Stephen J. Luczo - Chairman, Chief Executive Officer and President William David Mosley - Executive Vice President of Operations Albert A. Pimentel - Chief Sales & Marketing Officer and Executive Vice President of Worldwide Sales & Marketing Patrick J. O’Malley - Chief Financial Officer and Executive Vice President of Finance Unknown Executive -

Steven B. Fox - Cross Research LLC Mark S. Miller - Noble Financial Group, Inc., Research Division Richard Kugele - Needham & Company, LLC, Research Division Joe Yoo - Citigroup Inc, Research Division Kevin M. Hunt - Auriga USA LLC, Research Division Keith F. Bachman - BMO Capital Markets U.S. Scott D. Craig - BofA Merrill Lynch, Research Division Christian D. Schwab - Craig-Hallum Capital Group LLC, Research Division Aaron C. Rakers - Stifel, Nicolaus & Co., Inc., Research Division Ananda Baruah - Brean Murray, Carret & Co., LLC, Research Division

Good afternoon, ladies and gentlemen, and welcome to Seagate Technology's Fiscal Second Quarter 2012 Financial Results Conference Call. My name is Melanie, and I'll 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 includes 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 control. In particular, global economic conditions and significant disruption to the industry 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, and in the company's quarterly report on Form 10-Q as filed with the U.S. Securities and Exchange Commission on October 27, 2011. These forward-looking statements should not be relied upon as representing the company's views as of any subsequent date, and Seagate undertakes no obligation to update forward-looking statements to reflect events or circumstances after the date they were made. I would now like to turn the conference over to our host, Mr. Steve Luczo, CEO. Please go ahead. Stephen J. Luczo: Thank you, Melanie. 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; Dave Mosley, Executive Vice President of Operations; Rocky Pimentel, Chief Sales and Marketing Officer; and Ken Massaroni, Executive Vice President and General Counsel. We have posted detailed supplemental information about our fiscal second quarter on our Investor Relations site at seagate.com. In today's call, I will review the results for the December 2011 quarter, provide an update on our Thailand operations and our view of the impact of the flooding, share our progress on the Samsung hard drive business integration and provide our outlook for our fiscal third and fourth quarters, as well as calendar year 2012. After that, we'll open up the call to questions and answers. For the December quarter, the industry shipped approximately 119 million units, which was within our expected range. Seagate reported revenue of $3.2 billion and non-GAAP diluted earnings per share of $1.32. We shipped 47 million units during the quarter, and our non-GAAP gross margin was 31.7%. We ended the quarter with $2.3 billion in cash. The disaster in Thailand affected a vast number of individuals and thousands of businesses. Although the industry is continuing to increase output, it's important to note that while many observers tend to believe that mid to late October was the low point of industry production, we believe the low point was closer to mid-December. Seagate's geographically diversified factory footprint and broad supply chain provided inherent advantages that mitigated the impact of the floods to Seagate's operations, although many of our external component suppliers are still working to recover their businesses and return to full capacity. We have been very impressed with the response and efforts of our suppliers, who have worked tirelessly to rebound from the effects of the flooding. There are still clear challenges that lie ahead in our component supply chain. And to help address the gaps in various product lines, Seagate has worked with its customers and suppliers on aggressive qualifications of new parts and factories, allowing us to match precious supply to end demand. I'll now turn the call over to Dave Mosley, who will provide more detail on the situation in Thailand.

