10%. As always this outlook does not include the impact of any future acquisitions, stock repurchases or restructuring activities the company may undertake during the quarter. As Bill mentioned, we believe that providing annual revenue and earnings guidance in this volatile environment is not particularly valuable. We will continue to share annual information with the investment community relative to factors that impact our business. That concludes my remarks. I will now turn the call back over to Bill.

Thank you, Charles. There will be a quiz for the analysts if any one of you understands our tax structure. But anyway, on behalf of the management team I would like to thank our employees around the world who performed amicably in this fast-changing market. We are very confident in Seagate’s strong position moving into fiscal year 2008. And look forward to the opportunities in front of us. So with that let’s open it up to questions.

Thank you Sir. (Operator Instructions) Your first question comes from Aaron Rakers with A. G. Edwards. Aaron Rakers -A. G. Edwards: Yeah thanks guys. A couple of questions, I guess first just looking at the model, two things I guess one on the gross margin side, obviously seen a little bit of positive seasonality of as we get into the September quarter, but given your guidance it doesn't look like were expecting to see much in terms of gross margin expansion, maybe if you can touch on that first and then also I'd like to understand the pick up that is expected to happen in the operating expense line.

Okay, this is Charles I will answer both of those questions. In the September quarter we have built into the guidance continued aggressive pricing not as aggressive as in the June quarter but still at the low end of range of what is normal and historically in the September quarter we've actually seen a dropped below the normal range. We do not assume that it is prudent to anticipate it dropping below the normal range in the environment that we are in, and so that’s the main reason for not seeing any margin expansion even given the seasonal up tick. Then the second question relative to the OpEx if you look at the increase in OpEx it's almost evenly divided between the reinstatement of our variable compensation and then also some increased variable cost associated with R&D program that are in pre-production stages.

Hey let me just add one more comment because I know there will be a lot of questions maybe on the OpEx is the OpEx too high? And in all we're very focused on this OpEx expense. That said, for iMed I think theme is that we still see there is a lot of investment out here that we've want to make we think there lot opportunities in products. I think the critical issue for us and what we can focus on are we getting the cost reduction and or the market revenue opportunities with our OpEx expending and then that's where more focus on to take these money that we're spending and making sure its in program that reduce our cost, our breakeven points and or add to the revenue and product market breadth that we are trying to attend. So again, I think we are very extensive to that, but again we think there are clear opportunities and how we spend our money and that is the future for us. During this time we think we set the opportunities for two year out now. Aaron Rakers -A. G. Edwards: Great. And if I could ask one follow-up on your CapEx guidance for the year being flat with fiscal 2007, can you give us I think its your analyst day can give us breakdown of how that spending worked? I would like to understand maybe where are the reductions might be coming in the place given your comments around deployment of the Maxtor equipment as well as improving yields on some of your existing cost equipment?

Sorry and this is Dave, so the first what you describe at the end that was really the historical, how do we get from where we were to where we are the 900 million actual, and as you have mentioned a small piece of that frankly was utilizing for Maxtor test equipment. But the vast majority was one as Charles said earlier aligning the customer demand which we'll always do, we have been in this environment you should might imagine. Fairly conservative to make sure we didn’t ahead of our customer requirements, so we dialed back some flexibility throughout the year, and then secondly the team has just done a admirable job it continuing to look at equipment utilization and the factors that drive are yields and as we have said we are pleased with the continued improved and perpendicular ramp in associated yield, that helps with our equipment utilization and then just from continued remanufacturing standpoint to make sure from the supply chain and so forth there is no waste in the process. So the vast majority were, one time the customers and two equipment utilization. Going forward in the '08 the reason we are able to continue to invest in technologies and expand capacity are those same reasons primarily equipment utilization, enjoying the benefits of our new products in the yield associated with newer products. At the same time continuing as I said earlier was a significant investment, both in Woodlands 3 which is our Singapore finish media expansion as well as our Johor, Malaysia aluminum substrate expansion. Aaron Rakers -A. G. Edwards: Great, thanks guys.

Okay.

Your next question comes from the line of Harry Blount with Lehman Brothers. Harry Blount - Lehman Brothers: Thanks. Couple of questions. First, Dave, if I could start with you. You mentioned in your comments on media and substrate. Just in terms of the substrate capacity coming online for you guys internally, where are you guys with that. I think the last point I heard as you are looking at early 2008, is that a correct assumption?

