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

Aaron C. Rakers - Stifel, Nicolaus & Co., Inc., Research Division Ananda Baruah - Brean Murray, Carret & Co., LLC, Research Division Eric Sterling - Barclays Capital, Research Division Keith F. Bachman - BMO Capital Markets U.S. Richard Kugele - Needham & Company, LLC, Research Division Steven B. Fox - Cross Research LLC Katy Huberty - Morgan Stanley, Research Division Robert Cihra - Evercore Partners Inc., Research Division Joe Yoo - Citigroup Inc, Research Division Mark S. Miller - Noble Financial Group, Inc., Research Division Scott D. Craig - BofA Merrill Lynch, Research Division Mark A Moskowitz - JP Morgan Chase & Co, Research Division Jayson Noland - Robert W. Baird & Co. Incorporated, Research Division

Good afternoon, and welcome to the Seagate Technology Fiscal Third 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. I would now like to turn the call over to Kate Scolnick, Vice President Investor Relations. Please proceed, Kate.

Thank you. Good afternoon, and welcome to today's call. I'm joined today by Seagate's CEO, Steve Luczo; CFO, Pat O'Malley; Dave Mosley, Executive Vice President of Operations; Rocky Pimentel, Chief Sales and Marketing Officer; and Ken Massaroni, Executive Vice President and General Counsel. We posted our press release and detailed supplemental information about our fiscal third quarter 2012 on our Investor Relations site at seagate.com. During today's call, Steve will review highlights from the March quarter and provide the company's outlook for the fiscal fourth quarter and calendar year 2012. After that, we'll open up the call for questions. Before we get started, please note that we are hosting a Strategic Plan update for analysts and investors on September 21, with details to follow shortly. As a reminder, 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 June 2012 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 and 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 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 January 25, 2012. These forward-looking statements should not be relied upon as representing the company's view as of any subsequent date, and Seagate undertakes no obligation to update forward-looking statements to reflect events or circumstances after the date they were made. I would now like to turn the call over to Steve Luczo. Steve? Stephen J. Luczo: Thanks, Kate. Good afternoon, everyone, and thanks for joining us today. Seagate's third quarter results reflect strong operating performance by the company against the backdrop of a continued recovery of the hard drive industry. Our main focus this quarter were on operational execution in order to meet our customers' requirements and returning value to our shareholders. We delivered successfully on both fronts. In our fiscal third quarter, Seagate achieved revenue of $4.4 billion, diluted earnings per share of $2.48. Cash flow from operations was $938 million and we ended the quarter with approximately $2.1 billion in cash. Through the extraordinary efforts of our suppliers and outstanding execution from our operations, Seagate successfully delivered our portfolio of products to a broad base of customers. We also returned significant value to our shareholders this quarter, with over $1.2 billion in dividends, share repurchases and debt repurchase. The 43.1 million share repurchased during the March quarter reflected approximately 10% of the outstanding ordinary shares of the company. We increased our unit shipments by 29% over last quarter, shipping 61 million drives, which equates to approximately 42 exabytes. Shipments of our client products improved, with the notebook market almost fully recovered, as expected. We expect the market for desktop drives to remain constrained, most likely through the fall. In the enterprise, the mission-critical market segment market seems to have almost fully recovered, while business-critical continues to be constrained as demand for storage continues to increase rapidly with the ongoing build out of the cloud infrastructure. We believe we are well-positioned for these cloud-based trends because of our broad product portfolio, which represents several high-demand, sole-supply product offerings. Our Samsung label products represented approximately 13% of our shipments this quarter. We are very pleased with the value this business has brought to Seagate. We have increased manufacturing capacity and have successfully increased our additional design engineering headcount by over 25% at our Korean design center since the acquisition was completed. Gross margin for the third quarter was 37%. As expected, pricing was relatively benign in the quarter and Seagate's operational performance exceeded our expectations, as we were able to ship units at an increasing average capacity per drive with improving yields. We believe our average capacity per drive was at least 15% higher than the industry average. Our long-term agreements with our largest customers have been mutually successful and we delivered over 100% of our committed volume this quarter. The number of executed LTAs increased to 50% this quarter. We expect these long-term agreements to account for approximately 60% of our total production capacity for the calendar year. LTA pricing was more favorable to the customer than the company's average pricing, reflecting the benefit of longer-term visibility of supply and demand. Our new auction program continues to evolve and we held multiple auctions worldwide throughout the quarter, selling 100% of the products offered at or above the company's average pricing. As the industry recovered during the quarter, supply to the distribution channel improved. Distribution pricing remains well above historical spreads with respect to OEM pricing. As the drive industry works towards bringing supply and demand into balance, there are several market dynamics that remained unsettled in addition to a variety of supply constraints that have resulted in our customers mixing down their capacity requirements. Most interesting is a possible market share shift in favor of OEMs versus white box manufacturers who fulfill through distribution. The longer-term implication of these adjustments is not entirely clear yet. Regardless, we believe there remains a substantial and growing shortfall in unmet exabyte demand resulting from the supply-chain disruptions caused by the floods. Consistent with industry analyst projections, we believe that the June quarter TAM will be approximately 160 million units. Given these dynamics, the pricing environment remains benign and we are raising our non-GAAP gross margin expectation to be at least 34.5% for the June quarter. We expect to achieve revenue of at least $5 billion and operating expenses of approximately $400 million to $500 million. Fully diluted share count for the June quarter is expected to be approximately 440 million. For the second half of the calendar year, we are planning that the industry will continue its current pace of recovery, and combined with the demand for cloud infrastructure and the introduction of Win 8 and new thin and light notebook products, the December quarter TAM should exceed 185 million units. Under these conditions, we believe Seagate will maintain market share of approximately 43% and will be on track to achieve calendar 2012 revenues of at least $20 billion. In addition, we are planning for non-GAAP gross margins to remain above 30% exiting calendar 2012. With respect to our capital structure and priorities for cash, we expect to continue to return value to shareholders through dividends, share repurchases, and when appropriate, early retirement of debt. To the extent market and business conditions allow, we expect to continue the share repurchase at a pace to result in a basic share count of approximately 350 million shares by the end of the calendar year. Melanie, we're now ready to open up the call for questions.