Thanks, Steve. The human tragedy that surrounds the flooding in Thailand is deeply troubling, and our thoughts go out all of those affected, especially our employees and their families. To put the disaster in an economic perspective, it is by some measures the fourth-largest natural disaster in history. So far, estimates are at $45 billion of damage, and 13 million lives were disrupted. The damages done by the flooding created by far the most stressful quarter in the history of the disk drive supply chain. The flood was most impactful in the industrial parks approximately 30 miles north of downtown Bangkok, where 7 of our top 10 suppliers suffered direct factory damage. As a result, all of our 20-plus product platforms experienced some form of supply interruption, and for a few products, the damage brought down the supply lines completely. Components have had varying degrees of challenges in the recovery. Specifically, a large portion of the precision machining capability that supports the hard drive industry, the motors and base decks to actuators and specialty mechanical parts, were catastrophically lost. In some cases, various fixtures were salvaged, while in other cases our suppliers have had to rush to secure new tooling. To date, over 200 requalifications have occurred for motor base assemblies alone. Also, many cleanroom facilities that support the industry, where contamination control is critical, were destroyed. Even certain electrical component manufacturing was damaged, impacting parts from IC packaging to individual discretes like capacitors. In addition, we're seeing much longer than usual lead times for certain pieces of capital equipment. Some sub-suppliers have limited access to capital to rebuild their systems and get back online, and Seagate is working with many of its suppliers to provide assistance where it can to accelerate the return of those businesses. Examples include temporary changes in payment terms, adaptation of our product portfolio to match their capabilities and assistance in funding for capital equipment. We believe these structural changes occurring in the supply chain today will have a lasting impact on the long-term structure of the industry. We are also working to ensure these relationships will lessen future risks in supply chain disruptions. With these impacts and the temporary underutilization of our in-house capacity, our average unit costs went up approximately $2.50 in the December quarter. I would like to thank our suppliers for their efforts in these trying times. In particular, vendors have shown their dedication to our industry and our mutual end-customers to prioritize urgent product gaps and restore high-quality production as soon as possible. Steve? Stephen J. Luczo: Thanks, Dave. In response to the supply chain disruptions in the December quarter, Seagate dramatically reduced product configuration complexity and moved the vast majority of our fulfillment process to direct factory shipments. These efforts have fundamentally altered demand planning dynamics with our customers and have resulted in a much better alignment of supply and demand. We expect that these improvements to supply chain management will become standard practice as our industry fully recovers over the course of calendar 2012, benefiting our industry, suppliers and customers. Our average selling price per unit for the quarter was approximately $13 higher than they were in the September quarter. While market conditions would have clearly supported a higher price for our products across our portfolio, we balance this condition with the needs of our customers and suppliers, as well as our objective for more stability in our margins. We made the business decision to trade a short-term, profit-maximizing opportunity for long-term commitments from customers, stronger relationships and more stable margins. As a result of improvements in supply-demand alignment and our approach to pricing, nearly all of our largest customers have entered into binding long-term agreements or LTAs to ensure continuity of their hard disk drive supply. Some of these LTAs extend for multiple years. LTAs of this nature are new to the disk drive industry and represent a structural change in the way we do business. These agreements are mutually beneficial and improve the strategic alignment between Seagate and its customers by improving forecast accuracy, unit volume and pricing visibility, product build planning and logistics. The executed LTAs are expected to account for an excess of 60% of our total production capacity during the calendar year. These volume commitments were made while considering our broader business, which includes the global distribution channel, our own branded retail business and other OEMs who have not executed LTAs. We are receiving additional requests for LTAs from our customers, and we will evaluate our ability to meet those requests while ensuring that our customers have adequate supply to achieve their business objectives. The current industry environment has also created changes within our distribution channel, including the elimination of programs that historically have complicated pricing and reduced transparency. We believe these changes will improve the profitability of our distribution partners and also result in better alignment of supply and demand, reducing the potential for excess inventory. Finally, in order to provide our customers another channel to access Seagate products, we are planning to auction approximately 200,000 drives later this week. In addition to making drives available for those qualified customers not covered by an LTA or where LTA volumes are not sufficient to cover their needs, this will allow us to fully understand and gauge marginal pricing. We have over 50 customers already committed to participate in the first auction. Our current expectation is that we will be conducting auctions periodically during this and future quarters. As previously mentioned, product configurations were dramatically reduced in the December quarter. As a result, we have accelerated most of the critical product transitions we discussed in last quarter's call. We prioritized transitions in desktop, nearline and mission-critical to speed volume recovery, and we have made substantial progress in manufacturing yields across all these programs. Our 500-gigabyte per disk notebook products are still on the plan, and they will be substantially completed with this transition in the next 6 months. As previously reported, we closed the acquisition of Samsung's hard drive business on December 19, and our integration of the Samsung business is largely complete, and the transition has progressed as expected. The logistics to complete the shift of Samsung's disk drive operations to Seagate's system are closely coordinated, and the completion of this move is a testament to the solid work of our integration and operations team. In the final weeks of 2011, Seagate shipped approximately 700,000 Samsung drives using Seagate's global systems. The acquisition includes the addition of Samsung's Spinpoint M8 series to Seagate's 2.5-inch product portfolio. This product delivers industry-leading capacity and is a volume leader that will significantly improve Seagate's position as a supplier of 2.5-inch products. As with many other product lines, external component shortages resulting from the Thailand floods have constrained the production of this product. We are now seeing incremental improvements in the ramp of this product and expect ongoing improvements throughout the calendar year. We are excited about the broader ongoing relationship with Samsung and are pleased to welcome the Samsung employees that have joined Seagate at our new Korean design center and in the sales organization. With respect to our forecast for the remainder of the fiscal and calendar year, it is our belief that as a result of the structural damage to the supply chain, there is substantial and growing shortfall in unmet exabyte demand. We believe that the exabyte demand is growing at 40% per year, while areal density growth is increasing at less than 25% per year. We continue to expect that calendar 2012 unit demand will exceed supply, that the exabyte shortage will be more pronounced than the unit shortage, and that price declines on a like-for-like basis will be relatively benign throughout the year. We believe the industry will likely exit the calendar year with approximately 100 exabytes of unmet demand. Based on Seagate's average capacity per drive shipped last quarter, which was the highest in the industry, this exabyte shortfall equates to approximately 150 million units. For the March quarter, we are expecting drive shipments of at least 60 million units, revenues to be at least $4.3 billion, gross margins to exceed 33% and operating expenses of approximately $405 million. Based on share repurchases completed during the month of January, fully diluted share count used in the EPS calculation is expected to be 465 million shares. For the June quarter, we expect that our supply chain capabilities will continue to improve, which will result in revenues of at least $5 billion and gross margins comparable to those expected for the March quarter. In light of the persistent supply-demand imbalances that we believe will exist throughout the calendar year, combined with greater visibility due to our LTAs, we currently expect a relatively benign pricing environment resulting in revenues of at least $20 billion for calendar year 2012. With respect to the capital structure and our priorities for cash, we expect to continue our practice of returning value to shareholders through dividends and share repurchase throughout the calendar year 2012. To the extent market conditions allow, we expect to engage in share repurchases, which should result in a share count of approximately 350 million by the end of the calendar year. Last week, the Seagate board authorized a new $1 billion share repurchase program, which adds to the approximately $900 million remaining from the December 2010 authorization. Additionally, the board approved a 39% increase to our quarterly dividend from $0.18 to $0.25 per share. We believe these actions will help us maximize value for our shareholders and demonstrate our ongoing confidence in the business. Melanie, we're now open -- ready to open up the call for questions.

