William David Mosley - Executive Vice President of Operations Patrick J. O’Malley - Chief Financial Officer and Executive Vice President of Finance Steve Luczo - Chairman, Chief Executive Officer and President Kenneth M. Massaroni - Senior Vice President, Secretary and General Counsel

Keith F. Bachman - BMO Capital Markets U.S. Benjamin A. Reitzes - Barclays Capital, Research Division Richard Kugele - Needham & Company, LLC, Research Division Katy Huberty - Morgan Stanley, Research Division Ananda Baruah - Brean Murray, Carret & Co., LLC, Research Division Scott D. Craig - BofA Merrill Lynch, Research Division Aaron C. Rakers - Stifel, Nicolaus & Co., Inc., Research Division Jayson Noland - Robert W. Baird & Co. Incorporated, Research Division Shebly Seyrafi - FBN Securities, Inc., Research Division

Good afternoon, ladies and gentlemen, and welcome to the Seagate Technology's Fiscal Quarter (sic) [First Quarter] 2012 Financial Results Conference Call. My name is Francine, and I will be your coordinator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. This conference call contains forward-looking statements, including but not limited to statements related to the company's future operating and financial performance in the December 2011 quarter and thereafter and include statements regarding customer demand for disk drives and general market conditions. 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, uncertainties and other factors that could cause actual results to differ materially from those anticipated by these forward-looking statements. Such risks, uncertainties and other factors may be beyond the company's controls, in particular, global economic conditions and significant disruption to the industry's supply chain from the severe flooding throughout parts of Thailand may pose a risk to the company's operating and financial performance. Information concerning additional factors that could cause results to differ materially from those projected in the forward-looking statements is contained in the company's annual report on Form 10-K and Form 10-K/A, as filed with the U.S. Securities and Exchange Commission on August 17, 2011 and August 24, 2011, respectively. 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 the effect of events or circumstances after the date they were made. I would now like to turn the conference over to your host, Mr. Steve Luczo, CEO. Please go ahead, sir.