Ladies and gentlemen, our first question comes from the line of Aaron Rakers from Stifel Nicolaus. Aaron C. Rakers - Stifel, Nicolaus & Co., Inc., Research Division: First question for me is that I believe last quarter, when you guys had talked about the forward expectations in the March quarter, you had assumed that the industry can produce about 130 million to 135 million drives. The industry shipped closer to 143 million. Can you help us understand the delta there? Did production come back on quicker than you had assumed or is there -- how do we think about the further burn down of the inventory in the supply chain? Stephen J. Luczo: I think our estimates have been anywhere from, if I go back to October for the March, June, September, December 2012 quarters, anywhere from 140 million in March to 160 million in June to 180 million in September and 180 million to 190 million in December. I think when we had our call in January, the reason we were probably a little under the 140 million was that when we looked at the build rates for the first 3 weeks of January, it was extremely low. And we weren't -- it wasn't clear to us if the industry would be able to ramp to the 140 million or 140 million-plus that were shipped. And I think a lot of that was done by continuing mix down, which is done of course while addressing unit shortfall, which is good in terms of getting drives into our customers' hands, so we can keep demand overall strong. It's obviously addressing this exabyte shortage that we're focused on as well. Aaron C. Rakers - Stifel, Nicolaus & Co., Inc., Research Division: And the follow-up question up for me is that, I'll ask it because somebody's going to ask you this, it sounds like you're going to host an Analyst Day in September. Is that the time frame in which we expect or are you willing now to throw anything out there in terms of the long-term gross margin target model that you've talked about in the past? And on top of that, is there any way to think about free cash flow generation in the context of what you guys are targeting and more comfortable in targeting through 2012? Stephen J. Luczo: Well, I think, clearly, by virtue of what we said today, we've indicated a strengthening of our position of what we think is going to happen through calendar 2012 relative to what we thought in January, both with respect to the June quarter margins, as well as exiting calendar year 2012. I think in terms of being in a better position at the Analyst Day to talk about the longer-term business model, absolutely, I think that we'll be in a position to do that by then, if not adding more color on the June quarter call. Aaron C. Rakers - Stifel, Nicolaus & Co., Inc., Research Division: And free cash flow? Stephen J. Luczo: Same thing.