[Operator Instructions] And our first question comes from the line of Steven Fox with Cross Research. Steven B. Fox - Cross Research LLC: Two questions basically related to the same subject, which is mix. You mentioned that like-for-like pricing should be flattish in the quarter, but you didn't talk about the impact of platter density, I guess, improving as the year goes on. And also served market priorities going forward with regard to mix relative to branded, et cetera. Could you just sort of walk through what that means for pricing and gross margins? Stephen J. Luczo: Well, I -- I mean, Pat. I mean, I think we did say that we basically expect pricing to be benign for like-for-like for the year. If average drive capacity increases, then that would imply an ASP increase. And that's a function really of our recovery on components, our ability to deliver higher and higher capacity, Steven. As you know in the last quarter, we were up about 5% quarter-over-quarter, which will probably be the high-water mark for the industry. And we hope to improve upon that moving forward as we get stronger supply on the component side to build some of the shortages that are particularly heavy in the business-critical area. Steven B. Fox - Cross Research LLC: And then just to follow up on that, is there any way to prioritize or let us in a little bit on your thinking about what you're going to prioritize in terms of the served markets going forward, how much you can put more into the branded market given these LTAs, et cetera? Stephen J. Luczo: Again, the LTAs were -- the volume commitments made for the LTAs were made in consideration of the other markets that we have to serve, so as I pointed out, that's global distribution, that's our branded business and that's other OEM customers that don't have LTAs. So if you add all that up, it's obviously, it's in excess of what our capacity is. And so our ability to first address the market opportunities that our customers are presenting to us is the strategic decision Seagate's made, and the give for that was a commitment on behalf of the customers to engage with Seagate for 1 or more years. So we're going to obviously serve the retail channel as we can, but we're pretty heavily committed to our LTA customers and our global distribution partners.

Our next question comes from the line of Mark Miller with Noble Financial. Mark S. Miller - Noble Financial Group, Inc., Research Division: Just want to clarify. You said there would be 150 million units of unmet demand. What -- is that by the end of the calendar year or the fiscal year? Stephen J. Luczo: Yes, Mark. The way we're getting to that calculation is for the calendar year, we believe the growing exabyte demand will be about 100 exabytes. That might be more heavily weighted towards enterprise, both in nearline and mission-critical. And what we did is basically took our average capacity per drive to get to the 150 million units. So it's a calendar year statement, which basically means that we believe the impacts of the flooding are going to be felt well into 2013 in terms of trying to address the needs of customers to acquire storage. Mark S. Miller - Noble Financial Group, Inc., Research Division: What would you project as the industry capacity in the September quarter? Stephen J. Luczo: The September quarter of 2012? Mark S. Miller - Noble Financial Group, Inc., Research Division: Yes. Stephen J. Luczo: Our industry's capacity? Well, the drive industry or the component industry? Because those are 2 different questions. Mark S. Miller - Noble Financial Group, Inc., Research Division: Well, what would be the pacing capacity? Stephen J. Luczo: I think we still believe in the September quarter that it's probably going to be components. I think if you asked about drive capacity against the TAM, that's likely to be 180 million to 200 million unit TAM, will be below that, but I think that the component aspect of that will be even below the drive aspect. Mark S. Miller - Noble Financial Group, Inc., Research Division: So no more than 190 million -- 180 million to 190 million for the available shipping capacity? Stephen J. Luczo: No, what I said was less than that. I said the TAM, I believe, will be 180 million to 200 million, depending on what your view of Windows 8 is, which ours is pretty positive. The drive industry, I don't think, will get to those levels, and then the component constraints will be even below that.

