Steve Luczo – President, CEO Dave Mosley - Executive Vice President of Sales, Marketing and Product Line Management Robert Whitmore – Chief Technology Officer Patrick O'Malley – Chief Financial Officer

Keith Bachman – Bank of Montreal [Rob Ferro – Carris & Company] Kathryn Huberty – Morgan Stanley Richard Kugele – Needham & Company David Bailey – Goldman Sachs Mark Moskowitz – J.P. Morgan Amit Daryanani – RBC Capital Markets Aaron Rakers – Stifel Nicolaus

Welcome to Seagate Technologies fiscal third quarter 2009 financial results conference call. (Operator Instructions) This conference call contains forward-looking statements including but not limited statements related to the company's future financial performance. These forward-looking statement including any references to the savings we may achieve under our recently announced or anticipated cost reduction plans are based on information available to Seagate as of the date of this conference call but are subject to a number of risks, uncertainties and other factors that could cause actual results to differ materially from those anticipated by these forward-looking statements. Information concerning additional factors that could cause results to differ materially from those projected in 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 August 13, 2008 and in the company's quarterly report on Form 10-Q as filed with the U.S. Securities and Exchange Commission on February 10, 2009. These forward-looking statements should not be relied upon as representing the company's view 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. Steve Luczo, CEO.

Good afternoon everyone and thank you for joining us today. On the call with me are Pat O'Malley, our Chief Financial Officer, Bob Whitmore, our Chief Technology Officer and Head of R&D and Manufacturing Operations and Dave Mosley, Head of Sales and Product Line Management. Beginning in early January with the establishment of the new management team at Seagate, our primary focus has been to take actions that would improve the company's competitiveness, return it to profitability as quickly and efficiently as possible and to strengthen the company's balance sheet. In general we have been pursuing activities related to reorganization, refinancing, restructuring and running the business. I will first provide you with an update on the actions we have taken thus far and a description of the impact those changes have had on our operations and our financial performance both end quarter and structurally. I will then provide commentary on our third quarter performance and identify additional opportunities for improvement in the fourth quarter, and finally, I'll discuss other areas of focus going forward and the resulting improvements we expect to achieve. Our first actions addressed the organizational and financial structure of the company. We eliminated the business unit structure and returned to a functional organizational structure to improve decision making, drive better cross functional optimization and to provide strategic and tactical direction designed to improve overall corporate performance and manage resource allocation. Organizational changes include reducing our executive level positions by 33% since the beginning of fiscal year 2009, eliminating business units, integrating and redefining our sales, marketing and product line management functions, reintegrating certain functions of our branded business into the rest of our company and establishing a cross functional solid state strategy team. These organization changes are in addition to the previously announced closures of two recording media facilities and our Pittsburg research facility, the global work force reduction and company wide salary reductions announced in January 2009 and other cost reduction initiatives. To help facilitate and enhance our business processes throughout the company, we have reinstituted the company's executive committee which has responsibility for business decisions related to Seagate strategies and top level goals and the corporate management committee which has responsibility for implementing business strategies and making decisions related to cross functional and organizational optimization. From a balance sheet perspective, we have significantly improved our liquidity position and capital structure; first with the amendment to our credit facility with our credit facility and most recently with our debt financing. In addition, our Board of Directors agreed to adopt policy of not providing a dividend which when coupled with the reduction in dividend in January 2009 reduces cash obligations by about $230 million annually. We believe these actions position us to be cash flow positive and earnings positive during our fiscal year 2010 even if the current negative macro economic conditions persist. Specific to the March quarter, there are a number of encouraging signs for our company. From an industry standpoint the total available market was marginally higher than expected and Seagate delivered greater revenue than planned. The company also generated nearly $175 million of cash in the March quarter through working capital management, particularly as it relates to day sales outstanding and reductions in inventory levels throughout the quarter. The company was able to respond to customer demand increases for Seagate products throughout the quarter resulting in share increases in the notebook and desktop markets. As a result of this increased demand for our products, the company was also able to accelerate the transition to newer platforms while reducing the inventory of lower margin legacy platforms. As we mentioned last quarter, we are encouraged by the progress of our product transitions and the accelerating ramp of new notebook and desktop products namely in the 2 1/2 inch 250 GB per platter and the 3 1/2 in GB per platter products. We expect the ongoing transition of these new product platforms to provide the foundation for continued improvement of gross margins into fiscal 2010. Opportunities for mid to long term improvements that will support margin accretion as well as top line revenue growth include the following; in sales and product line management. First optimizing the product portfolio and mix for profitability, second better discipline around and senior management control of demand generation activities and third better management of inventory during product transitions. In operations and development, first improved absorption from capacity reductions and utilization rates, second greater integration of Seagate components, third improved execution on product and component ramp to yield and fourth, broader leveraging of our core technologies across products. Going forward, we expect further organizational restructuring before the end of fiscal year 2009. We believe this action, coupled with the restructuring and improvements mentioned earlier will allow us to achieve a cost structure that supports our operating expense projections. In addition we are looking at opportunities throughout the business to significantly decrease operating expenses and continually improve business processes. Through improved leverage of our processes and investments, we can position the company for sustained leadership and profitability. As a result, our long term gross margin is 18% to 24% on a revenue base of approximately $2.2 billion to $2.5 billion per quarter, assuming a more stable macro economic environment. With that, let me turn the call over to Dave Mosley, Executive Vice President of Sales, Marketing and Product Line Management. Dave has been with Seagate for 13 years in a series of executive management roles and enterprise desktop and notebook product development and most recently as head of our global operations.