Our next question comes from the line of Ananda Baruah with Brean Murray. Ananda Baruah - Brean Murray, Carret & Co., LLC, Research Division: Steve, just going back to gross margin, could you give us -- with all the moving parts that you guys have with pricing and product cycles and capacity utilization increases, and adding Samsung, can you give us, I guess, 2 parts -- number one, what's the -- where the, I guess, the mix -- I guess the parts that have you kind of guide down a little bit, at least at the floor in June versus March. And then presumably as pricing starts to soften a little bit as we move through the year, how should we think about some of the other levers kind of layering in to support gross margin through the year? Stephen J. Luczo: Right. Well, I guess I want to challenge that we guided down, we actually guided up relative to what we said in January. What we said in January is that we thought that the June quarter would be basically a minimum equal to what we guided in March, which was 33%, we're saying 34.5% now. Our performance in the March quarter was benefited by some really outstanding operational execution and we certainly hope to deliver on that in the June quarter as well. And if we do, then we will obviously outperform our plan of at least 34.5%. I think to your question of this is like, do you say potato, do I say potato, are margins going up, are margins going down? I think the things that are putting pressure on margins would be for us, as we continue to mix up our notebook product, and a lot of it is what we acquired from Samsung. Obviously, the notebook product pricing, so from an AUP perspective is lower than average. And then margins, we don't really talk about margins by products or markets. I'm not going to do that here. But there's also this issue that I try to point out between distribution and then the OEM distribution mix. So clearly, with the OE -- with the distribution price premium being significantly higher than historical norm right now, to the extent that distribution regains more of that white box share, then that would benefit our margins. To the extent that the OEMs continue to take share there, then that would obviously result in lower margins and we have our own view on how that all plays out, which is highly competitive. But when it's all said and done, that's how we get to our gross margin guidance. I think the other big thing, is what you hit, is we're working through some product transitions here that are pretty significant. We've really transitioned the entire portfolio over the last 6 months, which again, I think is a real statement of the company's performance operationally to not only were we chasing a supply chain that was severely disrupted but we actually were transitioning probably with the hardest technical transitions that the industry has gone through. And as we do that, as you know, that allows us to obviously have margin relief. And so as we mix up in either capacity or as we mix to the newer products and then as yields grow on those products, that would obviously benefit margins. So you got all the triggers of net-net, which ones influence the margins, which way, and our modeling basically results in the guidance that we gave.

Our next question comes from the line of Ben Reitzes with Barclays. Eric Sterling - Barclays Capital, Research Division: This is actually Eric Sterling for Ben. I just have a quick question on the dividend. In thinking about the shrinking of the share count, your cash outlay actually declined. So can you just sort of give some thoughts around how you're planning for the dividend throughout the year? Is there any thought around increasing it? Stephen J. Luczo: Well that's a discussion that we had at the board level. But I think we've been pretty consistent in what we've said, that we believe that a combination of buyback and dividend payment is an appropriate thing to do in terms of returning value to the shareholders. And I think we've also said that we think the concept of a payout ratio is one that makes sense. So by that sense, you're right. As we reduced our share count, it gives us more flexibility to increase the dividend. And that will be a discussion topic for the board to consider. Eric Sterling - Barclays Capital, Research Division: And I just have another question. In the release, at the end, there's actually a comment about building about 10 drives per second, which kind of implies a June quarter TAM of 79 million if taken literally. Is that sort of a number that you're comfortable with? Or am I just kind of reading too much into it? Stephen J. Luczo: Well, I think you're just taking a statement that we were trying to make in terms of the operational efficiency of the company and extending it through the entire quarter. So I think the point was, as we recovered in the March quarter, obviously our production was skewed. And at the end of the quarter, we were able to reach those kinds of efficiencies. We balance the supply with the demand, so we've already told you what we think the TAM is and what we think our market share is. So we'll be targeting our production and make sure supply and demand is in balance, not trying to optimize as many drives per second as we can.

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 questions related, Steve, to what you're just talking about. The first one is when you mentioned the exit December quarter rate TAM. I just wanted to clarify that, you talked about 185 million drives, I think. That's where you think the industry will be and in terms of its production capacity at that point? Stephen J. Luczo: I think what I said was that we believe there'd be a minimum of 185 million units and we tend to look to the industry analysts who are in the business of providing TAM estimates. We're one input to that, we obviously watch it very closely. But given some of the trends that we talked about in terms of cloud-based computing, the proliferation of a variety of mobile devices that drive storage up and down the device food chain, as well as Win 8 and thin and light, that we believe that a minimum of 185 million unit TAM is achievable for December. I think the industry analysts, frankly, are probably a bit above that. In terms of the drive industry's ability to respond to that, there's the drive companies and then there's the drive industry, and I'll let Dave talk to it. I think that's probably pushing the limit, but I'll let Dave talk to that in terms of what the industry can support.

Really gets into the specifics of which products we're talking about. So different markets, different products have many different dynamics. I think, like Steve alluded to, the box count has gone up but the average gigabyte per drive in the industry went down appreciably as a function of this mix down to basically chase that because there was such a dearth of total HDDs in the past 6 months. Now going forward, the question is does that dynamic continue to -- at those low capacity points, if you will? Or do we start to grow up the value chain for more capacity in those sort of boxes? And then obviously with the cloud growing, those are high-capacity drives as well. So I think we'll be mixing up our components available to be able to do that. I, personally, just knowing the supply chain the way I do, I don't feel that numbers that are much more than that are really capable -- the industry is really capable of. There are a number of components still have yet to recover as a function of the flood. Keith F. Bachman - BMO Capital Markets U.S.: If I could just ask a follow-up then. Steve, when you talked about pricing will be benign in the June quarter, is there any color you can give us on some specifics on either like-for-like or weighted average pricing for the June quarter? Patrick J. O’Malley: This is Pat. We've gone through negotiations. Generally, we've indicated that prices are going to be relatively flat. But as Steve said, as the channel moves, we'll be competitive there. We're still very competitive. But if you look at historical rates, Keith, I'll just say benign is below that. So that's how we should look at it.