Thank you, Francine. Good afternoon, everyone, and thank you for joining us today. On the call with me from Seagate are Pat O'Malley, our Chief Financial Officer; Bob Whitmore, our Chief Technology Officer; Dave Mosley, Executive Vice President of Operations; and Rocky Pimentel, Chief Sales and Marketing Officer. I first want to convey my heartfelt condolences and the condolences of the entire Seagate family to those affected by the tragedy in Thailand. This disaster has taken hundreds of lives and displaced thousands. Human impact is profoundly troubling. Our first thoughts and actions were for the safety and security of our employees, their families and all personally affected. I will provide further context on the situation in Thailand and its effects on Seagate at the end of my prepared remarks. We have posted detailed supplemental information about our fiscal first quarter on our Investor Relations site at seagate.com. In today's call, I will review the results for the September quarter, share progress on the Samsung transaction and provide our view of the fiscal second quarter, including an update of our Thailand operations. After that, we'll open up the call to Q&A. On our last earnings call in July, we cautioned that our outlook for the first quarter was influenced by the following: the significant uncertainty surrounding global macroeconomic conditions; increasing cost of many upstream materials, especially rare earth elements; and higher costs associated with newer, less mature products. We expected the industry TAM to be 165 million to 170 million units, Seagate's revenue to be up sequentially to approximately $2.9 billion and non-GAAP diluted earnings per share of $0.29 to $0.33 per share. For the September quarter, the industry TAM was approximately 177 million units, which was above our expected range. Seagate reported revenue of $2.8 billion and non-GAAP diluted earnings per share of $0.34. We shipped 50.7 million units during the quarter, and our gross margin was 19.5%. We ended the quarter with $3 billion in cash. Revenue was slightly below our outlook for the September quarter, and we managed cost effectively, while optimizing our product mix to slightly exceed our margin and non-GAAP earnings per share projection. We lost approximately 3 points of market share on the September quarter for 3 primary reasons: one, we elected to not participate in aggressive pricing in the mission-critical market especially at a time when we were attempting to pass through cost associated with the rare earth increases; two, in the notebook market, we raised prices based on anticipated demand. However, these price increases unexpectedly dampened demand for our notebook products; and three, aggressive pricing in the Asia distribution channel caused us to lose some share, which was offset by gains in North America. Macroeconomic issues particularly surrounding the Eurozone debt crisis continue to create a high degree of volatility for global demand and resulted in additional stress on consumer confidence and spending in general. Despite these issues, the HDD industry shipped a record 177 million units and continued its record 45% year-over-year petabyte growth, reflecting the sustained fundamental demand for hard drive storage. As expected, the cost of the components using rare earth metals are 5x to 8x higher than historical norms and impacted our gross margin by approximately 100 basis points, as compared to the June quarter. Rare earth price increases impact mission-critical products more acutely due to the relatively larger amounts of rare earth elements used in those products. Our effort to pass through temporary rare earth surcharges to our customer to offset these cost increases was largely unsuccessful due to aggressive pricing from a competitor in the mission-critical market. We expect an incremental impact to cost of goods in the December quarter, as the cost increases are fully absorbed throughout the supply chain. Recently, prices for rare earth metals have abated about 20% from peak levels. Assuming no further increases from today's prices, we expect some relief in cost of goods for rare earth metals in the March quarter since these price changes tend to take over 1 quarter to work their way through the supply chain. Regarding our discussion last quarter on product transitions being slower than planned, recall we are transitioning 8 products in fiscal 2012. As indicated last quarter, 2 of the most substantial product transitions targeted for early in the fiscal year were pushed to the second half of fiscal year 2012. With respect to the 2 products, component and drive yields improved on the 300 gigabyte per platter 2.5-inch mission-critical product line, and we will begin an aggressive ramp in the December quarter. The 1 terabyte per platter 3.5-inch desktop drive also lagged behind our initial plans and is now beginning the volume transition. We expect to ship millions of units on this platform by the end of the quarter. 7 of the 8 platforms are industry-leading products, and as such, we continue to expect significant margin accretion with these product transitions by the fiscal fourth quarter. With respect to the Samsung transaction, we are pleased to report that the European Commission has approved our transaction, concluding that Seagate's proposed acquisition of Samsung's hard drive assets does not raise competitive concerns in the region. We are continuing to work with the regulatory agencies and other jurisdictions to reach the same conclusion. The European Commission's decision to end this investigation is a significant step in closing the proposed acquisition, which Seagate anticipates to occur before the end of the calendar year. Demand supply agreement and cross licensing agreements with Samsung have been executed. We expect to execute the HDD supply agreement with Samsung in the near future. Provided we receive all necessary regulatory approvals, we expect to begin integration of Samsung's HDD business during the March 2002 (sic) [2012] quarter and to complete the operational integration by the end of the calendar year. Importantly, upon completion of the acquisition, our product portfolio will include a market-leading notebook product from Samsung that delivers 500 gigabytes per platter in 1 and 2 disc configurations. We believe this is the industry's leading notebook platform, shipping approximately 4 million units in the September quarter. With respect to our December quarter outlook, the flood disaster in Thailand is having a widespread impact in individuals and businesses of all types, including the hard drive industry, disrupting transportation, logistics, power generation and the availability of labor. Specific to the hard drive industry, this is a serious and highly volatile situation, which has shut down component manufacturers, as well as drive assembly operations in the flooded region. The severity of the impact on the component manufacturers and drive assembly operations range from inundated factories and submerged equipment at one extreme or the inability to get people into the workplace on the other. Seagate's component and drive assembly factories in Thailand are operational, accessible to all our employees and are running at full production. As previously reported, this is not the case for some of our component suppliers. Our business priority is to work with our external component suppliers, supporting their efforts to rebuild the supply chain as quickly as possible. We expect to experience significant impacts to our production levels, while our suppliers work together businesses up and running. Given the severity of the situation and the expense of supply constraints caused by the disruption, including those described by our primary competitor, the effects on our industry are likely to be substantial and will extend over multiple quarters. As we strengthen our supply chain and optimize our output, we are engaged with customers to realign build schedules, product mix and to reset delivery expectation. Prior to the flood, our TAM expectations for the December quarter was unconstrained demand for 180 million units, and Seagate expected to regain the market share lost in the September quarter. Based on our current assessment of the external component supply chain, we expect to ship between 40 million and 50 million units in the December quarter. Given the volatility in the supply chain, which will impact mix and volume, we cannot provide a meaningful revenue estimate at this time. As noted already, our production is not constrained by either internal components supply or by our ability to assemble finished product. Rather, we are constrained by the availability of specifically -- of specific externally-sourced components. If these component constraints are resolved result by the end of the December quarter, we expect to exit the quarter with a production capacity of at least 60 million units for the March quarter, excluding any additional capacity from the Samsung acquisition. Assuming no component constraints, we would expect additional capacity of at least 10 million units associated with the Samsung acquisition. Finally, relative to our dividend policy, it remains unchanged from when we established our dividend in April. The board and the management team have confidence in the company's ability to generate free cash flow on a continued basis, and the quarterly dividend reflects the strength of our balance sheet. Francine, we're now ready to open up the call to questions.