Before I provide details on the current market environment, I'd like to give a quick description of the organizational changes we have made. As Steve indicated we've been repositioning the organization to address the current demand environment and simplifying and improving business processes. We have identified a few key areas of immediate focus. First, optimizing the product road maps and mix for profitability by accelerating new product transitions, second, improving business processes around demand generation activities and finally, effective inventory management during product transitions. The functional organization structure provides the process leverage that was the foundation of our model before and had been less efficient in our recent business unit structure. Now I'll provide some market commentary. Specific to the March quarter, Seagate shipped 38.4 million units against an overall industry total available market of approximately 112 million units, both of which were higher than the company expected at the beginning of the quarter. The increase in industry TAM was primarily a function of adjusting the supply chain that was depleted as days of supply levels exiting the calendar year that did not support end user demand. Throughout the quarter we were able to meet demand increases from customers in the notebook and desktop markets which drove significant share gains in both markets. Product mix was less favorable than planned as we shipped higher volumes of lower capacity product. We did receive a benefit from this as we were able to sell through our older inventory which positioned us to move to our newer, more cost effective platforms. Finally, pricing for the March quarter was in aggregate less aggressive than we had planned. Now I'll give some detail on individual markets. In the enterprise space the TAM in the March quarter was approximately 5.6 units which was down roughly 20% quarter over quarter. Seagate maintained its leadership position in this space during the quarter, shipping 3.4 million units. We believe this current TAM is stabilized at these levels largely due to replacement demand in the IT sectors. As a result, for the June quarter we are expecting the overall enterprise market demand to be flat sequentially. While it's difficult to predict when, we do foresee growth returning to this market based on the continued increase in content creation in the enterprise. Specific to solid state drives in the enterprise, penetration has begun in the highly transactional work load environments today representing less than 5% of the total enterprise storage by revenue and less than 1% of if by shipments. We believe this will grow and expect to participate in this market in fiscal 2010. The TAM in the desktop computer market for the March quarter was approximately 52 million units. We believe Seagate gained significant share in this market as we shipped an industry leading 22 million units during the quarter. Adoption of our more cost effective 500 GB per platter configurations is progressing well. For the June quarter we expect the desktop compute TAM to be relatively flat sequentially. We are also encouraged by the consistency in the consumer electronics market where we shipped 3.9 million units in the DVR applications which was essentially flat quarter over quarter. With regards to the mobile compute market, the overall TAM was approximately 39 million units in the March quarter and Seagate shipped 8.9 million units resulting in significant market share increases. As I mentioned earlier, we did experience strong demand for lower capacity products in this market and we were able to meet that demand. The movement of this inventory better positions Seagate for the ongoing transition to the 250 GB per platter 2.5 inch platform this quarter. That 250 GB per disk per platform is transitioning well which Bob will discuss in a moment, but I'd like to point out that we believe our non captive, i.e. non branded market share of 500 GB two disk products was comparable to the competition in number of units shipped. We expect the June quarter for the mobile compute market to exhibit a seasonal decrease in unit demand. In branded solutions we are encouraged by our ongoing market share growth and acceptance of our products. We grew our branded solutions revenue sequentially in both 3.5 inch and 2.5 inch form factors at a faster rate than the market and we reduced inventory. Finally, the newly reorganized sales and product line management organization is focused on continued operational improvement in the areas in our control that could contribute to our margin recovery. Now I'd like to turn the call over to Bob Whitmore to provide an update on our operations and development.