Our next question comes from the line of Rich Kugele with Needham. Richard Kugele - Needham & Company, LLC, Research Division: Just a couple of questions. Steve, you talked about how you're doing a direct shipment to the OEMs in this environment. Is that in lieu of JIT hubs or are JIT hubs still included in that view? And then would you expect to go back to JIT hubs later in the year when supply gets better or do you think you can keep it this way, directly shipping to the customers or their manufacturing centers? Stephen J. Luczo: Well, I'll let Dave answer the first part after I answer the second part, which is the customer behavior has clearly shifted as a result of what's happened to the supply chain. And if you think about it, it's not all bad. So for those customers that have been able to take advantage of the direct ship and then revenue that product fairly quickly, thereby avoiding kind of the inventory holding period that goes on in JIT hubs, they're going to be obviously advantaged to continue to do that, which would make me think that the competitors that aren't able to do that are going to have to address that pretty quickly. So as I said, we expect that these changes that are occurring in terms of better and quicker alignment between supply and demand, at the end of the day, are going to sustain themselves because certain companies are clearly using it to their advantage to take market share currently. Dave, do you want to add anything?

No, Rich, I don't have a lot to add. We went through this transformation fairly quickly, and it's been fairly positively received as well, because people just wanted line of sight to the supply. I don't see that changing anytime in the near term, and we would have to discuss whether we change it in the future. But right now, with today's service models, I don't see it changing. Richard Kugele - Needham & Company, LLC, Research Division: Okay. And then from a technology perspective, the Samsung 500-gig notebook drives have been pretty well received. If they could have shipped more, it would have been even better received. You're keeping your 500-gig notebook plans in place. Is that a go-forward decision or is that just for the moment? Or can you just talk about the synergies between the roadmaps? Stephen J. Luczo: Sure. The Samsung product is a 9.5-millimeter, 1-terabyte, 2-disk product primarily. It obviously can be less capacity to that. Our Singapore product is a 7-millimeter product, Rich, so it's really targeted as a drive for the ultrabook market. Richard Kugele - Needham & Company, LLC, Research Division: Okay, that makes sense. And then lastly, it seems a little silly to ask about inventory levels, but because there seems to be some confusion in the market, and I kind of need to do so, can you just talk about what you're seeing in U.S. inventory in the channel and then North American inventory and then what's out there in Asia? Stephen J. Luczo: This -- I mean, Rocky, you want... Albert A. Pimentel: Yes, Rich. We -- this is Rocky. We still see a pretty constant flow in the non-OEM channels, and certainly, the channel has been probably the -- suffering the most from the standpoint of availability of the drives, so we still see healthy demand and continuing flow. We don't see any inventory buildup at this point. In fact, as Steve mentioned on the -- on his prepared comments, we've had tremendous reception on our auction concept, because the non-OEM customers see it as a great way for them to access additional products, so all the anecdotal evidence is we still a pretty healthy channel flow. Stephen J. Luczo: Yes. I think for us, Rich, where there might be inventory that's not moving as quickly as you might think given the magnitude of the shortages, those tend to be pretty low-capacity offerings, and Seagate was able to obviously bat [ph] half the mix down. So from our product perspective, we feel that the product we're putting into the channel is moving quite quickly. Richard Kugele - Needham & Company, LLC, Research Division: Okay. And it's helpful to put out the $20 billion tough [ph] guidance, so that'll be fun tomorrow.