. [Operator Instructions] Our first question comes from the line of Jayson Noland from Robert Baird. Jayson Noland - Robert W. Baird & Co. Incorporated, Research Division: Maybe if you could talk more about your -- where you are with Tier 2 and Tier 3 suppliers in the supply chain and your handle on the situation right now.

And obviously in any of these answers we give you, you know it's been stated in the Safe Harbor and other comments, we are trying to be as transparent as we can here and give the best information that we have right now. But as you might imagine, it's been a daily event. The teams have been pretty much working 20 hours a day for the last 14 days. And bear with us, we're going to give you the best information we can right at this moment. I'm going to turn that question over to Dave Mosley because he's been most deeply involved with what we're doing with our supply chain in our factories.

Yes, so Jason, my question -- sorry, my response to the question would start with the impact at the start, which is over 10 days ago now, of some factories. We've been able to assess some of those factories with the sub-suppliers. And the problem is that as time has gone by, there's been more and more impacts to the supply chain, different parts. So as you can well imagine, it's a fairly complex problem that just continues even until now. There continues to be disruptions to people who are actually doing the assessment because the region is still quite disrupted. Peoples homes are affected. They can't get in to certain regions, so it's quite tentative at this point. That's how we've come up with the expectations that we laid out before about mix given the impact that we have in this region, for the factories that we have in that region, for the factories that we have globally. We have second sources in some cases for some products. But it's still a very highly volatile situation, as you can well imagine, not knowing exactly what we're going to get 4 or 6 weeks from now based on a lot of assumptions about how fast people can or can't come back from some of these challenges. Jayson Noland - Robert W. Baird & Co. Incorporated, Research Division: Okay. And then last question for me on the mission-critical side. Is there a chance that we've seen a reset on the profitability level of those drives given there's a new competitor out there?

Who's the new competitor? Jayson Noland - Robert W. Baird & Co. Incorporated, Research Division: We've got Western Digital.

Well, I mean, they're buying Hitachi. I mean, I guess I don't view them as a new competitor if that merger goes through. So I think, the mission-critical space has been competitive for a long time, and Seagate really tends to differentiate itself with the breadth of the portfolio. When we get long in a portfolio and we're transitioning new products, like we are now, is clearly where customers are maybe more willing to sell a share, if you will. But that's why it's so critical for us to continue with these transitions to the next generation. And as we do them, we believe we can regain the market share to the levels of good condition [ph] which are 58% to 62%.

. Our next question comes from the line of Aaron Rakers from Stifel, Nicolaus. Aaron C. Rakers - Stifel, Nicolaus & Co., Inc., Research Division: I guess, the first question is on just looking at the acquisition of Samsung. Obviously, the EU has approved that. Where do we stand with the FTC? And as far as the EU is concerned, were there any remedies or remedial things that you guys had to do to basically getting that deal done?

I'm going to let Ken Massaroni answer the question. Kenneth M. Massaroni: We're working cooperatively with the regulators at the FTC and other jurisdictions around the globe, and we're comfortable that we're being responsive promptly to their request for information and that we're on track to close the transaction before the end of the calendar year. Aaron C. Rakers - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And as it relates to your comments on the supply chain, are you telling us that it is your expectation at this point that the supply chain should be back to production levels by the end of December? I guess, I just want to understand what the message here is. Is that you -- do you fully anticipate everything to be back online and therefore, operating at a $60 million full capacity run rate in March?

First of all, there were no remedies on the EU question. No, I think what we're seeing is the disruption in the supply chain is kind of multi-threaded and either certain component suppliers just can't get to their building. But we believe the factories are dry and ready to produce once people can get there. Others obviously have damaged the equipment. And some of those are longer lead time and shorter lead time and some of those, their second sources are not. I think that at this point, it's unlikely to assume that everything will be back to normal by the end of December, although, I don't think it's improbable that parts will be flowing in the month of December to a much superior degree than they will be when parts stop arriving sometime at factory doors some time in the next 3 weeks. And so I think as that recovers, the point is Seagate doesn't have factories affected. And so we can start taking those parts and start building drives as quickly as possible. Aaron C. Rakers - Stifel, Nicolaus & Co., Inc., Research Division: And then final question...