I'll start with an update on products and technology followed by operations and then finally an outlook for capital spending. As I stated last quarter, we had not been satisfied with the consistency of our product execution in recent quarters and have been working to resolve that issue. I'm happy to report that we continue to see steady improvement in executing to our strategy of sustained product and technology leadership. While we are pleased with our progress this will remain the highest priority and believe there is room for more improvement. Last quarter, I reported the progress towards introducing the industry's highest arial density into our notebook, desktop and enterprise platforms. Today my report is focused on the product transition of those platforms. With the majority of our customer qualifications now complete, the factories are concentrating on converting to these higher arial density products. To give you a feel for our transition progress, I will provide you with a combined production percentage of our desktop 500 GB per platter and our notebook 250 GB per platter products versus the previous generation. We exited the December quarter at under 5% of production for the new versus old products. Exiting the June quarter, we expect that number to be in excess of 50% new versus old. Our focus this quarter will continue to be on product line transitions, yield improvement, factory ramps and sustained quality growth. Both our new desktop and notebook product yields support our plans to rapidly convert the factories to high volume production. I would also add that both of these platforms and qualified and shipping with internal and external heads and media. As for enterprise, our new 10,000 and 15,000 rpm products are fully qualified and largely transitioned within the factories. In addition to our industry leading enterprise product lines, we remain committed to solid state development and are on tract to deliver our first enterprise SSD product shipments later this calendar year. We have increased our development focus on solid state and will continue to invest the appropriate resources to be successful in this emerging storage market. Overall, customer qualifications, the factory transitions of our new products are progressing well and will play an important role in improving margins and driving sustained product leadership. I would now like to provide some insight into Seagate's manufacturing operations. Over the last six months, while the macro economic conditions deteriorated, and demand for disk drives contracted rapidly, we have been adapting our manufacturing operations accordingly. Since the beginning of our fiscal year, we have reduced head count and support structure across our manufacturing sites. Simultaneously we have adjusted our factory lay outs and taking capital off line consistent with that structural reduction. We are currently reviewing operations to further reduce the company's fixed overhead cost structure going forward. This will continue to be reviewed in the coming quarter. In regards to capital investments, we are on tract to achieve the targets we communicated last quarter. We continue to minimize our capital spending consistent with the current demand environment and therefore most capital investment going forward will be targeted primarily at technology transitions. As such, capital investments for the March quarter were $59 million which supports our outlook for fiscal year 2009 of approximately $650 million. Our outlook for fiscal year 2010 has been reduced from last quarter's forecast. We believe we can believe our capital investments at approximately $450 million in fiscal year 2010 while continuing the necessary investments in our core technology. We will continue to evaluate both the manufacturing strategy and the capital outlook as the demand environment evolves. In summary, my team remains focused on sustained product and technology leadership, maximizing our scale and leverage to Seagate components and optimizing our manufacturing structure. Now I'd like to turn the call over to Pat O'Malley. Patrick O'Malley: You'll find the company's press release, 8-K and additional financial information related to Seagate's financial performance and other supplemental information in the investor relations section of Seagate's website at seagate.com. We said in January that our priority in the near term would be improving liquidity and strengthening the balance sheet. Significant progress was made over the last three months so I'd like to touch on some of the many actions we have taken. First, we successfully amended the terms and conditions of our revolving credit facility including adjustments to the financial covenants that we believe provide flexibility to fund the restructuring needed to reduce the company's cost structure and continue to invest in technology. Second, last week we issued $430 of senior second lien secured debt. The proceeds are expected to be utilized to address upcoming debt maturities. This should not be viewed as incremental debt added to the capital structure. Third, we have ceased quarterly dividends which will enable the company to reduce annual cash flow by approximately $230 million. And fourth, the company did an outstanding job of optimizing working capital specifically inventory, which yielded a significant increase to the cash balance during the quarter. Taken all together, these actions better position the company to address it's near and mid term debt obligations. Now I'll cover some of the details. Cash, cash equivalents and short term investment ended the quarter at $1.5 billion, up $172 million from the previous quarter. It should be noted the company paid in aggregate approximately $150 million in cash restructuring, dividends and interest during the March quarter. Cash flow from operations was $239 million for the quarter, while free cash flow defined as cash from operations less capital expenditures was $180 million. Depreciation and amortization for the March quarter was $226 million including approximately $16 million of purchased intangibles amortizations and $11 million for accelerated depreciation related to the fixed assets at facilities we previously announced were closing. Cash conversion metrics are as follows: day sales outstanding was 37, days payable outstanding was 63 and days inventory outstanding was 26 for a cash conversion cycle of zero days, an improvement of 15 days compared to the prior quarter. The improvement in DSO reflects revenue linearity and a higher percentage of revenue from the distribution channel. Looking forward, we expect the cash conversion cycle to move back toward the low double digit range and DSO normalizes and inventory turns stabilize in the 11 to 13 range. Inventory turns improved from 10 to almost 14 as the company tightly managed production and used the steady demand throughout the quarter to significantly work down the inventory of older, more costly product configurations. Inventory in aggregate decreased by $219 million or 28% compared to the prior quarter as finished goods decreased $116 million and work in process and raw materials decreased by $51 million. Distribution channel for Seagate products once again ended the four weeks using a four week training average. We believe inventory of Seagate products in the distribution channel is appropriately aligned with the near term demand environment. Now I'll provide some comments regarding the March quarter financial results. For the March quarter, Seagate's unit shipments were 38.4 million, up 5% compared to the prior quarter while down 10% compared to a year ago quarter. Reported revenue for the quarter was $2.1 billion above our expectations due primarily to improved demand for 2.5 inch and 3.5 inch Seagate products, a modestly higher overall total available market and slightly favorable pricing primarily in the retail branded market. Offsetting these favorable items was a lower capacity mix in the desktop and enterprise markets. Gross margins for the March quarter decreased by approximately 700 basis points compared to the prior quarter, primarily due to lower factory utilization as we aggressively managed inventory, a 20% reduction in the enterprise unit TAM and the sell through of older products in inventory. R&D and SG&A totaled $377 million for the March quarter and include costs related to acquisitions of $2 million and accelerated depreciation of $11 million related to our closing of the Pittsburg research center. During the March quarter, we recorded an additional $25 million of restructuring charges that substantially relates to global headcount reduction actions. Now, I will address the business outlook for the June quarter. While there are signs of improved visibility the ongoing uncertainty in the global economic conditions make it difficult to predict product demand and other related matters which makes it more likely that Seagate's actually results could differ materially from expectations. For planning purposes, the company expects the overall demand for disk drives to be relatively flat as compared to the March quarter and the pricing environment to be consistent with historical June levels. Specifically, the company expects the following; revenue to be approximately to be $1.9 billion to $2.2 billion, gross margins for the June quarter to improve by 300 to 400 basis points as we continue to transition volume to the new product platforms and improve factory utilization rates. Product development and SG&A costs are expected to be approximately $340 million in the June quarter, down approximately 18% compared to the year ago quarter. Other income and expense to be a net expense of approximately $40 million and a book tax expense due to discrete items in the range of zero to $15 million. As such, the company expects a loss per share of $0.37 to $0.47 which includes charges of approximately $41 million of costs or $0.08 per share for restructuring, purchase intangibles. amortization and other charges associated with acquisitions. As part of the company's ongoing cost structure alignment, additional restructuring actions are currently being addressed. The company believes opportunities exist to reduce operating costs and product development, marketing, administrative and manufacturing areas to target a cost structure that generates positive cash flow and earnings with fiscal year 2010. The estimated cost of additional restructuring activities has yet to be determined. Consequently, the company expects to incur additional restructuring charges in the June quarter of an undetermined amount. That concludes my remarks for today.