Our next question comes from the line of Rich Kugele with Needham. Richard Kugele - Needham & Company, LLC, Research Division: A couple of questions about the enterprise and notebook markets, if I could. Given the commentary about basically meeting supply and demand in the quarter for those 2 segments in particular, can you just talk about with the customers that have signed LTAs, how their behavior was at the moment of balance? The market's very concerned that as soon as things get into balance, that you're going to see dramatic pricing pressure or backing away from the LTAs. So any commentary from a high level on those 2 segments given the fact that we've seen supply and demand balance in those areas? Stephen J. Luczo: Well, I think we already commented on pricing, Rich. I mean, pricing is effectively done for the LTA customers for the June quarter. And as Pat just indicated, there's been little change to no change in pricing overall. I would say that the behavior through the quarter is there's been a lot of continued chasing of demand, even in those 2 segments. What we've noticed is the LTA customers seem to be taking share and what's really interesting is the LTA customers with the longer-term LTAs seem to be even taking more share. And that may be a function of their ability to do some longer-range planning knowing that they have the supply available, particularly in some of these product categories where Seagate is a sole supplier and is likely to be a sole supplier for anywhere up to 12 to 18 months. So I'd say, in general, as notebook came into balance, the pricing has remained fairly stable and certainly, the same thing in mission-critical business grew [ph]. And I think pricing is really a function of an industry that has a lot of capital to recover, probably at least a couple of billion dollars have to be reabsorbed into the industry, and the supply chain is still not functioning anywhere near where we need it to be functioning, and that's our job through the rest of this year as an industry, is to be able to more closely align supply and demand with our customers' needs. Richard Kugele - Needham & Company, LLC, Research Division: And just lastly then, on the CapEx front, you talked about in the prepared remarks, that your CapEx would be, for the quarter, below your targeted range. How long do you think you can maintain that level? There's got to be some base level of just maintenance, right? But how long do you think you can go before you might have to expand capacity?

Rich, this is Dave. I think we'll do pretty well at the levels that were at, low end of the range we said 6% to 8%. That will be at the low end of the range. Until we really see a big pop in the TAM, and I think everybody's fairly conservative relative to that macroeconomically. We are through the bulk of this product transition that we talked about. So most of the technology transition, capital that we have to put in place is already in place. There will be some of what you referenced but it's more of that kind of run rate level that we're at right now. And we'll spend as we see the need for it within the lead time, but nothing major to take us up to the high end of the range, certainly. Richard Kugele - Needham & Company, LLC, Research Division: And actually, one for Pat. Just on the authorization of the stock buyback, how much is left on that? Patrick J. O’Malley: As of today, Rich, we authorized an additional $1 billion in the last quarter. With that -- we have made the announcement. We've just now entered into that phase. So we have $1 billion left of all authorizations in front of us. And as Steve suggested about the capital structure, we have ongoing discussions every quarter with the board and they'll continue to look at that on what the appropriate authorizations are to get us to 350 million... Richard Kugele - Needham & Company, LLC, Research Division: So is that $1 billion as of April 1 or of today? Patrick J. O’Malley: Today. As of today. Stephen J. Luczo: Rich, just on the pricing thing, back, I'm not sure that you caught the point on, first of all, the LTA pricing is below the company's average. The LTA customers are benefiting from our ability to line up our factories efficiently to meet the demand they're putting in front of us on a scheduled basis, which means then we can obviously deliver some of that cost savings to them. It's evidenced by a lower price to them. In addition, you need to recognize that we're overshipping the industry average capacity by 15%. So when you take the overall AUP deltas, either on average or if you then even apply it to the LTA customer, and then also take into effect the capacity difference, I mean, there is a very substantial savings to the LTA customer right now in terms of the pricing they're receiving.

Our next question comes from the line of Steven Fox with Cross. Steven B. Fox - Cross Research LLC: Two questions, please. First of all, is there a way to put mix aside and talk about your manufacturing efficiencies exiting the quarter, versus, say, pre-flood levels? How much more improvements do you think you have to make relative to the supply chain and just your own internal production? And then secondly, Pat, could you just talk about your receivable days and it spiked up a little bit during the quarter versus sales growth. Where do you expect to see that, say, exiting the June quarter?