And then we have now a level of productive capability, which obviously could change as a bunch of mix, which is what we're working for our customers on, is the ways that we can basically even increase that output by working with them on mix. Aaron C. Rakers - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And the final question for me is what is the lingering overhang on the gross margin related to rare mineral costs going into this next quarter? Patrick J. O’Malley: The next quarter we have talked about is increasing another 100 basis points. So we have about 200 basis points that we look at this quarter and then it should abate if -- depending on where assumptions, where the prices are today, if they don't go back up. So in March quarter, we should start getting relief from that, which was better than what we thought in September quarter. But that 200 basis points that we talked last quarter is fully going to be baked in.

Just think of it this way, there's a one quarter lag to what's happening in pricing in the rare earths and how it is to the drive industry. So the rare earth prices were increasing all through the September quarter and didn't start abating until the December quarter. And if you would factor the June quarter, they were not rising the entire time or certainly not at the rate that they were in the September quarter. So the September quarter for us was a big hit, the December quarter will be a full impact, if you will. And starting in the March quarter is when we'll start seeing the reactions in the spot market today.

. And our next question comes from the line of Rich Kugele from Needham and Co. Richard Kugele - Needham & Company, LLC, Research Division: Just want to touch on 2 different areas. One, in terms of looking at margins in the first half of next year, I mean, you've got rare earths likely to come down because of the lag. You got utilization clearly maximized, so price diminished. At least according to car checks, prices are going up. So at least in terms of 2012, should we think about a different type of gross margin profile? Any comments you can make there?

Richard, I think right now like we said, I mean, if we can make a revenue prediction, we could probably make a gross margin prediction, right? I think it's a pretty volatile situation right now and really all of the dynamics you just described are recurring, and they kind of started like what that means, to think it's just something that's more appropriate to do in a few weeks when we have a better visibility on what our output, our mix and our volume's going to be. I don't disagree with the general statements that you're making. And yes, we believe that they're multi-quarter and certainly they extend into the first half of the year, and I believe likely to the end of the calendar year. Richard Kugele - Needham & Company, LLC, Research Division: Okay. And then secondly, in terms of your footprint. We're getting asked all kinds of questions, as you would imagine, about how your footprint might differ in terms of component supplier versus WD and others. Is there anything you can just talk about, how you structured it and how maybe even Samsung's footprint is different and why it has affected you less?

Well, starting at the drive level, I mean, the company's drive factories, as you know, are in China and in Thailand. And where we're at in Thailand is where we have the flooding situation. Our wafer facilities are in Minnesota and in Springtown. And so we're -- we have 2 wafer facilities. Our slider facilities are Penang and Korat in Thailand. So 2 slider facilities, and media is in Singapore. R&D capabilities are in Minnesota, Colorado, Fremont, Springtown and Shewsbury, Massachusetts and in Singapore. So we've got a pretty diverse base on the development side as well. So I think from the kind of factory and the development side of it and I think, on the sourcing side, I'll let Dave talk to it. I mean, as you know, we've, I think, articulated our belief that we have a pretty deep and robust and strategic supply chain, which is one of the reasons why we feel that as soon as parts start flowing we're going to achieve some of the output goals that we mentioned earlier. Dave?

Rich, I talked about the complexity a little earlier on all of our products. We have 25, roughly, product lines that are going. Some of them, from a mechanical standpoint, have numerous different configurations, largely capacity-based. So the supply chain that feeds that is there's some places like in our China factories, for example that are specific to China. There's numerous other suppliers in different locations as well. And that's something that we're going to have to factor through the impact with the suppliers that are in the affected region. This is very substantial to us, very substantial to our whole industry. And that's where, we're focusing our concern. But we do have some opportunities to move equipment. We have some opportunities to keep lines going that are in unaffected regions and thus disciplined up mix, that's why we have to rework the mixture that the customers are getting, what we can build and what they need outside of these things together. So it's going to be a very volatile quarter. Richard Kugele - Needham & Company, LLC, Research Division: And most of the Samsung stuff comes through TDK, correct?