On behalf of the management team, I'd like to thank Seagate employees around the world for their continued commitment and effort during this time of change, and I'd also like to thank our customers, suppliers and partners, investors for their ongoing support, collaboration and confidence in Seagate. We're ready to open up the call for questions.

(Operator Instructions) Your first question comes from Keith Bachman – Bank of Montreal. Keith Bachman – Bank of Montreal: A couple of times you mentioned having products in the SSD space. I was hoping your could flush that out a little bit. What's Seagate, how are you going to drive value in that area? How do you compete with your existing products in terms of margins in the enterprise space?

We're not disclosing specific product strategy there yet, but I think we can articulate it enough to say that as we look at the margin analysis from our viewpoint today, leveraging the expertise that we have in the enterprise market which is where we think the SSD is going to play first, for us at least, that a lot of the value obviously relates to things other than heads and disks. Of course there will be a lot more competitors in there with significant market share. So writing to different media while providing maybe some different technical challenges, we still think that there's a great margin opportunity for us and it shouldn't be ultimately that different than what we get in the enterprise sector today. Again, I think SSD is really fast memory and we think anything that improves performance of systems will then also drive additional storage which would also probably drive the necessary requirement of greater storage behind it which would most likely be in rotating magnetic's. So it's the hierarchy that we're looking at and we'll basically be rolling out a product strategy through the rest of the fiscal year 2010. Keith Bachman – Bank of Montreal: Just so I'm clear, I think you said before the end of the calendar year you'll be rolling out products in the SSD side? Did I hear that correctly?