Steven, this is Dave. I'll handle the new product yields first. Actually, we made appreciable progress in the last 6 months. While some of the time was, I'll say, slow time in manufacturing because of the flood, the new product yields improved quite substantially. I'm not happy. I'm never going to be totally happy with them but they're way ahead of plan right now and that's flowing through our numbers quite a bit. Are we done yet? There's a couple of product transitions that I think we still have yet to finish but I'd say, like we talked about last quarter, mission-critical, business-critical, those are the product transitions are complete now. The desktop transition is largely complete and we'll balance that as time goes on. And then notebook products are still in the process of transitioning. The notebook yields, though, I'm very happy with the progress we've made last quarter. So mix aside, I think in these products we're doing well. Steven B. Fox - Cross Research LLC: But, in aggregate, you're saying there's more room to improve efficiency, say, over the next couple of quarters?

Always, yes. I certainly think so. I mean, we still are not at some of the historical levels that I want to be at on some of these new products so there's work to do. Steven B. Fox - Cross Research LLC: And then just, Pat, on the receivables? Patrick J. O’Malley: As Steve alluded to about the January, when we looked at January production and as Dave talked about how we got much more operationally efficient, it was a great quarter from that aspect, but as you can imagine with that, we delivered a lot of product towards the end just because that's when it was coming online. So a lot of this was driven from linearity, not really Ts and Cs or anything like that. So I'd certainly target as we go through our growth curve, to get back to steady-state, that would be sub-50 and closer to historical, about 48 days. So I would expect to get those days working capital back, but this as a function of linearity and sort of the growth projection we had throughout the quarter. Steven B. Fox - Cross Research LLC: And is that a reasonable target exiting June or is it going to take longer? Patrick J. O’Malley: I think that's what we'd target to. I mean, June's always a fun quarter. But I think, as Dave's run the factory as it is [ph], I think we certain -- should target under 50 because it's running much more linear this quarter than it was last quarter.

Our next question comes from the line of Katy Huberty with Morgan Stanley. Katy Huberty - Morgan Stanley, Research Division: Just a follow-up on that last question. First, I understand you saw operational efficiencies as you moved through the quarter, but did you also see some improvement in demand and pulls from your OEM customers that would be constructive on the overall demand environment moving into June? Stephen J. Luczo: Well, again, I don't want to talk too specifically about customers. I already made a comment about customers sets [ph], where we do believe that the OEMs are at least in this environment, taking share probably from the white box companies. So we did see that as an improvement in the quarter, Katy, because I don't think we had planned aggressively for it at the beginning of the quarter. And I think as the quarter evolves and they're gaining more confidence that, that may be a more sustainable share shift, then, yes, we do see strength there and that's one of the reasons I think that even for some of our products like in the notebook segment, we were continuing to chase demand for LTA customers through the quarter. And that's why I was saying in the scripted part of the call, that depending on how that plays out in the near term and long term, it may be kind of a structural shift that -- in our customer base that we'll have to adjust to. Katy Huberty - Morgan Stanley, Research Division: And Pat, as DSOs normalize in the June quarter, can we get back to that $1 billion-plus quarterly free cash flow target that you had said back in January? Patrick J. O’Malley: Yes, absolutely. I mean, right now, as you can imagine it, we're growing through the -- from going from 40 million units, to plus 60 to plus 70, we're chewing up working capital going there. But that's -- once it gets into, as Steve talked, as TAM stabilizes, our share stabilizes, we can run a fairly stable model.

Our next question comes from the line of Rob Cihra with Evercore Partners. Robert Cihra - Evercore Partners Inc., Research Division: I wonder if I could just ask a question on mission-critical, you said units were good and you said the industry looks almost fully recovered. I recognize it's not the easiest time to be probably looking at long-term trends. But if you look forward there, when you combine flash at the high end and then near-line growth, which has been obviously there's a lot more demand probably than supply right now at the low end, I mean, do you think of that mission-critical, traditional, 10K certainly 15K market being a growth market looking forward? Or is this kind of -- how do you look at that kind of beyond the next couple of quarters? Is there positive growth, negative growth? Stephen J. Luczo: No, I think absolutely it's a growth market. I mean the enterprise -- the strain on the enterprise numbers, regardless of how you split it between mission-critical and business-critical, which gets in the probably [ph] more art than science at this point. That's where all the petabyte growth is and whether or not it is private or public clouds to changing infrastructure that is back-end storage weighted. And as long as bandwidth keeps opening up, that's the architectural shift that's probably going to occur. So I think there's absolutely big growth and whether or not it's some sliver or Tier 0, that's SSD or bigger piece of Tier 0 that's hybrid or the rest of it, which is 95% of it, which is going to be rotating mass storage. That's just the big petabyte growth requirement that we're going to be chasing hard as an industry. In the enterprise, those numbers are probably in the 40% to 50% annual growth rates and their density growth, as you know, is half that. So that's a big puzzle for the industry to solve. And therefore, I think the demand requirements in the supply demand and balance is going to be something we're chasing for a while. Robert Cihra - Evercore Partners Inc., Research Division: And within business-critical, do you see that as something that the industry gets back to recovery coming out of the June quarter or is that still you think a couple more quarters, because it seems to be still the tightest? Stephen J. Luczo: Well, it's hard for us to say because we're uniquely positioned there with a couple of products that are in very high demand that I mentioned, we're sole supplier on and just, architecturally, we will be for a good period of time. So there's a lot of growth in the cloud in the near-line business-critical space in general and then for our products in particular. So we're going to be running hard to meet that demand, I think, certainly through the year.