Yes. Sorry, Richard, I'm didn't mean to avoid that question, yes. I mean, Samsung, is generally -- doesn't have internal components. And again, I want to stress that we produce some of the internal components, slider wafer, slider and media. We have productive capacity, and we feel good about our ability to flow those parts, which will, I think, tie into when other parts of the supply chain are available, that we're going to be probably best positioned to take advantage of that to provide output. With respect to Samsung, they're obviously not vertically integrated like we are. However, a lot of their supply chain is in Korea. Although they do depend on certain parts out of Thailand as does everyone. And yes, they do have a strong relationship with TDK in terms of the outsourcing of the [indiscernible] .

Our next question comes from the line of Shebly Seyrafi. Shebly Seyrafi - FBN Securities, Inc., Research Division: So it looks like in the December quarter, the impact from rare earth is going to be more muted. If you hit the high end of your 40 million to 50 million, it's going to be roughly flat financially. Pricing according to checks have gone up maybe 10% to 20% in the past week alone. So why wouldn't you have a meaningful improvement in your gross margin in the December quarter?

I don't know, that we didn't say we would. I mean, that's for the analysts to determine. All we said is what the rare earth impact would be against whatever the gross margin is.

And clearly part of this is aligning for the mix of our customers. We certainly have to do that. So there's a big range of outcomes on there and we're working closely with our customer to see what they want us to maximize, and we will work with them. But certainly, directionally, everything you say is in that way, but given we're talking a 10 million range of units we certainly have a wide range of outcomes. Shebly Seyrafi - FBN Securities, Inc., Research Division: Okay. And can you also talk about opportunities to gain share? Clearly, I think you will gain share in the next few quarters. But can you talk about the opportunities for these share gains to linger over the next several years? Basically, how can you take advantage of the situation?

Yes, I mean, I hate to use the words take advantage as much as we're obviously going to try and respond to the customer needs that are out there and also, the supplier needs that are out there. What we're really doing is trying to align our capabilities, which are pretty substantial with the suppliers that we have partnerships with and that need our help to regain footing, as well them delivering the maximum amount of products to our customers. And the customer dialogue, as you might imagine, given the description of the impact to the industry, given by Western Digital yesterday, has been one of desire to align for certainly an extended period of time. We've had customer calls with several strategic customers and several large customers in both the OEM field, as well as the distribution field that are willing to do multi-quarter alignment with Seagate. Shebly Seyrafi - FBN Securities, Inc., Research Division: Okay. And last one for me, have you discussed specifically the key components which are most constrained in your view affecting Seagate?

We can do it a little bit. I'll let Dave touch on that. Obviously, we're not going to talk about specifics in terms of companies or anything like that. But to you give an idea where some of the constraints are so you can get a sense of this, through your own work, you see us the lead below [ph] as you can get a sense of when we can address the market opportunity. I think that's fair.

This is Dave. And I think it's very specific to product lines timing based on the amount of inventory we had in certain chains. It's also very dependent upon second sources or in some cases, dual sites that individual component vendors had and then the amount of reaction that's happened. During the past, there's been some factories that have been able to respond differently than others, just based on a lot of logistics issue. So it's a pretty complicated equation, obviously. I think they tend to the biggest impacts tend to be around our ability to build headstocks for all the subcomponents where headstocks can -- in particular, there are a lot of mechanical piece part vendors in these regions that we're going to have to go to get a solution as we try to put the supply chain back together.

And our next question comes from the line of Katy Huberty from Morgan Stanley. Katy Huberty - Morgan Stanley, Research Division: Given the share loss in enterprise this quarter and the higher margin in that category, is there any reason why you wouldn't do everything to protect or to maximize the production in that segment so that you can manage those long-term relationships with enterprise customers and maximize mix and margins in the near term, as well as your ability to take back share? Or are there limitations, as it relates to needs in other segments, that would force you to not shift production in that direction?

No, again, I think the issues around share and enterprise are more related to us continuing to ramp our new product line. The breadth of our portfolio is significantly more extensive than our next biggest competitor. And as long as we get the portfolio out there, then we'll gain the share that we need. I think in terms of how we allocate our productive resources, Katy, that's clearly going to be a function of, again, working with our suppliers and then working with our customers to see how we can optimize what they're trying to solve right now, not what we're trying to solve. Seagate is going to do fine through this in terms of being able to make drives and ballpark. So I think to me, it's a question of how do we mix that for our customers, and obviously, our customers drive a lot of margin from enterprise. They drive a lot of margin from newer line and business-critical. They drive a lot of margin from high capital, so all areas that have been hit very hard. So obviously, yes, we're going to be mixing in that area. But it's really to optimize with our customers and with their suppliers. Katy Huberty - Morgan Stanley, Research Division: Okay. And then just a quick follow-up. Have you thought yet about whether you're willing to order new equipment and take on more capacity if in a few months you believe that the issues that your competitors will last and you have an opportunity to take even more market share than what you could take given the March quarter capacity?