Our next question comes from the line of Joe Yoo with Citigroup. Joe Yoo - Citigroup Inc, Research Division: I just wanted to get a better sense of what's happening on pricing within the channel. I think there is some concern that channel pricing, which is still about 50% or 60% above pre-flood levels for Seagate, might come down pretty meaningfully downwards as supply actually moves closer to demand. I mean, can you give us a sense of what your expectations are for channel pricing for Seagate for the next 2 quarters? Stephen J. Luczo: Yes, I mean, I think -- again, I think that we've been pretty articulate what we think pricing is going to be like overall for Seagate. I think you have to also look at what pricing was like for our competitors and us. I mean typically, Seagate would be $10 to $12 a unit ASP higher given our mix. In this quarter, it looks like we're $2 lower, which means, obviously, that disparity was probably across all channels but probably particularly evident in the distribution channel. So I don't think you should read into what other people might have to do in channel pricing what we have to do in channel pricing. We've tried to keep our pricing competitive in light of the constraints, but as I said also, leave it at levels where we don't have a lot of fluctuation to our gross margin. So in certain capacity points, pricing seems to have affected demand, and therefore, when you're running a portfolio as broad as ours, there's always opportunity to generate gross profit dollars that are a function of pricing and volume. But overall, I would not expect any drastic reduction in our pricing in any one of our go-to-market channels. Joe Yoo - Citigroup Inc, Research Division: And for Pat, I wanted to get a better sense of your dividend policy. Obviously, you've increased it meaningfully last week. Do you have any targets in mind whether it be payout ratios or a minimum dividend yield? Is your plan to increase it consistently every year? Any color would be appreciated. Patrick J. O’Malley: I don't know that we're quite viewing it as a payout ratio. Probably over as time evolves, as we go through this normalization, however you guys want to characterize it, but we look to returning a percentage of our cash flow as a payout ratio, not necessarily yield. And -- but this year, we just felt with the acceleration of the earnings model and the cash model that we got ahead of it as a combination of the share repurchase and the dividend increase as a balanced way to reward our shareholders and returning capital to them. So I would say it was a policy-driven thing as more as a relooking at our model for the next year, and we'll continue to assess that generally from year to year. Stephen J. Luczo: Yes, I think, Joe, that the -- clearly, with our intent to reduce the share count, that allows us a lot of flexibility to increase dividend and not increase cash outlay. So we think they work hand in hand, and we're trying to be thoughtful in terms of the total cash flow that we expect the company to be able to generate over the next several years. What's that split between obviously returning first and foremost into our own business to drive our technical leadership, and then how do we return to shareholders in the form of dividend and share repurchase? And I think we've had -- we have a pretty good balance here and we're always open to suggestions. But as one of the few tech companies paying a dividend or one certainly that -- the few that pay at the yield we do, we certainly think we're striking a balance that shows our confidence in the business.

Our next question comes from the line of Kevin Hunt with Auriga. Kevin M. Hunt - Auriga USA LLC, Research Division: I have a couple of questions. First, I continue to get lots of questions on pushback on the long-term agreements, generally the pushback of the long lines of OEMs, and what are of those when push comes to shove a year from now? So maybe you could give us a little assurance on what are the mechanisms to ensure that they can't reneg on those? And the second question is really on the hybrid drive, if you could give a little more color on -- those all obviously have a big push from Intel coming late in the year, and what the positioning is there for you guys. And maybe what other -- what the competitors are at, at this point? Stephen J. Luczo: Well, on the LTAs, I guess I would start by saying if you don't think the CEOs of the companies that have signed these contracts are worth the signature on the paper, you may wonder if you should be owning any of their stocks either. These are firm contracts that are negotiated in terms of volume commitments and our commitment to supply, and they have conditions around them in terms of pricing and availability. And they're not contracts that you can decide 6 months from now that you really didn't want to enter into. I think the bigger point, which if anyone is not understanding, these contracts are extremely beneficial to our customers. They came about because customers that understood the implications of the supply chain disruption understood that access to this technology is going to be absolutely critical to deliver the solutions they're delivering. And while historically, maybe people look to say, "How do I save $0.50 or $1 buying a disk drive?" what people learned over the last 6 months is that by doing that, you're putting at risk, sometimes, anywhere to 10x to 12x that amount in revenue. So I mean, 1 million disk drives going to a customer is going to generate today even on the client $300 million or $400 million or $500 million or $600 million of revenue, depending on what your client base is. And on the enterprise, of course, the numbers are probably 10x that. So this is an opportunity, I think, for a lot of the customers to basically assure themselves that they have access to the product so they can then do their planning, and especially when it's against a big shortfall in demand. I guess the analogy I use is if you lost 1/3 of the oil production in the world and everyone realized what that meant in terms of availability to gas for your car or fuel for your home, and you happen to have a relationship with a station owner down the block that happened to have stations all over the world, and they offered you the ability to basically get fuel whenever you wanted to at competitive prices, would you view that as an advantage or a disadvantage? I think it's pretty clear it's an advantage. So we have a lot of confidence that these contracts will be adhered to. They are involving the highest level of executives at the companies that we engage with them. They are mutually beneficial, they are competitive and they're giving these companies a great capability to plan their businesses going forward. And in an environment like we said, where we believe there's going to be an exabyte shortage that could -- that goes into 2013. With respect to a hybrid technology, we -- as you know, we're on our second generation of hybrid technology moving into our third generation of hybrid technology, and we're quite confident that the performance and cost aspects of the devices that we'll be delivering over the summer will be best-in-class and basically will have SSD-quality performance with marginal cost adder [ph], so we believe this is a big category for us going forward.