It will be in fiscal year 2010 and I think just depending on some of the issues that we're working with our customers on, I don't really want to disclose specifically the timing, but it's the end of 2009 or the beginning of 2010 because a lot of it relates to the work we're doing with specific customers. But it's 2010 event. Keith Bachman – Bank of Montreal: You mentioned OpEx is $340 million and then additional restructuring. Is there any color that you can or want to add on how OpEx unfolds post the June quarter and then obviously the fourth? Patrick O'Malley: We talked about this last week, but our intent is to drive an OpEx model of under $300 million per quarter. We aim to do that more near term than longer term, but as I said we're going through and addressing our plans but hope to have those underpinned shortly and we can come to the mark and be very clear, but the target is to get that under $300 million in short order.

Your next question comes from [Rob Ferro – Carris & Company] [Rob Ferro – Carris & Company]: On your depreciation is still even X items call it $200 million a quarter. It's a lot higher than it was a few years ago. Is that the type of thing where there's anything you can do to try to bring that down in terms of asset write downs, that sort of thing just because I would imagine that's a pretty big weight on your gross margin even though maybe it's a cash flow cushion. Is there anything you can do there to try to get that number down? A question on desktop units, I had some people ask, you went another quarter with really low channel inventory. You had a nice rebound in desktop units. I guess any indication of channel inventory coming out of it and how do you feel comfortable that you didn't over ship? Patrick O'Malley: On depreciation, obviously one way to lower depreciation is lower your CapEx which we're in the process of doing. Last year we added $980 million. This year we're targeting $650 million and next year around $450 million. So that's obviously the easy answer. Now as we go through the factory utilization and we look at excess capacity, as we shut down facilities we certainly would be required to write those off as in the January action that we did was primary cash related, it was people related. And so there was no facilities, but as we go through this factory footprint, there will be opportunities to write that depreciation off. But first and foremost is to preserve cash, so as Bob highlighted, we're driving the factory the most effective utilization today, will draft the overhead of the depreciation and existing depreciation as we continue to rationalize our footprint. [Rob Ferro – Carris & Company]: Do you have any kind of depreciation target for fiscal 2010 yet or is that too early? Patrick O'Malley: That would be too early given that some of that would tie into restructuring plans, but we certainly as that comes through will be able to clarify that. But as I said, first and foremost is driving down the CapEx will clearly start flowing through the numbers next year.

I'll answer your question on the channel inventory. The 3.5 inch like we said at the start of the quarter there was some rebound that occurred in the channel that lasted through January, but I think some of that was temporary replenishment of inventory positions that were very low going into the quarter. We exited the quarter with below four weeks in the channel, well within our goals so we think we're on track right now.

Your next question comes from Kathryn Huberty – Morgan Stanley. Kathryn Huberty – Morgan Stanley: I just want to confirm your comments around the fiscal 2010 profitability goal and the confirmation is you are not looking for a revenue uptick, rather can hit that profitability with the cost plans you have in place and just confirm that. And then on the back of it, if we do see a seasonal uptick in unit shipments in the second half of this calendar year, is it possible to actually hit break even or even a slight profit in the first half of fiscal 2010?

The answer is yes to the first part. I think you said the cost plans in place. I think that is and to be announced, but if you include that in your statement, the answer is yes to the first question. And to the second question, the answer is yes as well. Kathryn Huberty – Morgan Stanley: And given how important the enterprise is to margin performance, can you just comment on whether you've seen any signs of stabilization or even an uptick in the enterprise business in recent weeks?

I don't want to kind of address it specifically in terms of recent weeks because the enterprise customer base is fairly narrow and we don't like talking about our customers. But I think a more general statement, we believe that corporations and IT infrastructure has probably been aggressively managed and is likely to be aggressively managed until people see better traction in the overall macro economic condition. Therefore, while I think there's been signs of improvement certainly in the last several weeks or even a couple of months globally, I think most companies and people running companies would say until that continues for at least a period longer than one or two quarters, it's probably hard to imagine that things are going to improve drastically in terms of the people letting the capital flow which would obviously impact some of the broader based computing systems. So our view is probably relatively flat for the next quarter or two. I think the encouraging part of the enterprise segment is we do believe that is more likely to come back in a more of a step function format with maybe some pops in demand that are more dramatic than notebook and desktop where the return of growth is probably more gradual. Kathryn Huberty – Morgan Stanley: You did a good job taking share in the branded business in 2.5 inch and 3.5 inch. Any reason to believe that market share traction is not sustainable into the second quarter?

I think as Dave pointed out, I think the share gains were a function of two things. One was our ability to deliver some of the legacy products that were lower capacity and we see as you a shift down to some of the lower capacity products. But the other point which I think is just as important is the traction with our new products, both the 250 on the 2.5 inch and the 500 on the 3.5 inch and we expect that with our continued improvement and ramp yields on that and qualifications with customers that that's a product offering that if you compare it to a year ago, certainly is much more compelling and competitive from a competitive perspective. So we would expect that we can continue to execute there, basically offering good products. This is not related to trying to buy market share. It's just by executing a good product delivery.