The facility in Johor in Malaysia, Harry the expense I mentioned while the building will be up. It really won't be operational until March or June of next year. So think about mid calendar year '08. Harry Blount - Lehman Brothers: Okay. And what are [two bottom x] to bring that online in a timely fashion?

Well, first, it's just a facility and getting that complete and all the logistics are getting the facility up and running. And that's proceeding as planned. And then like I said, it will largely be complete by the end of this calendar year. And then after that, it’s facilitating it and the equipment for plating and so forth. Harry Blount - Lehman Brothers: Okay.

So, that's a first building, second from the long lead time equipment. Harry Blount - Lehman Brothers: Okay, great. And then Charles, in terms of phenol, first of all, should I think of depreciation of about $800 million for fiscal '08, is that the right number?

That would sound about right to me. I don't know the number up top of my head, but given the fact that our capital investments are a kind of $200 million to $225 million a quarter and it's been ramped up a couple of times during the last couple of years. That sounds like about the right numbers, Harry. Harry Blount - Lehman Brothers: And then given the better experience and field reliability with drives, is there a reason to expect your warranty reserves might improve in '08?

I guess I don't have that much visibility as to count right now. We track the reliability and adjusted the biggest thing you see relative to the ongoing warranty expenses, so that's a very, very large [PO] population that exists.

The other thing Harry, we still got a lot of legacy master parts too. Harry Blount - Lehman Brothers: Okay. And then the share buyback by the current authorization, current stock price that would be about 14 million shares which we have taken basically flat free Maxtor. When should we expect you guys to be buying that back, what other factors you are thinking about to get more or less aggressive over the next several quarters?

I guess I will have two answers to that. First is that normal season speeds of things if we were doing it out of operating cash, we'd probably be completed by mid next calendar year. At the calendar we took out our debt offering last September, we indicated that in late summer, early fall, we would evaluate whether or not we wanted to further utilize the balance sheet to accelerate the share repurchase anymore. We still intend to do that and we'll be evaluating that in the coming 60 days or so. Harry Blount - Lehman Brothers: Last question, it is actually two part question. But it's related to the September quarter, I guess it's in my historic impression that mix tends to work a density on the margin side of equation with the little bit more gaining etcetera, is that true? And then related to that as we think about your gross margin structure longer term, could you maybe give us some of the ups and downs that you'd expect to see over the next several quarters? Thanks.

Brian.

I will take the next question, Harry. And I think you hit nail on head. So if you just follow through in the market comments that I made, you'll find that the growth market are on the client side and the CE space. Those, spaces in general have ASP's that are below our average and so you are exactly right, from a mix perspective, ASP's and margins do get affected in the reverse direction, and right now of course it comes with it as tremendous amount of unifying growth. So, from gross margin dollar perspective, it's still positive.

Remind me of the second question. Harry Blount - Lehman Brothers: Going forward on gross margin.

I think it would be better Harry to talk about the model of the company as we have our analyst day in September and to go through some of those real point then. I think it will be a more complete answer during that period of that.

I mean I guess I'll give a short answer to that Harry. We feel comfortable on those things we can control and the biggest assurance in why we talked about not giving the annual guidance, is our ability to predict pricing. We have run in vertical moderate pricing decline we went 21, 24, 26. So, we have aggressive pricing decline, its hard for us to be that much better than rest of the industry. So, it's little bit out of our control. But when we think within a certain pricing range, we can handle and that price, I think to be the point that we're trying to get our break even points lower.

Your next question comes from line of David Bailey with Goldman Sachs. David Bailey - Goldman Sachs: Yes, great thank you. Just follow up on the pricing question, you commented on desktop pricing in the quarter, could you talk about pricing in the other areas as you went through the quarter. And what have you seen in the market lately from Samsung and Hitachi and how realistic is it, to expect those two companies to remain a little more well behaved as you go forward.

I will let Brian start it and then I will give you a comment.

Yes, Dave, I think Bill might have addressed the later half of your question, since his comments of, let me tackle the beginning part. I think with the exception that I noted and one of the reasons they didn’t comment selectively through the segments, because we price behavior largely what we expected at the beginning of the quarter. So in the notebook space we had intended it was going to be relatively aggressive and in fact it was. In the enterprise space we expected to be in the normal range and in fact it was. So, really the only exception was as I noted mid to high cap early in the quarter which produced a net differential on the quarter for the desktop products.