Yes. Again, I think the issue as we get more definition around what the constraints are and what the longer-term impacts are with the industry structurally, then we can make those decisions. Right now, we're, obviously, just trying to solve equations for our customers and suppliers in the December quarter. And then we're extending those conversations in terms of the first half of the year and in some cases for the calendar year. With the assets that we have, we have -- we do have capacity, and we do have the ability to drive more capacity to yield improvement depending on what our mix is. And so that's our first order of focus and then alignment with our customers on that. And when one of it looks like there's sustained shortfalls off of that, then we'll it consider after this.

Our next question comes from the line of Ananda Baruah from Brean Murray. Ananda Baruah - Brean Murray, Carret & Co., LLC, Research Division: Steve, I guess, just going back in sort of around the topic of potential mix of capacity this quarter, maybe next quarter, depending on components. Do guys have a visibility to tell if you have access to sort of the mix of components you need to, I guess, give you generous capacity around what you guys and your customers ultimately choose what they want? Or are you sort of -- I mean, is there sort of a ceiling to what you could do on enterprise or a ceiling to what you could do on PCs?

I'm going to let Dave answer the question. I'm not sure I quite understood it. So if you did, Dave ...

Here's the way I see it. We have ceilings, so to speak, on our production capabilities for some of those different product lines. But I think the nature of this problem and the vendors that impacted, are the wide swath of different parts. So the various impacts for the different product lines is pretty broad. I would say that -- and we can't shift for a lot more enterprise, for example, versus what our production capacity is for ourselves internally. The question really is, what do the end customers need and then what can the suppliers produce. And those are the 2 ends of the supply chain that we're going to have struggle to tie together. And I think, that's going to be a very dynamic question especially because we can't get a sense in some of the impacts. Some of the sub-supplier factories just occurred literally in the last 72 hours, so we continue assessing the very dynamic situation, and we're going to have to figure out and shift our capacity to it and the boundaries of what our manufacturing capability is very quickly. Ananda Baruah - Brean Murray, Carret & Co., LLC, Research Division: That's quite helpful. And just follow-up for me. I guess, in terms of absolute units of PC drives that seem to be out there sort of in the collective distribution channel and I guess, plus any comments you might have about what brokerage you're holding. Is there any estimate you can give us as we try to get our arms around what the actual impact to the PC production might be in the coming months?

Yes, I think, it's just hard to speculate. There wasn't a lot of inventory in the OEM hubs. There wasn't a lot of inventory in the channel when, as you might imagine, all of that has been filled in the last 48 hours. So I think the impacts are really probably going to be expelled in about 4 or 5 weeks. And this is going to be a function of really when are we able to basically start shipping drives again and at what volume in terms -- it's going to have to skew in the quarter. I think, it's the complexity. So we're obviously building drives today and shipping drives, and we're going to be able to do that for -- at capacity, for a couple more weeks. And then we'll start being impacted and then how quickly we can recover, again, if it turns out that we're having access to parts in December then we're going to build as many drives as we can in December. And hopefully, our customers can incorporate those in the channel, might be able to take them later in the quarter and the OEMs clearly even a little earlier on the quarter. And that's another thing we're trying to optimize right now. But again, I think the bigger issue is really the impact in the first 6 months of the year, as much as this is an issue about December. Given the structural issues that we described yesterday, I think, in certain way you're right, that this quarter is actually cushioned a bit by -- we have product that was on boats. I mean, WD described that they actually had actually put a greater-than-normal product into finished goods and onto the boats, although obviously been able to draw down from that in the next couple of weeks. And so -- but then given structural impact to the productive capability, I think, the real issue is around March and June. And that's what we're really lining up for as much as we can.

. Our next question comes from the line of Ben Reitzes from Barclays Capital. Benjamin A. Reitzes - Barclays Capital, Research Division: Just a couple here. I wanted to ask you specifically about motors. It would seem like that would be the big bottleneck here. Did you find something out over the last 48 hours that plenty of motors could be available for you to do 40 million to 50 million drives and then have units up sequentially in the March quarter?