Your next question comes from Richard Kugele – Needham & Company. Richard Kugele – Needham & Company: As you look at your manufacturing mix of 2.5 inch versus notebook, where are you relative to where you think the market could be a year from now? Obviously desktop has been replaced by notebooks in many situations but 3.5 inch goes still into other applications so for overall footprint when you're talking about consolidation is this an element of it or do you think you have the right mix now? Any comments on that relative mix within your manufacturing.

We do see the transition between 3.5 and 2.5. That's a part of the equation but not the whole factor. It really depends on where we end up with overall TAM's I think in large part. So I think that's a factor. We've got manufacturing equipment that's pretty flexible and we can manage between the two form factors pretty readily. But I think the footprint is going to be determined more by what we end up with max capacity in the quarter. I think as we go through the next couple of years that may become more of a factor but certainly in the next year, probably a larger part of just overall TAM per quarter. Richard Kugele – Needham & Company: Obviously this downturn has affected everyone but sometimes the effect is a little magnified as you move further into the supply chain. Have you seen anything within the substrate world for example or any other components that has given you pause?

No, I think as we've gone through this macro economic downturn we stayed real close to our suppliers. Obviously we're in what I call an over capacity position across the board. We don't see any issues with regards to substrates, be it glass or aluminum and we're in pretty good position here for the next couple of quarters unless things significantly change.

It's one of the areas of the industry really if you think about the TAM going from 150 million units to 112 million or wherever it settles for the March quarter, that the industry is actually managed itself extremely well in terms of adjusting to that drop off and as we talked about last quarter, so much of that drop off actually occurred in about a three week period, not really a six month period, and obviously our customers adjusted their supply chain and the drive industry adjusted it, and the supply chain behind it had to adjust it, and as you mentioned as you go further down the supply chain, the more pressures exist. But really as an industry, really nothing really broke which is actually pretty impressive I think and most companies at this point have adjusted to the point where the new TAM's are where people are trying to balance supply and demand and work business models that are cash flow positive and earnings positive at these levels so I think thus far the industry has reacted quite well.

Your next question comes from David Bailey – Goldman Sachs. David Bailey – Goldman Sachs: How much if any of the weakness in traditional enterprise drives do you think is due from a more permanent shift to Sada rather than a weaker end demand environment?

I think to answer your question the weakness that we've seen in the last couple of quarters in mission critical is not correlated to business critical, what we call business critical. The business critical space is we think that the TAM is down about 22% quarter over quarter but mission critical itself which is what I spoke to as enterprise was probably more influenced by IT spend directly that the transactional spaces and then I'll call it the highest capacity boxes. The business critical side was down as a function of some macro economic stuff that started two quarters or three quarters earlier relative to the cloud compute space. We think that side if any will come back first based on pent up demand and its a trend we're watching, but the comment that I made earlier, we weren't correlating the two. David Bailey – Goldman Sachs: Can you talk a little bit about the gross margins of the drives that you sell that go into notebooks relative to your other product lines and your notebook drives? Patrick O'Malley: We don't break margins that specifically but obviously a notebook space that's growing in this and we design products to try and hit the acceptable margin in each segment. David Bailey – Goldman Sachs: Does that mean that you have comparable gross margins with the products designed for notebooks? Patrick O'Malley: We think we get acceptable gross margins for a target market application.

I think the good thing about the notebook is again, we're actually probably at the end of the day as focused or more focuses on gross profit dollars than gross margins. Gross profit dollars is what basically funds our operating expense structure and as you know our operating expense structure is now returning to one that is saying how do we leverage our R&D and factories across all of our product lines. So it's a model that really says, does that market offer the opportunity for additional gross profit dollars that fund the incremental leverage off of the underlying investment and the answer is absolutely. That's just more units going out the door that does lots of things for us in terms of absorption on heads and media, leveraging our overall R&D expense whether that's component or drive related and puts more compute power in the hands of more people that are hooking up to basically a big sky full of disc drives somewhere.

Your next question comes from Mark Moskowitz – J.P. Morgan. Mark Moskowitz – J.P. Morgan: You talked about your normalized target rates as far as gross margins of 18% to 24% and $2.2 billion or $2.5 billion in revenue threshold, can you give us a little more though kind of going off Rich's question in terms of the mix. How should we think about the mix a year or two out? Is there going to be kind a step function down away from the enterprise maybe because of the data compression technologies, virtualization, maybe provisioning hurting you guys also solid state drive and thereby it's going to be really based on just an ultra focus on bill materials, leaner cost structure in the notebook, in the branded and probably solid state drives. How should we think about it?