Just let me add onto that, I think, in the pipeline again we had a hard time predicting what people do, because people are not in certain cases they seemed to be very market share driven versus comp ability but that said after this last year I haven't been through the industry as long as I can think. I have never seen two year like last year. But we are preparing ourselves for clearly aggressive year ahead of us. David Bailey - Goldman Sachs: And then just one clarification, if you back out the three non operational items that you included in GAAP and non-GAAP, what would your tax rate have been in the quarter?

In the note that you send out there before you normalized it to 7.5%, that is probably the right way to approach it. David Bailey - Goldman Sachs: Okay, thank you.

Your next question comes from the line of Rich Kugele with Needham and Company. Rich Kugele - Needham & Company: Thank you. Just two questions, first obviously the unit guidance, more of the commentary in the 15% for the TAM and your own revenue guidance 6% to 9% sequential growth is not so different in how September quarters have gone for history, but probably a little bit better than has been typically guided at this point in July, can you just comment on what you are seeing today that might be giving you confidence in this type of guidance level?

I've bought to a sales book, and I have to brand it, no actually it's too early to call the quarter, again we've looked at this from a quarter perspective and again we think there is pretty good demand out there and we feel good about the cost structure and some of the things that are going on the new products. We expect the 250 gigabits single disk you have out there. Again, it's our kind of confidence on the thing we can control. And I guess the concerned we have is all things we can't or what the behavior or what competition. So, right now, we feel that we got the right structure and right things going forward, but it still early to say, how this will fall out to. Rich Kugele - Needham & Company: Okay, and just secondly, Dave, you talked about how you are comfortable with your VTAs and you’ve mentioned your specific rollout there for Malaysia. But on Woodmans' 3, has this action caused you to in any way accelerate those plans to bring Woodman 3 up and is it even possible to accelerate those plans?

First, Rich, technically we are not going to change anything as I indicated with the VTA. We’ll continue to buy from Komag, and Kellogg’s we sit on lounge, look at expanding Woodman 3. We really don’t see the need to accelerate that. And frankly, speaking and honestly speaking, there is not much more we can do, because it similar to Johor to navigate in the facility up in running and facilitate. They are really some extent expense restrictor or will it be flexible from an outside perspective. So we are going to continue to work with Komag. We look at other option, as you might image there is lot of dynamics in share shifts going up between the remaining three median suppliers. And we will just have to asses long-term what we want to do regarding finished media. So, we are -- current question is to be full steam ahead on Woodland 3 and then one that’s in place, will have pretty much unlimited flexibility. Rich Kugele - Needham & Company: Okay. Thank you very much

Your next question comes from the line of Mark Miller from Brean Murray Mark Miller - Brean Murray: Following up on the Komag acquisition, do you see any long-term implications, I mean Komag was noted as a low cost producer, and also having very good substrate. I just wondering if that might put cramp in certain people ability to drive pricing

This is Dave Mark let me take a stab at it certainly with one last independent media supplier on the outside it's going limit the amount of opportunities for others to compete if that's a technique that they use to drive pricing lower but having said that I think there is lots more than adequate capacity in my opinion already on the market. So I think that the three remaining finish media suppliers will be very flying full on how they add capacity and as terms of the behavior how they want to price that I guess should have to ask them I really satisfactory but clearly one big one of the market will have some implications source on supplying pricing is my view.

I think just makes 17 more competitive but also I think it makes the Siemens, Samsung, and some of you guys less competitors. Mark Miller - Brean Murray: Do you think that you've already said there is that consolidation will be a continuing trend you think that forces the two firms you just mentioned that there is something and any speculation what they might do?

It's personal I don't see how these three Japanese media suppliers exist on broad. Its like there couldn't two head suppliers and so there is already one source my personal but you never know I mean Japanese are a little bit different than we do so. Mark Miller - Brean Murray: Alright thank you

The next question comes from the line of Christian Schwab with Craig Hallum Capital Group Christian Schwab - Craig Hallum Capital Group: Great, my question is, quite some people it seems like we've taken away some price discounts on high capacity drives here recently, hear you chatter of that. Can you guys comment on whether you think that we are now in a situation where we might see stability and 250 and 500 drives.