Our next question comes from the line of Joe Yoo with Citi. Joe Yoo - Citigroup Inc, Research Division: Steve, I just wanted to get, I guess, back to the gross margin question. There has been some concerns that you are incurring some additional costs as you try to help the supply-chain in Thailand recover. I was just wondering how -- if any were of an impact to the gross margin that you posted this quarter and then if anything is embedded in the June quarter guidance? Stephen J. Luczo: Yes, I mean, absolutely. We've done a lot to support the supply base in different forms that some of which have hit the gross margin line as you indicate. And yes, I mean, this is back to the point, this is a structural change and so we believe that will be structurally in place. This is how our industry supply-chain recovers and there's going to be costs that get capitalized throughout the supply chain that's going to be have to be absorbed by us and our Downstream customers. And that's the reality of a structural change. I don't know Dave, if you want to add anything else.

I'll just say that the suppliers, in general, have done a nice job of trying to recover the volumes as well, which helps them quite a bit as they're pulling that structure back together as well. Joe Yoo - Citigroup Inc, Research Division: I guess more specifically, I'm just looking at the guidance and obviously, you want to provide a range, a pretty wide range, but just taking really the conservative route and going to 34.5%, a lot of what Steve has mentioned is actually positive. We could make a good case that gross margins could actually expand sequentially. So I'm trying to get a handle on what... Stephen J. Luczo: That's why we raised the minimum from 33% to 34.5%, Joe. Joe Yoo - Citigroup Inc, Research Division: I mean, what is the biggest concern to gross margins, I guess, more directly to the June quarter? Patrick J. O’Malley: I don't think it's concern as much as sort of opting... Stephen J. Luczo: I guess I'm not understanding the question, Joe. We just said we raised our minimum guidance from 33% to 34.5%. Joe Yoo - Citigroup Inc, Research Division: I understand that and that's well taken. It's just that you posted 37.5% and you're saying at least 34.5% but as you know, a lot of people will just interpret that as 34.5%. Stephen J. Luczo: I'm not going to get in a dialogue about what people are going to say. We said, our minimum is 34.5% and we also gave you the pieces of what could put pressure on margin. I think it was the very first question. I don't know if you were on the call or not. If you weren't, I'll just repeat it briefly. One is that there seems to be a shift going on right now between OEMs and distribution. That's not clearly understood in terms of how long it's going to last. But to the extent that it's a more permanent shift and given the fact that distribution pricing is substantially higher than OEM, then that would obviously reduce in the lower margin structure. At Seagate, because of our share gains in notebook, as a result of the Samsung acquisition, our mix is basically increasing more notebook drives and that's putting margin pressure on us as well. And then to your point, we hope to offset that with mix up and with yield improvement. Did I miss anything? Joe Yoo - Citigroup Inc, Research Division: Fair enough. The other question's on share repo, to Pat, I wanted to get a sense of what -- how you see the pace of share repo for the next 3 quarters. Obviously, you bought a lot more than the normal pace in the first quarter -- first calendar quarter. So just get a gauge of how you plan to pace for the next 3 quarters. Patrick J. O’Malley: Well, we target 350 million by the year end, if you want to do a linear basis, you can certainly model for that. That's probably the best way. I'm not looking to super time market. We have a plan in place, a structured plan, and we've been pretty regular about those purchases. So that would be the way I'd model it. Sometimes you might see a little different, but it's modeling a linear base is probably the fairest way.