I guess I certainly accept the second half of that. We want to make sure that we're optimizing our cost structure for the product categories that you talked about, but I guess the first part of it, I don't know that I could sit here today and view what the world might look like three years from now. But I would say again if anything for example, solid state storage, that's fast memory and if what you're doing is saying that you have a big block of fast memory, that means it needs somehow to have a big block of data in there to munch. And once it munches that data what exactly is it going to do with that data spit it out into the air? It's going to go put it back on the rotating magnetic drives that it came from and to the extent that they're making systems that are more and more capable of doing that affordably across more and more application spaces, that's a good thing for us, and particularly because we're going to play in the SSD space. Whether or not it goes tier one, tier two, to tier zero to tier two we can argue about it. We could see what happens once the systems people really decide. Right now the only architecture we really have seen from the storage subsystems companies, the host computer companies are the server companies are really still architecting those systems but at the end of the day what those systems are really about is being more efficient in terms of driving better application utilization which really means more data. And I think you hit a good point. On virtualization, people thought that server virtualization was going to impact storage negatively and in fact we believe if anything it probably helped storage because it just meant that there was more processing power which meant therefore people needed more data to process. So I think that whole scheme is to play out and as we manage our portfolio going forward I think the more critical point is for us to keep engaged with those enterprise level customers to make sure that we're offering a complete suite of products. So in that sense, our product line will remain the most extensive and broadest. How it really mixes in terms of contribution margin at the operating level, it's to be seen. But I still think all of this is beneficial for us as basically new technologies are deployed. Mark Moskowitz – J.P. Morgan: So you really don't think there's a need for any major structural change in the revenue model. The reason I ask is I know you're just throwing this out as kind of a base line as far as the quarterly run rate to give us better mile post and we do appreciate it but as I look back these are revenue thresholds that haven't been touched since 2002 for the most part so I understand and appreciate how we're in a real tough period and it's going to take a few years probably to get back to 2005 or 2006 levels for the industry but to think about you guidance run rate going back even seven, eight years, I think some investors may walk away and say there's something structurally changed. It kind of gets back to David's question about the enterprise.

Let me clarify that because that's how you interpret it. That wasn't really the direction. I think what every company is struggling with right now is where is the new new and because there doesn't appear to be enough data in the world to say that we're at a bottom, or that there's enough traction being gained basically in the banking system yet to understand that the global economies are going to be basically able to re-gear at these levels or lower or where. As we look at what happened last quarter and still from a planning purposes in terms of how we structure our company, we're not planning on revenue bailing us out. So we're structuring our company so that if the current macro economic environment persists again into 2010, that this company can cash flow and be earnings positive. You're asking kind of a different questions which is what we're trying to provide some visibility on is from what we've seen over the last few months, where does the company look like coming out of this thing, if it comes out of this thing in the summer of 2010, then I could see the company being in a 2.2 to 2.5 revenue rate and then growing from there. So my message isn't that this isn't a 2.2 to 2.5 company and that's where it stays, but we're trying to give people an idea of where does it likely gain traction and that number could change positively or negatively over the next six months depending on how the summer goes. The December quarter was a quarter that as we described, basically stopped functioning somewhere around December 10 and I think the concern about March was, was March going to be a three month quarter or not? And we came up to March 15 and demand had pretty much been stable if not building through the quarter in different markets and on March 15 things continued strong and everybody held their breath and said well maybe it's March 20th when everybody says we don't want anything. And the reality is we actually got stronger pulls through the end of the month as opposed to decreasing and then the orders for Q4 continued to build through March and we actually had to build inventory and carry inventory from March so we could fill April demand. If June turns out to be a three month quarter and September turns out to be a three month quarter, then I think our confidence level of being able to articulate what the revenue range looks like and ability to get to the gross margins that we're indentifying increases, but this is what we're just telling your now. So it wasn't supposed to be a message of negativism. If anything I was thinking it was better than when we started at $1.6 billion to $2 billion a quarter ago. Mark Moskowitz – J.P. Morgan: In terms of the gross margin commentary, can you help us out a little more? I think a lot of us out there have been talking lately about the manufacturing yields. Can you maybe walk us through the desktop and the notebook in terms of the new product platforms, where you think it is and are you at the 50% threshold going to 75% to 80% in terms of yields, and how should we thing about that time to really get the gross margins back up into the mid teens?