We got to wait for this quarter it's a little early for me to call I have seen behaviors change pretty fast so quite early to call in rather.

If we toss stability and pricing rational pricing in particular the Desktop, probably doesn't happen in the mobile side, but what's the gross margins be? Christian Schwab - Craig Hallum Capital Group: I am not going to speculate. There has also been speculation about other components you shipped into disc drives and mergers that could be happening within that space. Maybe you could comment on your thoughts on the suspension side of the business?

Go ahead Dave.

Christian, this is Dave, yeah. There are three independent suppliers, one of them has in fact posted on their websites that they were in some talks, nothing definitive, nothing finalized. And so we are monitoring that situation and continuing to do business with all three. They'll get partners of ours. We'll stay close to see what happens but it's too early to predict what we might do. Christian Schwab - Craig Hallum Capital Group: Great. And then I would imagine that your build plans aggressively could down our finished goods, probably manufacturers that drives than we shipped, is that a correct assumption?

Yes. Christian Schwab - Craig Hallum Capital Group: Great. No further questions. Thanks.

Thanks Chris.

Your next question comes from the line of Mark Moskowitz with J.P. Morgan. Mark Moskowitz - J.P. Morgan: Yes, very good afternoon. I was wondering Brian if you can weigh in on the mix within Desktop and Notebook as related to the geographies of the world, or the certain geographies, and thereby certain foreign factor calls that we will now announce. We are hearing a lot of that, some of the low array of PCs fees over an Asia, Eastern European are up picking up, are you seeing a dynamic as well for both Desktop and Notebook?

Well, let me try to give you an overall answer on the Desktop. The Christmas seasons saw a pretty dramatic shift. I think we talked about this in our January call upwards in terms of capacity. And so for large part of the December quarter, we actually were short of 300 gigabyte and prototype products. We've moved into this calendar. We saw that shift exactly other direction. My sense is that we'll see in the back half of the year as the consumer becomes more of a factor in PC purchases in the seasonal seasons that will be shift back in other way. So, I don't think that gave complete answer to your question, whether you state for that geographically. But geographically what we do now is that those systems tend to be at the lower end of PC spectrum to clean the desktop. And as the growth rate outside of the US, Japan and Western Europe in the desktop are double digit whereas in those countries reports are more than likely negative. All in all, we are seeing desktop growth rates in the 7% to 8% range globally and the majority of that growth and all that growth is happening in those regions. So, the only offset to that is what we see happening in external storage environment, IER branded business where there as I mentioned the average capacity is up over 350 gigabytes. And so we have got that phenomena. We have also got from the 3.5-inch ATA spectrum, the business critical or the near machine critical taking high capacity product in some sectors of the DDR environment. So all that rolled out great set phenomena, I talked about which is about 35% of the market today being 250 gigabytes in greater. And I think you will see that percentage increase this quarter or next quarter. Mark Moskowitz - J.P. Morgan: Okay, I appreciate that. And then you mentioned Brian, maybe you or Bill could weigh in, in terms of how Seagate is assessing the branded performance thus far versus your internal expectations. You have been pretty resolute in terms of why you have been doing out there in the marketplace? How do you feel the velocity of revenue trajectory is to fill into plan at this point?

Yeah Mark, I will take that one. It's too early to call in terms of what really happened in the overall market in June, we are still trying to get our arms around the overall market. Our sense is that that's a quarter where seasonally the retail market is little bit softer. As I mentioned we met our internal plans and those plans were to be added above March results and we achieved that. So to the extent that we achieved that plan in the market, in fact we have moved the other direction and I think we feel good about that. If for some reason it’s busted through seasonality, then I think we feel such good about our results. But they are making mistake about it's really a focus force. I think it is a tremendous growth opportunity for ourselves and for the industry, and that consumers are going to continue to draw storage into their home in a pretty significant way. Mark Moskowitz - J.P. Morgan: Okay. And I have a one more question for you Brain, and then I'll have a follow-up with Charles if I may. Earlier you talked the enterprise, the dynamics in terms of how CE views the potential penetration of high-end 700 gigabytes SATA drives over time that wasn't performance based, just system file applications, I wanted to get a sense in terms of how you view the comparative dynamics? Obviously, you guys enjoy the considerable dominance within the fiber channel and SCSI, but given that we see a lot folks introducing their own flavor of 750 gigabytes and one terabyte SATA drives. Do we have more of a competitive dynamic growth that you are going to be watchful of?