Our next question comes from the line of Keith Bachman with Bank of Montreal. Keith F. Bachman - BMO Capital Markets U.S.: I had 2, if I could. Pat, is there any cash flow targets you could provide for the March quarter or more broadly for CY '12? Patrick J. O’Malley: I think we have a philosophy around our business of keeping enough cash free [ph] liquidity. I mean, we certainly have shown in the past that we can run that number as low as $800 million. But for our business, we look to keep $1 billion-plus of cash on the balance sheet, and then we generate at least $1 billion-plus of cash flow. So but that -- so looking at both aspects of the flow and what we'd like to have gross on the balance sheet. Keith F. Bachman - BMO Capital Markets U.S.: So sorry if I misunderstood that, but how much free cash flow do you think you can -- if you're going to do $20 billion in revenues this year, how much free cash flow do you think you can spin off of that $20 billion? Patrick J. O’Malley: Well, we can do -- I mean, you're talking about $1 billion a quarter, at least, so you could model that, but it's certainly north of $1 billion a quarter. Stephen J. Luczo: I mean, you guys can model that. We've given you basically revenues and our view on at least pricing through -- margins through halfway through the year and pricing through the whole year, no big changes to OpEx... Patrick J. O’Malley: Or CapEx. Stephen J. Luczo: Or CapEx. So you guys can work your own models. Keith F. Bachman - BMO Capital Markets U.S.: Okay. Fair enough. And Steve, a follow-up for you, if I could. If you could talk a little bit about what you think industry TAM on supply of drives would be for the June quarter. And more specifically within that context, what do you think Samsung can do for Seagate over the next couple of quarters in terms of output of drives, please? Stephen J. Luczo: Well, I think June -- you have to start with March, right? I mean, at the end of the day, we're a manufacturing industry, and so you kind of have to think about June as a function of growth over March, which then makes you think about December. And don't worry, I won't take you back to 1957. So I think if you really think about December, the math lays out like this: the industry shipped 120 million units, but it only built 105 million. So I think the earlier forecast of the industry being able to ship something like 145 million for the March quarter would have been pretty spectacular in light of 105 million built, because you figure there's no inventory drawdowns that's going to occur in March, right? So you're talking about 105 million going to 145 million. I think that's a stretch. I mean, is it possible? I suppose if you mix way down in capacity, and you're only shooting for unit volume, it might theoretically be possible. But if you look at the first few weeks of production, it looks to us that the industry is on a pace to do something closer to 130 million, 135 million. You can therefore -- to me, 150 million to 160 million is probably the right number for June, again, depending on mix and recovery to the supply chain.

And components as well. Stephen J. Luczo: Yes. Did that answer that question? Keith F. Bachman - BMO Capital Markets U.S.: It did, Steve. And then if you just don't mind, a little bit on Samsung, how do you think they can ramp? Stephen J. Luczo: So Samsung's interesting. It's a great product. It's a high-yielding product. As you know, it's a outsourced manufacturing product currently for us with TDK, SA, Winpoint. And really, they ran into a situation where they were constrained by a component. And other than that, we would've been able to probably produce millions of those drives in the December quarter or they would've. In March, we probably would've been in the 10-plus million range. We've addressed the component shortage, we're ramping it quickly, and I think it's certainly reasonable that if you look over the course of the year that we can hit 50 million units a quarter with that product extending into the fall.

Our next question comes from the line of Scott Craig with Bank of America. Scott D. Craig - BofA Merrill Lynch, Research Division: Can you just talk a little bit around the CapEx and how you're thinking about CapEx over the next few quarters, Steve, and what your thoughts are on maybe trying to add capacity at some point and how you're thinking about that in the context of the industry? And then secondly, on the gross margin side of things, given you've still been pretty constrained, obviously, on capacity, can you talk about the 33% gross margin that you're pointing to in the June quarter, approximately 33% in line with the March quarter? And then sort of how pricing and maybe mix and then the volume bouncing back to higher levels for your production would all play into that number? Stephen J. Luczo: Yes, they all play into that number. You got it. Yes, more volume, relatively stable pricing environment, mix, again, kind of a function of meeting our customer demands. And you've got to remember that mix is a little different than it's probably been in the last several years where we get orders from customers and then we basically work with our supply chain to address mix. It's a little bit in reverse right now. We have our supply chain that's presenting a bunch of parts to us, and then we dynamically rework every 24 hours what we can build in order to best satisfy our customers' demand. So it's a little bit in reverse, and it won't be fully recovered by June. So there's still going to be a big influence in the June quarter that says, "Here's what we can build and how do we best address the market?" So I think it's really a September quarter, maybe exiting the June quarter where we're going to have the flexibility that you might normally think of a company like Seagate, where you could put an order in, sometime 8 weeks ahead of time, and we could probably respond to it with our supply chain. So that all plays into it, and that's why we believe there's going to be stability to our margins, at least for the next 6 months, and probably throughout the calendar year. And what was the first part? Sorry, CapEx. I'll let Dave answer the CapEx. The general answer is right now, we're working against, if you will, a capital -- I mean, a productive capacity that's fixed, that's not fully utilized, obviously, because of supply chain disruption. And what we're doing right now is keeping our heads down to work towards getting fuller utilization of the assets that we have. We're also in product transitions, which require technology and capital to transition. But generically, there's not a plan to put capital at work to raise that ceiling. And we wouldn't plan on doing that unless we got to, let's say, the fall, and it was clear that the unit and exabyte shortages were even more pronounced and of a longer duration than what we're thinking, which is kind of through 2013 in various forms and function. You'd then be into lead times where you probably would have to address increasing capital, and then we would obviously come back to our strategic customers and negotiate that commitment with some sort of extension to the various LTAs because we obviously don't want to be on the hook for putting a bunch of capital to work and then have excess capacity in the industry.