I think we're staying in tight contact with all suppliers that we have and watching all aspects of the supply chains that they have. So I wouldn't say there's any real new news in the last 24 to 48 hours. Patrick J. O’Malley: Ben, this is Pat. The other thing is that the motor suppliers, not all in Thailand, as well. There's other diversified supply chain so as given that Steve talked about rare earth, with us being China, we have some flex there. So there's going to be tightness there. But I don't think there's any new found parts. It's just we're optimizing how we use what's there and what factory it comes from. Benjamin A. Reitzes - Barclays Capital, Research Division: Okay. Then with regard to -- Western Digital talked about some special charges, as well as some special expenses, to expedite materials. And there's also other things going on behind the scenes. I'm sure even at your place, even though your plants are operational, is there any special charges? Any increased OpEx over the next quarter or 2 that you can project that result from this? Or is it business -- more business as usual the way it will flow out in the P&L?

Yes I mean maybe incrementally, but nothing that we're calling out right now. Benjamin A. Reitzes - Barclays Capital, Research Division: Okay. And then I just got to ask you again. I mean, the gross margin guidance or I guess you don't have official, but it sounds like that you're saying the gross margin could be up sequentially in the December quarter. And I just want to make sure that, that's clear. I just -- what gross margin should we model? It sounds like you are open to the idea that it could be up sequentially due to the better mix of enterprise and some share gains even on lower volume.

I think, you're going how to model that depending on if we can build 40 or 50. We just gave you a range based on what we know today and told you that it's likely subject to change, which means -- obviously, a 20% range is a pretty big range, which means it could even go in or out of that range. So I think it's hard to say at 50 million units. That's a completely different answer at 40 million units given the absorption associated with the additional 10 million units. So I'm not trying to be cagey or not transparent, but it's just that's how dynamic the situation is right now.

Yes, multi-variance equation there. And as you get up to that 50 million, everything that everyone's characterized, short supply demand and balance, those things certainly pushing margin upwards, and that would imply that we can hit the mix our customers want and keep our factories full. That's a very good equation. In 40 million depending on what that mix is, when it comes there may be period expenses that just can't cover. So as Steve said, we're not trying to be less than clear. It's just when you're talking 40 million, it's a much different outcome than 50 million.

. And our next question comes from the line of Scott Craig from Bank of America Merrill Lynch. Scott D. Craig - BofA Merrill Lynch, Research Division: Steve, I think some people are a little confused by the 40 million to 50 million number from the standpoint where -- what sort of impact are you expecting on your Thailand operations? In other words, what's the output there that you could do? And what sort of assumptions are you making there? And I know there's a lot of moving parts because you're assuming to gain some share in other spots and then you've got other factories that can fill. But I think that 40 million to 50 million number has kind of caught people by surprise based on some e-mails I've gotten already. So maybe start there, and then I have one follow-up.

Okay. Well, I think, again, the 40 million to 50 million is not contingent upon what the factories can do, whether they're in Thailand or China. We have 2 drive factories in China, and we have one drive factory in Thailand. We also have complemented factories in Thailand that can continue to manufacture. The 40 million or 50 million is contingent upon how much, and what mix of supply, that we can actually get of complements that are coming from these many, many affected factories. And some of those factories are still impacted today. They can't -- there would be assumptions about how fast they come back up or wide, and they're assumptions. Some of them will need the water to recede. Some of stop still being damaged today. Some of them have different levels of equipment damaged. So I think this is very volatile situation right now and expecting accuracy on some of that is just very.. .

I think, the implied question is why is your number so high relative to WD. I think you need to understand that WD's number's, as best we understand their business, is being driven by a super set of slider -- lack of slider. So regardless of what they're -- well, if you could say it a different way, if they had a full access to slider, what their number would be would probably likely be much higher than 22 to 26 shipped. And that would include, we're assuming, whatever was in the inventory. So that's a hard constraint that they have, that they know that they can't resolve this quarter. And hopefully, that we're working to resolve in the next couple of quarters as you indicated. Seagate doesn't have that type of part constraint either on the factory side, which -- they also some have on the factory side. As has Toshiba and marginally, Hitachi because they can't get people to work. And we don't have another component side other than non-captive components. And so for us, it's a bunch of our assumptions based on our conversations to date with our key suppliers about what parts we think we can get when. Scott D. Craig - BofA Merrill Lynch, Research Division: Okay. And then just as a quick follow-up. Steve, from a long-term margin basis when you look at the mission-critical enterprise business, is there any concern there from what you saw this quarter from a longer-term basis that, that market is potentially less profitable as other competitors, maybe ramp up a little bit there from -- and try and gain market share?