Yes, I am Brian Dexheimer Mark. It’s a great question. So, there is couple dimensions to that. One is to the extent you believe that those customers will always want the highest capacity available at the best cost per gigabyte. This plays right in the hands of our leading technology. So, we have every intention of deploying our latest aerial density technology into the products that you just mentioned, Really that gives us a great advantage and I think the evidence of that's in the 750 gigabytes soon to be a terabyte product. The other thing is that it is little bit customer dependent, this is not a, what I call desktop class products. So, what we are finding is that, while these products have characteristics of many desktop drives, like the interface and capacity point in the form factor. There is additional set of requirements that many of the customers are taking into market and deploying in these enterprise like applications or putting on top of that. I think we understand that better than anyone, because of our position in the classic enterprise and actually think that’s worked to our won designs and we were able to incorporate that future set into that product class for lot more regularly than maybe others are. So, I think those two things will continue to play to our advantage sort of stake. And make this market a pretty attractive market for us as it grows and it's growing pretty rapidly. Mark Moskowitz - J.P. Morgan: Thank you. And then Charles if at all if I could, looking at the gross margins. Can you give us a sense of what are the key levers that really need to stick at the key gross margins within a relatively range going forward . Do you need to really continue to execute on your new technology and product announcements in the past few months or longer term should we think about you maybe even taking on more interest in having a wider range of gross margin profile to give you a little more breathing room given the current types of mix that you and Bill have referenced?

I think there is a number things that have changed overtime that are making it a little less predictable, Mark and that is just as Brian mentioned earlier, during the back half of the year when historically margins had expanded. Today with consumer electronics which tend to have margins lower than corporate average both are heavy seasonal periods for that which tend to mute the gross margin expansion opportunities in the back half of the year and all. That along with the pricing environment and the fact that there you have a higher mix of products that are going into applications that do have lower margin areas, the home hand held devices and other things. All make it a relatively tight range themselves, that product mix and the pricing environment are the two single biggest levels, the pricing environment first, the product mix second. Mark Moskowitz - J.P. Morgan: Thank you.

Your next question comes from the line Katie Huberty with Morgan Stanley. Katie Huberty - Morgan Stanley: Hi guys, good evening. It sounds like channel inventory are back to normal levels and Intel commented earlier this week that inventories declined especially in emerging market. That’s something that you also saw on the disk drive space.

Its depends where you measure it from. Katie this is Brian. Our observation is the quarter-on-quarter that we saw relative flat profile exceeding margin exceeding June. So, less than five weeks for the industry as it works at the end of March, it' a great differentiation up by region in that number. Katie Huberty - Morgan Stanley: Okay. And then in the first quarter many of your competitors lost quite a bit of money. Do you have any sense as to whether industry profit has a whole improved or deteriorated this quarter and what implication that may have for further consolidation or restructuring at the vender level?

No Katie, we don’t, we really don’t. I mean we have to wait and feel over the next week so that people come out. But no we really don’t have a central at. Katie Huberty - Morgan Stanley: And then just lastly, since there will a quiz. What drove the decision to reverse the evaluation allowance on the deferred tax asset?

Good question, well its actually not the decision that you make to do it. There were set of circumstances given the industry, at the company structure that we have Katie for there have been some changes during the course of the last year, for really to follow appropriate accounting. We had to review the valuation allowance. Just as a quick reminder the deferred tax asset and then many companies are required to look in and evaluate the ability to utilize those deferred tax assets and if it's not apparent that they can fully utilize the differed tax assets. They required a reserve against those and then at least on an annual basis you go through and evaluate that. We've had a couple of tax related changes that had occurred during the year so as we reviewed the reserve against the differed tax assets, we were really require to take down those reserves which would reflected with the benefit that you found the income statement. Doesn’t change our cash taxes paid, doesn't change to reporting this is purely financial reporting accounting issues. Katie Huberty - Morgan Stanley: Okay, thanks.

