Dave Mosley: Yeah. As we said before, Karl, we’re bringing on multiple customers right now. So we’ve already shipped qualification units out to multiple customers. I won’t talk about them in particular. The HAMR reliability metrics will be identical to the reliability metrics of traditional drives. So there’s really no change there, and there’s no change in the power either. I mean, the people have pointed to the laser subsystem and things like that. Yeah, there’s some very small changes according to that, but we’re also working power down in normal course on these products. I think one thing important to realize about the family is that the mechanical and electrical design points of the of the 2.4 terabyte per platter drive that we just announced are very similar to the 3 terabytes per drive, nodes or even beyond that, we should get into the mid 3 terabytes per disk drives.
With those same parts. So same electronics, same mechanics. So there’s really no change in power. There’s no change in reliability expectations either.
Karl Ackerman: Super helpful. If I may sneak another one, just on your systems business, that has moderated roughly 40% the last two quarters. Just curious. I suppose why and kind of the outlook for that. And within that, how much of that is maybe softness in flash prices versus perhaps the core vault hard drive offering. Thank you.
Dave Mosley: Yeah. I don’t really think flash has much to do with it. It’s more, what I’ll call on prem traditional enterprise applications. And thankfully, that space has not been as bad as we thought it was at the back of the year. It’s not nearly as cyclical as what the cloud has been in this recent cycle. But it was down year over year. And I think it will recover over time as well because I think on prem enterprise should benefit from all the growth of data. And in many cases, you can’t move the data off-site or into the cloud. It’s just either too massive or you’ve got regulatory requirements or sovereignty requirements and you want to keep multiple copies anyway. So I do think on prem enterprise should have a good recovery at some point. And we’re happy with the systems business and our penetration into multiple accounts on that front to recover when the on prem enterprise business does recover.
Operator: The next question comes from Aaron Rakers of Wells Fargo. Please go ahead.
Aaron Rakers: Yeah. Thanks for taking the question. I wanted to maybe just unpack the gross margin a little bit. Appreciating that you guys don’t give a defined kind of guide on a forward basis. Could you help us understand kind of the impact of underutilization you expect going into the December quarter relative to the $59 million reported this last quarter. And how do we think about as maybe that starts to lift out of the model, kind of the glide path to back to that 30% level as HAMR starts ramping, etcetera. I’m just curious of how we think about or how you guys are thinking about the gross margin trajectory kind of the variables within that looking out over the next couple of quarters.
Gianluca Romano: Hey. Good morning, Aaron. Thank you for the question. Yes our guidance for December quarter is, of course, implying an improvement in gross margin. It is not coming from underutilization. We think, underutilization will be fairly flat, with the September quarter. But it’s coming from, of course, there’s a pricing actions that we are taking, and we have already started in the prior quarter. And a better cost structure. No part of improvement is for sure coming from the full impact of their restructuring plan that we started in the prior quarter. So now we start seeing the full impact in our cost structure. So those are the major drivers for the improvement in gross margin. Then now we will continue to improve our structure and we think our revenue will continue also to increase sequentially.
Now to go back to the let’s say the 30% gross margin. No, we think we need to have a revenue that is lower than the prior peak. We think at least 20% lower. So we can achieve that level of profitability with a much lower rate.
Aaron Rakers: Very helpful. Thank you, Gianluca.
Gianluca Romano: Thank you.
Operator: Next question comes from Timothy Arcuri of UBS. Please go ahead.
Timothy Arcuri: Thanks a lot. I also wanted to ask on gross margin. Gianluca, as HAMR ramps, I think there’s some controversy in terms of whether it’s initially negative for gross margin or, you know, like what the crossover point will be for when it becomes positive to gross margin. I think it depends on your yields, obviously. But can you just talk about sort of how that plays into the answer to your question, the trajectory of margins off the bottom here. Thanks.
Gianluca Romano: Yeah. No. As Dave said before, no, HAMR will strongly increase our capacity per drive. And that will for sure improve our gross margin. It will, no, it will be accretive to our gross margin since the beginning. But, of course, when we go to 3, 4, 5 terabyte per drive, you will see even a bigger improvement. Now we think we’ll start our HAMR revenue fairly strongly in the first six months of the calendar 24. Now we think we have about a million unit as opportunity to be solved. That will help. Of course, as every time you go into a new technology and new product, we could have a little bit lower yield, and that could limit in the first quarter or two. The improvement to the gross margin, but we see gross margin improving sequentially.
Dave Mosley: And, Tim, just I would add, remember that it’s not just about the highest capacity point, although that drop does drive a lot of heads and media in our factories. It’s also about mid-range, if you will, capacity points like 20 terabytes or 24 terabytes again or those the areal density enables us to go address those capacity points with improved cost structure.
Timothy Arcuri: Great. Yes. Thanks for that. So I also jumped on just [mid way] (ph). So, maybe you talked about this, but can you talk about how the change to build the order is impacting bookings? So I know that revenue is being guided pretty flat, but it seems like bookings are improving. And I wonder how much of that is due to the shift to bill to order and how much of that is due to just the customers having worked through inventory. And what do the bookings tell you about the trajectory of where revenue is going to into the first half of next year? Thanks.
Dave Mosley: Yeah. It’s actually an interesting question. So we do have some customers that are embracing the predictability. And there are reasons for that, maybe some of it is because they have burned through their inventory completely. And so they know that they’re going to be buying. I think there are customers who are not leaning into, multiple years just yet. For various reasons, they make procurement decisions all the time and so do we. Right? Everybody has to make these tough decisions. But, you know, generally speaking, I think it’s giving us better visibility, at least at the lower rate that the industry now runs because remember, the industry just doesn’t have the money to speculatively start a bunch of products right now.