Again, it's always been a highly competitive market, and whenever you're in a product cycle where we're transitioning, if TAM wasn't growing aggressively and that competitor decided to use that as an opportunity to make -- to take market share. If you want to be aggressive on price and buy market share and it's in a cycle where the customers are willing to do that, then you can do that. Is that a sustained way to take market share? Not really. That's why we're convinced that as long as we keep our heads down, and deal with this new programs, which are making good progress that, that portfolio is what the enterprise customer wants. And it's part of the portfolio that we think we can, again, return to what we believe is the kind of balanced market share of kind of 58% to 62%, which then, obviously, allows our customers to diversify their supply base with 1 or 2 other suppliers in the form of Hitachi or Toshiba, who are both very good suppliers.

The mission-critical business still drives enormous margin for our customers, and they're highly-valued products that have to have certain liability and quality service features that basically take more to develop. They take more to test, and they take more to service the operating side of supporting an enterprise business goes well beyond the gross margin side. Which is the point we continue to make. And one of the reasons our operating model is different than people going into the enterprise, it takes a lot more to support that.

. And our next question comes from the line of Keith Bachman of Bank of Montreal. Keith F. Bachman - BMO Capital Markets U.S.: Steve, is the demand side of the equation in December -- you talked about 180 million units. If you -- what's your perspective on what the collective supply side is? You heard WD's numbers last night, we have yours. But any guesses or views on against that 180 million demand, what the industry can generate this quarter?

Not really, because we really don't have a good view into what's going on with Toshiba, other than they've said that their factory is closed and I believe they said wet. One of Hitachi's factories is closed, and again, it just depends how long are they kept away from building drives even if parts are starting to show up. That's kind of very difficult to say right now. Keith F. Bachman - BMO Capital Markets U.S.: Okay. But let me try the second part against that. Whatever number it comes about for this December quarter, based on your comments will there be greater production capabilities, you think, in the March quarter, flat down or up relative to whatever occurs in December?

Well, as you know, that's a really interesting question because if you're talking about Seagate, Samsung, currently we indicated up by a fairly substantial amount. I think with Toshiba and Hitachi, it's harder to say. My sense is Hitachi would be up just because, from what we understand, the factory has not been affected by water. So it's just a function of getting people back to work. Not an easy task by the way, but it is certainly a lot easier than drying off equipment first. Toshiba, I think, I don't know. It's just hard for me to speculate, so let's just say it's flat. And then, I think, the WD question is better for them to answer but like I indicated if they lost slider fab and they're working through inventories and right now, I think, that's, I think, a question for them to answer. But that number could actually go down, I suppose. Depending on how they fill that gap, and obviously, they're over -- they're doing everything they can. I'm sure with regard to how get HTA and HSA and slider output. And it's a strong, good, well-executing company, and I won't underestimate their ability to recover. It's better for them to answer but it's hard to say. Keith F. Bachman - BMO Capital Markets U.S.: Okay. And then the difference in March would be presumably all the collective industry would have used up their inventory buffer. Well, the last one I have then is on the enterprise. As you guys are going through and you're going to make your priorities about how you want to allocate your production capabilities, presumably enterprise will bubble up there at the top of the list. As we think about your prioritization, should we think about prices remaining stable? Or is there a chance that you guys might look to raise prices in a particular category? I know going they're already going up in desktop and notebooks. But how about enterprise, is there a chance that prices go up? Or do they remain stable and you guys gain share or try to regain share with your new platforms?

Well, again, I think we'll try and regain share with our new [ph] platforms. I think it depends on the enterprise customer. There's very few enterprise customers who only take mission-critical. There may not be any even. And they're seeing that it's, obviously, they need mission-critical and/or business critical or the entire product line. Clearly for the customer's that need the entire product line, those are the ones that we're trying to address with the portfolio. And I don't even think about it in terms of pricing or unit as much as what can we deliver to the customer and what does that look like in terms of our supply chain and does that look like for them in terms of achieving their business goals. Okay, and I think we're going to wrap it up there. And I'd like to thank all our employees and certainly our suppliers and our customers for their ongoing support. Thank you all for joining us on the call today, and we look forward to speaking to you next quarter. Thanks very much.

. Ladies and gentlemen, that concludes today's conference. We thank you for your participation. You may now disconnect. Have a great day.