Our next question comes from the line of Mark Miller with Noble. Mark S. Miller - Noble Financial Group, Inc., Research Division: Just wanted to talk about this margin situation. You said that Samsung is going to try to be reducing them, but if you internally supply heads and media to Samsung in the long-term, won't that be a significant boost? Stephen J. Luczo: We don't disclose what our long-term plans are with respect to internal heads and media, other than the high-level numbers that we give, Mark. As you know that today, those are heads that are supplied by TDK, you're right. I think you're also aware that we have a pretty significant partnership with TDK going forward and we expect to continue that. So all of that is taken into consideration. But I think the point more about Samsung was, is that overall, notebook margins are probably not the highest margin business that the carry, so to the extent that we increase our relative exposure there, that could put pressure on margins. Mark S. Miller - Noble Financial Group, Inc., Research Division: There has been some debate recently, but you said the inventories in the channel are still fairly modest. Could you give us in terms of weeks, is it a week? Is it 2 weeks currently? Stephen J. Luczo: I think it's hard to say because it was so back-end skewed. The channel is kind of like the last customer base, if you will, to kind of get a flow of drive certainly from Seagate as we supported our LTA customers. And again, I think there's also this issue around, how much of the channel business is being fulfilled by the systems vendor. So it's not really a comment on the health of our channel partners because they're fine. They can either take drives and motherboards and sell them to white box companies or they can ship whole systems and there might be an argument that says they actually like shipping whole systems better. I think with the price deltas at the component level that we've seen going into the channel, that's provided an opportunity for the OEMs, and especially for the OEMs that have had supply visibility through the LTAs to gain share. How that plays out, I think, is a good question and we're just going to have to watch it. That's one of the issues around, if you will, supply in the channel. So we're watching it very closely and to the extent that we feel that the channel isn't moving the product, then we'll probably see that in the OEM side, because clearly, at the end of the day, all those bars and systems integrators need disk drives. Mark S. Miller - Noble Financial Group, Inc., Research Division: Just finally, would it be fair to say that the channel's certainly below seasonable norms for this time of the year? Stephen J. Luczo: Yes.

Our next question comes from the line of Scott Craig with Bank of America Merrill Lynch. Scott D. Craig - BofA Merrill Lynch, Research Division: Two question on the OpEx for Pat. Pat, can you maybe take us through what sort of leverage you think you can get on the OpEx line here as you continue to move forward? And then secondly, maybe for Steve, from an Ultrabook perspective, if you want to call them that or thin and light, whatever the right terminology is, when do you think the hybrids really start to penetrate that market from a timing perspective? Patrick J. O’Malley: On the OpEx, I think, actually we've leveraged it fairly well. We take a very minimal expense with the Samsung team and add that revenue fairly effectively. So at that $400 million level, I wouldn't say that's a high watermark, but we'll certainly target that model over the coming months to probably a year. And so there's some leverage capabilities in there but I think we've done a pretty good job in there. So we're not really looking to tune that up and shed anything significantly. In fact, we'd probably look at areas that we might need to make more investment but I think we could fit in that range of that $400 million. So I don't think that's anything that we're looking to take a big step function down. Stephen J. Luczo: I think in terms of thin and light, that we do believe that obviously is kind of a next generation of the notebook the next incarnation of the notebook. And we believe it's going to be a very successful form factor of product. And hybrid probably plays a very big role there and when that happens is clearly a function of when you can get MLC flash working in those products. Because then you're at a cost difference that's pretty compelling in terms of versus an SSD and the performance differential being negligible. And when does that happen, I think it starts happening at the end of this year, but in terms of volume shipments and adaptation, I think you're looking at calendar 2013.

Our next question comes from the line of Mark Moskowitz with JPMorgan. Mark A Moskowitz - JP Morgan Chase & Co, Research Division: A few questions. First, have you ever given us the breakdown in terms of the LTAs? What's the composition of OEM versus distribution? Patrick J. O’Malley: No, we haven't but we just characterize the vast majority of our top customers, which you would think of large OEMs. But that's how we'd characterize it and I think that's probably the best way to think about it. Mark A Moskowitz - JP Morgan Chase & Co, Research Division: And then within that composition of being primarily OEM, has there been any one OEM or another that's take on a greater or less of that composition over the last, call it, 2 months? In terms of changes? Stephen J. Luczo: What do you mean? I'm sorry. Mark A Moskowitz - JP Morgan Chase & Co, Research Division: Let's say OEM A, maybe at one time they were 15% of the total base. Now they need a lot more from you. Now they sign on for even more LTAs. Now they're suddenly like 35% or 40% of that base. Are you seeing any sort of outsized changes or is it pretty linear? Stephen J. Luczo: So there were different volume commitments by Seagate to different OEMs, which represented different percentages of what that OEM buys. So you're talking about percentages and absolute numbers here. So in some cases, we could have had a lower percentage but a bigger absolute number than this other guy that had a higher percentage, but a lower absolute number, right, depending on how big that customer was. The question is, have we seen general increase in demand by those LTA customers? And the answer is, yes. Has that been relatively stronger with certain customers than others? And the answer is, yes. Mark A Moskowitz - JP Morgan Chase & Co, Research Division: If I could do a follow-up to the yes and yes part. Within that context, are there any customers who are taking on more of the lower capacity versus higher capacity? I think probably at the lower capacity... Stephen J. Luczo: No. Mark A Moskowitz - JP Morgan Chase & Co, Research Division: I'm trying to get a sense in terms of gross margin overage -- are you getting a better benefit from some of these customers versus others because of their shift to the lower capacity versus high-capacity or vice versa? Stephen J. Luczo: No. Mark A Moskowitz - JP Morgan Chase & Co, Research Division: And then as far as just looking out here, trying to get a sense in terms of the significant amount of cash flow that Seagate has been generating. Do you guys feel that there's a need to accelerate some of these advanced technologies, pulling forward some of that move to hammer and other stuff just because you have such a great market position and cash flow position? Or is that kind of getting too cute? Stephen J. Luczo: Well, I don't know if it's getting too cute. I think it's just we're advancing those technologies as fast as we can right now. We weren't R&D expense or capital limited prior to this to driving that technology as fast as the technology will allow it to be driven. So we're still on that pace. I think the different question might be is there other technologies maybe not related to HDDs that we're looking at? That's a different question. But with respect to HDD technologies, it hasn't really changed the pace or the amount of investment that we're putting into our core underlying technologies or into our product development.