First of all, I'd just tell you because of competitive reasons we don't give specific yield numbers. There has been some discussion that our yields were on the low side like below 50% and that's not true. They're well above 50%. They're in a range where we can execute a ramp in the factories. Obviously when you're going through a new technology transition, you don't have mature technologies so we're not to that point yet. But we're in a position where we can execute the transition and set ourselves up to be in a position for next quarter and the next several quarters at the mature yields that we should be. So I'd say that this quarter is a transition mode. We're growing the yields in the factories, but we're certainly in a position to make the transition and convert. And that's really what we've been doing. Last quarter was all about qualification completion. This quarter it's all about transitioning through the older products and into the new and next quarter it's all about being as secure as we can with the new products. I'll add one element that as Steve said, on the quicker transition of older than new that's much more important than yield. Now obviously you have to have acceptable yield to transition but taking out heads and disks are much more valuable to the margin accretion. So as we transition these newer products, that element of lowering the build materials will be much more important as we drive the margin accretion. I want to clarify I think you have to go to 2006 to see the $8 billion to $10 billion revenue range, so I'm not sure it went back to 2002. I don't have my numbers in front of me but I think it's closer to 2005 or 2006.

Your next question comes from Amit Daryanani – RBC Capital Markets. Amit Daryanani – RBC Capital Markets: On the cash flow perspective, do you think maybe the inventory level that Seagate has become rather lean and you may have to build up some inventory in June and would that result in possibly negative cash in the June quarter? Patrick O'Malley: Obviously running a zero cash conversion cycle as proud as I am to how we managed cash, I'm not necessary signed up to it and say there's elements to that but by inventory this quarter we had a specific plan to drive to this level. In fact we probably ran a little higher to support April's demand so I think we'll continue to manage inventory effectively as we've done. We'll add a little more onto the books. That will really depend on how we see July but we'll make that trade off all day long on how to supply what's in front of us versus what's on the balance sheet. We think we're still in a position to do that. It certainly may go 11 to 13 versus the 14, but we feel very comfortable how we're managing our inventory right now. Amit Daryanani – RBC Capital Markets: It sounds like you don't really have to not build back a lot of inventory beyond what happens with demand so you should still be able to be positive cash, you should be able to generate cash in the June quarter as well? Patrick O'Malley: We targeted maybe getting into a cash conversion cycle [inaudible] that would imply using cash from the balance sheet from operations certainly from what we've done this quarter we certainly would be up 400 basis points and we will continue to manage the balance sheet very tightly, but we'll do those trade offs as we see appropriate what volume is in front of us as we end the quarter.

Your final question comes from Aaron Rakers – Stifel Nicolaus. Aaron Rakers – Stifel Nicolaus: Could you give us the details with regard to, you gave three items effectively driving the meaningful decline in the gross margin, utilization, enterprise mix as well as sell through of inventory. Can you break down and give us some color of what the contributions were from each of those? Patrick O'Malley: I'd say in order of magnitude and that's probably a fair way to look at it and so we're certainly addressing the utilization in the factory with the depreciation and overhead, we're certainly managing our cash. We'll continue to look at our footprint, but utilization of our factory, whether it's people, whether it's the footprint of overhead, that's certainly we're challenged on that in the short term, but we continue to look at that. Obviously with our strength in the enterprise business, that's a significant element of our business model and so we're aligning the business appropriately to support whatever the new new is and we've seen where we think the bottom may be. And then as we transition as Bob talked about into new products, it's about half the magnitude of the other two. It certainly has a quick tail to start driving the accretions so I'd say as much as driving the accretion you want to put some quantification is that product transition and then slight factory utilization. But the product transitions are the quicker tail to recovery. The footprint and the enterprise will be a longer tail to recovery. Aaron Rakers – Stifel Nicolaus: The retail business looks like it showed actually some sequential relative out performance, pretty strong results on a sequential basis. Can you talk a little bit about what you're doing there relative to your competitor?

I think in the branded space you're right. I think it's actually for the last couple of quarters we've been gaining more share and I think it's probably just better execution in terms of the product offerings that we have and better management into the customer base and identifying the key customers where shelf space is really critical and servicing those customers with good product and good support around the product. So we expect that that would probably continues. Aaron Rakers – Stifel Nicolaus: With regard to you talking about the 250 Gig ram, I believe that the next step from a technology perspective is 320 and I think one of the merchant providers out there noting that that's more of a mid 2009 inflection point. Can you say at this point where you're at in terms of 320 per platter and the 2.5 inch drive?

We're not going to disclose that obviously for competitive reasons and again, we feel that with our 250 and 500 it seems to us we're certainly doing well relative to the competition and we're focused right now on getting our customers up and running on that platform. That transition is key for us here in the next six months so we obviously continue to pay attention to the products in development that will basically replace these products when they become legacy, but they're just babies in the carriage right now. I think we'll just get them walking and running and worry about the new guys next.

That concludes Seagate's' conference call.