Your next question comes from the line of Steven Fox with Merrill Lynch Steven Fox - Merrill Lynch: Hi, good afternoon. Could you just go back over the notebook market a little bit I am just curious if you can provide more color on why you gain so much share during the June quarter? And then when you talk about you strong seasonal outlook for the September quarter is that assuming more share gain or is that just based on end market demand?

Maybe the second one first, Steven this is Brian, so the comment about strength in the September quarter is not Seagate specifics it's really market comments, so we certainly believe that we'll grow at least that market rate. We don't have any great ambitious to grow share was any execution issues but some of our competition. I think comparing March to June which is first part of your question recognized that March we were really happy with our performance there. It was a flat to slightly down share performances in December quarter. We had some product issues in the March quarter that presented some planed growth in the March quarter. So a part of what we saw in June was recapture of what we didn't get in March, as well as we saw early in the quarter and really drop most of the quarter about a half of dozen large customers that came back to us for additional product as either they has quite disruption issues with some of other competition and or they send more demand than they had planned in the quarters. So I think part of that additional share volume that we got was maybe at the expense of some of our competition. We didn't execute it, because of our customer mix and their ability to gain in the marketplace and an environment that probably ended up be in a little bit stronger than everyone had anticipate. Steven Fox - Merrill Lynch: Okay, that's very helpful. And then just on the consumer market. Once you get through this quarter, are you still looking for, will Seagate reposition that well enough to participate in the December quarter for consumer demand that should pick up even further? And how much can some of the branding efforts play a role such as the FreeAgent product?

Well, we see consumers were really talking about those products that we sell to OEM device manufacturers in the handheld DVR gaming space. So I want to differentiate that from our brand solutions business, which was the last part of the comment. The net as we feel bullish about all the above. We have far more control of our brands solutions business. We take directly in some market under the Seagate Maxtor brands. We think the December quarter is going to be as it is always a high seasonal quarter for the product set. And we think we're well positioned. We'll be announcing some new products over the course of the next 90 days that fall into that space, which you will hear about in September when we have our Analyst Day. On the Consumer Electronic side and the DVR gaming, handheld space, I don't think you will see much change for us in the handheld space. There will be some incremental growth there from us in the December quarter. But we do expect both DVR and gaming to have their high cycles in December quarter more fully participate now. Steven Fox - Merrill Lynch: Great, thanks again.

Your next question comes from the line of Jeff Brickman with UBS. Jeff Brickman - UBS: Great, thanks. Just wondering if you could discuss the linearity on the quarter, particularly as you entered after a month of March that's perhaps a little disappointing takes on what you have been expecting?

Go ahead Brian.

Yes, Jeff, this is Brian. It ended up be in a pretty typical June quarter. I think your comment about March is fair, certainly reinforced by what we said in our April call. But the linearity of the June quarter was about we expected and about 50% of the quarter half and then the month of June. Jeff Brickman - UBS: Okay and then just on, 2.5 inch in notebooks, I know this has been asked a couple of times, but did anything from a price perspective, do you see any sort of moderation and also, you felt you could come in and maybe be a slightly more aggressive or was that really not the dynamic, I know you have mentioned a few other things still going on.

Right most of the notebook pricing for last quarter would have been negotiated prior the end of March. So, that's pretty clear in understanding that when we talked about it in April, and really didn't see much change. So, what we saw in the June quarter, beginning the negotiations for the September quarter, too early to comment on whether those keep hold or not, but there is some reason to believe that there might be a little bit of moderation there, just based on overall supply and demand characteristics, the September quarter being much stronger than the June quarter. Jeff Brickman - UBS: Got you, okay. And then just last bit from me. Could you just give us an idea of the rough percentage of the line which from gaming and non-inflated. Maybe the counts per markets were weaker than expected. But any views of this, some of the price that we are hearing about, might be an opportunity to catalyze some sales there?

We are pretty far back in the supply chain just so. I am not sure that you know any price cuts you see at the console level are going to be reflected in demand to us probably for months to come. Supply chain is relatively complete, I think after a year of rollout of that particular console. So I think, you know, while at the margin it seems to be a positive for demand in this space, I don't think we are going to see a direct within days kind of correlation, just because of the length of the supply chain. And note that in the June quarter that's typically the slowest or lowest build out quarter for the game console market. We expect September will be better and probably December incremental and better than that. Jeff Brickman - UBS: Again would you share us the rough percentage that I think you have in the past, but just as far as a percentage of units you shipped?