Our next question comes from the line of Christian Schwab with Craig Hallum. Christian D. Schwab - Craig-Hallum Capital Group LLC, Research Division: Is it safe for us to assume, because everyone's trying to figure out when all this ends, that the gross margin targets that you guys laid out before of 22% to 26% is a long-term target? Obviously, we're well above that. Do you see the world possibly settling out higher than that post Thailand issues? Stephen J. Luczo: Yes. It's just, first of all, when all this ends, I mean, I think there's the -- the question when does all this end, which of course is the biggest question in life. But -- and then what does it look like? And the second biggest question in life. And what I think the answer is, it doesn't end. This is a structural event that's happened, and the industry has changed. And people want to get into the simplistic model of "and then, on July 17, it's going to be just like it was, and there's pricing is going to come down and everybody's margin." I mean, this -- and that's just -- that's just not very sophisticated nor I think reflective of the business that we're in. And I think that what's going on right now is showing that. So I think it's a structural change and we've been saying this for a long, long time. This is structural. And what it looks like when we're through the transition -- and I would view the transition to mean, like I was saying before, when customers say "Here's what we need," we can be very responsive with our supply chain and deliver commitments with what they need in very short order. That is at least 1 year out, I think, in terms of meeting the unmet demand. So what does it look like then? It looks different, and it looks different probably forever. What does that mean in terms of business models and gross margins? I would say that it means higher than what was in place before, because by definition, what was in place before had too much risk in the model. I mean, at the end of the day, the reason the industry is going through what it's going through right now is because there was excess risk in the system. And that risk, in part, was a function of gross margins that weren't sustainable for what our industry really delivers, either in terms of productive capability or R&D and capital. So I believe when it's all said and done and partly, there's going to be more efficiencies, partly there's going to be more systems put in place. That supply availability is going to be more important than saving $0.50 on a disk drive. And if you ask any customer right now, would they rather have another million drives or would they rather save $0.50 a drive, they all will tell you, they want another million drives so they can go produce $400 million or $500 million in revenue. And I think that's what the smart strategic customers are focused on, and the smart strategic customers are the ones that are going to win.

Our next question comes from the line of Aaron Rakers with Stifel, Nicolaus. Aaron C. Rakers - Stifel, Nicolaus & Co., Inc., Research Division: First, a model question, and then kind of most of my questions have been answered, but a follow-up on the earlier question. First on the model, just real quickly, what tax rate are we to assume as we look out going forward? Patrick J. O’Malley: Well, for the rest of this fiscal year, I was just planning on a 3% tax rate. In longer term, we've modeled closer to 5%. But as you follow our tax structure, obviously, it's -- I won't say fixed, because it's not fixed, but it's certainly, as we earn numbers in these ranges, it makes for a foreseeable low rate, so I'd used 3% for the rest of this year and 5% long term for the model. Aaron C. Rakers - Stifel, Nicolaus & Co., Inc., Research Division: Just to be clear, for the calendar or for -- you're talking fiscal year? Patrick J. O’Malley: 3% for the remainder of the fiscal year and 5% for -- as a normal model going beyond that. Aaron C. Rakers - Stifel, Nicolaus & Co., Inc., Research Division: Okay, fair enough. And then on the areal density transition that you're talking about being pretty much completed through over the next 6 months, can you remind us again how that flows to the gross margin line in what looks to be a stable pricing environment, how we should think about that on a per unit cost basis?