Operator, we have time for one more question.

Our next question comes from the line of Jayson Noland with Robert Baird. Jayson Noland - Robert W. Baird & Co. Incorporated, Research Division: I wanted to ask about auctions, just some more color. What you learned? How frequent they'll be? And is it fair to assume that these auctions would impact the OEM distributor dynamic you talked about, Steve? Stephen J. Luczo: I'll let Rocky talk to you. Let me just give a general answer. I think it's -- this is still something that we're learning and we expect to kind of continue to learn from over a period of time. And so every quarter, we're trying something slightly different to see what works for us and what works for our customer. We get the feedback from our customers in terms of what they liked and what they didn't like and we try to make adjustments. And as a result of that, I don't think we want to get in a position of saying we're going to have fewer than or more than or whatever quarter-to-quarter because it really still is a learning process here. But in general, we've been very pleased with the results, both in terms of what we have learned every auction. You go into it expecting certain things. A lot of times you are right, sometimes you're wrong. You get to learn a few things you are wrong about. And I think in terms of validating that the marginal price of this technology is quite valuable. It's been proven out. And today, that's been done with products that maybe are not as scarce as some of our other products that we might auction going forward. So we get a better sense about the margin, what are some of our products worth that are very high demand. These are all the elements that we're testing out. And Rocky, would you want to add to that? Albert A. Pimentel: Yes. It's an indication there. We're pretty excited about the results of the auctions we held this quarter. I would say that they exceeded our, going into the quarter, expectations. I think it's an indication of sort of creative thought that we continue to perpetuate across the management team at Seagate, developing a whole new sales channel that we see longer-term becomes an important information gathering point, as well as indicator around the market and the products we're offering. I think also we'll see it as a key tool in some of the spot market characteristics and behaviors, we'll have a better understanding of, as Steve talked about, the marginal value of key products, as well as what the behavior in the market is. So we're pretty excited about using this, one, again as another sales channel and two, as a realtime dynamic information validation tool. Jayson Noland - Robert W. Baird & Co. Incorporated, Research Division: And last question for me on Toshiba, they're obviously going to benefit from some regulatory stipulations here recently, but what are you seeing now and what do you expect? And is it still fair to assume a longer-term percent of the market at around 20% by units approximately? Stephen J. Luczo: Well, I think it's tough, especially if the TAM plays out to the 185 million going to 200 million in the next year, let's call it. That's 20% of that number is a long way away from where they're at today, which is a fairly substantial capital investment, which it's not clear that the parent companies' choices are going to be optimized around disk drive given all the other pressures that the Toshiba Corporation has relative to its competitive footprint on its real business. That being said, I think Toshiba is a very tough competitor. They do very well with certain products and we expect that they're going to continue to be a relevant player in the tune of 14% to 16% market share, which is still a nice business. But I think it's a little hard to see where the capital would come from to grow it to the numbers you're talking about. That would be 40 million units a quarter. That's a long way from home. All right. Thanks, everyone. I just wanted to comment that the company's performance during this unprecedented time has really put us on a course for continuing success and I really want to thank our employees and our customers, our partners and especially, our suppliers, as they work with us to recover, for their continued hard work and perseverance. We look forward to updating you on our longer-term strategic plan at our Analyst and Investor Meeting on September 21. Thanks a lot everyone.

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