Of the 5 million that we shift last quarter? Jeff Brickman - UBS: Yes.

Now that’s a 35% about third to that would be in gained consoles. Jeff Brickman - UBS: Great, Thanks a lot.

Your next question comes from the line at Daniel Renouard with Robert Baird. Daniel Renouard - Robert Baird: Hi, Thank you, my question is just related to your restructuring charge $29 million, can you give us a little more detail where exactly that came from, how much of that was head count related, versus facility related , and how much you think about further restructuring potentially ongoing basis?

The entire $29 million was facilities and non-employee related restructuring, we would anticipate that they wont still be reduced during the course of this year to further reduce cost in certain areas no but non of the existing restructuring was employee related. Daniel Renouard - Robert Baird: What was the $10 million in cash then related to that just? I think out leases things of that nature.

Correct. Daniel Renouard - Robert Baird: Thank you.

Your next question comes from the line of Kevin Hunt with Thomas Weisel Partners. Kevin Hunt - Thomas Weisel Partners: Hi just a couple of questions I didn’t hear you really talk about the OpEx for the current quarter, you mention the bonuses in fact I think future cores but OpEx was really high looks like in the June quarter as well, then also what tax rate are you building in forward into that guidance you gave?

Okay. During the existing quarter part of the increase that you see in the OpEx, we did have the purchase of some IT and storage related IT that was expensed in the quarter that's the single biggest jump up in terms of the increased in spending in OpEx this quarter, as I have indicated both in terms of last quarter in the way to kind of look at it, normalize it, using the 7.5% rate that we had talked about early in the quarter is probably the right way to look at it, and going forward as I had indicated I think using something between 5% to 10%, and if you wanted cut it in the half and turn it to 7.5% its again probably the right way to look at it. Kevin Hunt - Thomas Weisel Partners: Okay and then one other follow up here, on CapEx may I miss it, but did you say that you were planning for the year it can imply to 800 or a billion for a year but could you --

How is $900 million Kevin? Kevin Hunt - Thomas Weisel Partners: Okay. And then just one other follow up on, just to clarify the questions on the sort of I guess, build or buy on a media, is there any change to your plan or is there any reconsideration going on your plan? What are you going to do internal versus external?

It's too early Kevin like I said, short-term we are going to continue between that 10% or 15% for next three to six months beyond that. We will take a look at it if you have anything reportable we will get back in September. Kevin Hunt - Thomas Weisel Partners: Okay. Thanks guys.

Okay, thank you.

Hey Janice we’ll take one more question.

Thank you sir. And your last question comes from the line of [Keith Beckmann] with Bank of Montreal. Keith Beckmann - Bank of Montreal: Hi, thank you. Just two quickies, on the media side, is there are difference between the actual substrate and the media itself in terms of your goals on that 10% to 15%?

That’s a finished media statement. Keith Beckmann - Bank of Montreal: Right, so how about on the substrate line?

Well on the substrate side we are going to continue. The vast majority is external and as indicated we will proceed with the expansion of aluminum substrates into Johor, but as far as our relationships with our external substrates acquires they will continue. Keith Beckmann - Bank of Montreal: Okay. Then just on the 1.8 inch drive rather, you mentioned that it was a little bit disappointing you are going to try to move up in capacity point, how does that play out do you think over the next couple of quarters? In terms of either comments on where that support needs to be, any kind of color on the projected unit volumes or anything along those lines?

Yeah. Keith this is Brian, l really don’t want to get into unit volumes or announcing a new products, it suffices to say, that there is some prices in the market today, announced products that are higher capacity then the one that we have. I think you can project out this and some of the things we said about aerial density and kind of anticipate what the next one might be. I don’t there will be product that we’ll release anytime before 2008. So, products we have today, will be the products that we take to market for the next several quarters. And I think, we’re going to keep our expecting in line just based on where that fits, given some of the applications fits out there today. Keith Beckmann - Bank of Montreal: Okay. Thank you very much.

Fine. Thank you, all for joining us today. We look forward to speaking with you next quarter. Thank you.

Ladies and gentlemen, this concludes today’s conference call. You may now disconnect.