Well, we'd never characterize it per unit but obviously, if you take -- you think about it from the construct of if you're taking a 500 per platter notebook, you're taking a disk in the head out. And so if you're talking the range of historically, we take out anywhere from $4 to $8 on a transition for a standard platform, obviously, that's our leverage, that's our way we look at it, and that's what we're calculating. But as Steve talked about in his prepared comments, we're largely done with the rest of the portfolio, and now we're going to have -- as we ramp those, we'll continue to get savings but we've done a -- last quarter, done a great job of pulling that forward. So that's sort of already baked into the financials, but I think what we'll get in our financials is much more capital and efficiency utilization as the factories ramp. Stephen J. Luczo: And I think what's interesting is the transition for the industry. If you asked that question 5 years ago, you would say that you have compressed margins at the front end of that transition just because you're putting a lot of capital to work in new equipment and yields are low, and then you kind of get this margin expansion that might last 4 or 5 quarters, depending on what's going on competitive with that particular product. And then you start getting some margin pressure the back end of that cycle. I think it's a little different now. You still are thinking of obviously all the issues on the front end. And in fact, it may be a little longer and tougher just because the technology is getting tougher in terms of these transitions. But I think the big difference is once you get the margin expansion, and again, when that starts to come down is a function of competitiveness, I do think that you're getting longer tails on margins just because people are driving yields a lot higher. Our industry historically would've said, "Hey, if you get to the low 80s or mid- low 90s" -- sorry, "mid-80s to high 80s to low 90s on yields, then you kind of start thinking about the next product." And that's -- it's just a different world now with these capacity points staying in production longer and what's going on competitively, we can drive yields higher than that for longer periods of time, which might give us a little longer tail on the margin, so we'll see. It's -- I think, it's kind of a new phase of the industry right now. Aaron C. Rakers - Stifel, Nicolaus & Co., Inc., Research Division: And final thing for me. Do we exit the calendar year based on what you guys have said, at 80 million per quarter in production capacity? Stephen J. Luczo: Yes. I mean it's your model, but I wouldn't -- I don't -- it doesn't sound too far off, depending on mix. Depending on mix. But yes, I mean, it's about right.

Our final question comes from the line of Ananda Baruah with Brean Murray. Ananda Baruah - Brean Murray, Carret & Co., LLC, Research Division: I guess, Steve, could you make any comments around what to expect on the, I guess, from the efficiencies gained from Samsung on OpEx as you move forward? I guess, what's going on right now with margins is a lot is sort of -- is probably covered up with what's going on with pricing, but you made a comment earlier, or Pat did, about not much going on with OpEx as you move through the year. Stephen J. Luczo: Right. Ananda Baruah - Brean Murray, Carret & Co., LLC, Research Division: So is -- yes, is that kind of partially impacted by the Samsung integration? And then if you can make any comments about like a longer-term Samsung OpEx framework, that'd be helpful. Stephen J. Luczo: Yes. No, it's a great question and I'm glad you asked it. I mean, I don't -- we don't have a number for you yet. Maybe by next quarter we can start gauging that for you. Although, of course, as we go through time obviously, it's all Seagate. But what I will tell you, because I think you hit on a good point, is that we will learn a lot in terms of better operating models from what we've acquired at Samsung. They took a different design approach, they took a different qual approach and they took a different manufacturing approach. And there's a lot of good stuff there that we're learning that, as it turns out, we can apply to our broader portfolio, whether or not, again, that has to do with how we qual the product, how we ramp it or even how we build it. And they do a great job. The yields are very high. They run very clean factories. And at the end of the day, I think that, that's going to benefit us in terms of our operating efficiency, i.e. lower cost of goods sold for any product made. And it should have an impact that helps us throughout a product line. And I think probably by next quarter, we can maybe start scoping what we think some of that benefit is. You hit another point that pricing kind of masks what's going on. Well, it does and it doesn't. Like I said, you can see what our margins are at with price increases that were a lot lower than our competition. We're making really good progress on our cost and our yields, and we're getting through some of these transitions that are challenging. But like I said, once you get through them, then you basically have a pretty nice product to build for a while. And at these capacity points, when you're at nice round numbers like 1 and 2 terabytes and 500 gigabytes, we think these products are going to be in production for a while, so we have to be able to make them at very high yields. Aaron C. Rakers - Stifel, Nicolaus & Co., Inc., Research Division: That's helpful. And just a quick follow-up, if I could. Is there any point in the second half of the year when you think that you'll actually be able to ship the mix, I guess mix-appropriate, for what customers are wanting, and then, really, at that point, it's just a matter of being able to ship enough of the right mix? Stephen J. Luczo: I'll let Dave answer the question. I think it's going to be a struggle for a while. Business-critical has been really impacted quite heavily. Mission-critical probably recovers first because there's so much effort by the industry to solve that problem, and it's a relatively lower volume. Of course, you have substantial growth in the nearline business-critical space as a result of cloud computing. So not only was that segment hit the hardest, it's also the one where there's just very significant growth opportunities. Then notebook probably and then desktop. So I think it's going to be a while. Dave, you want to add a little more color?

I think there are some customer systems that are qualified. Different applications require high-capacity drives, so I think that'll still be unmet for quite a while. So the answer to your question directly is no. I believe that we'll still be mixed down through the balance of the year. Stephen J. Luczo: Okay, I want to thank everyone on the call today, and I'd like to also stress my admiration for Seagate's customers, partners, suppliers, our employees and the rest of our industry for the hard work and perseverance through these very trying times. Thanks for joining us, and we look forward to speaking with you next quarter.

Ladies and gentlemen, thank you for your participation in today's conference. That does conclude the presentation. You may disconnect. Have a wonderful day.