Erik Woodring : Dave, just for you, great to see confidence in the June HAMR launch. I’d love to know just kind of what the feedback is that you’re getting from prospective customers. Clearly, we’re in a more cautious macro environment we’ve heard the term like optimizing cloud spend more often. And so is this a technology and a capacity size that they’re really pushing for now despite the slowdown that we’re seeing in the market? Or are there other factors driving the timing of the launch? I would just love if you could unpackage that question.
Dave Mosley: Yes. Thanks, Erik. I would say that the onus is really on us. It’s a control of ours to make sure that we can drive the transition exactly to Eddy’s question about get the yields up and get the production capability to where we want it. I like to think that somebody making a decision to build out a data center would much rather have a drive with 3x terabytes instead of 2x terabytes. And because that’s such a great TCO proposition for them over the long haul. We have deep customer relationships, obviously, on this front. This is not a surprise to them. The results that we’re showing in our labs are not a surprise either. So they’re very well connected with us on it. Where their spending profile might be muted, say, in the first half of this year because of all the issues that CSPs are going through, and they’ve shared some of those with us and they’re the tough problems themselves.
I do think that the secular demand for mass capacity in those data centers is still going to be huge. And we want to make sure that we’re staging the absolute best value proposition for us and for when we get there. So it’s really ours to go drive.
Erik Woodring : Super. That’s really helpful. And then Dave or Gianluca, I’m not sure. Can you just remind us exactly how we should think about the potential margin impact of launching HAMR and ramping that platform just as we think about, again, the next 12 months? And that’s it for me.
Dave Mosley: Yes. Thanks, Eric. I’ll pass it over to Gianluca in a second, but it really does come down to yields and scrap. I mean, we’re going to be targeting most of this at the highest capacity points, although there are opportunities in lower capacity points if we can take disks and heads out of already existing platforms in the 20s or teens, then we’ll go do it. And we have to go work that through qualifications with our customers. That’s how we get margin oxygen, if you will, back into the system. And so yields, scrap, our ability to go through the cycles inside of our factory, that those are the relevant parameters.
Gianluca Romano : Yes, and more new products. So we need to go ova little bit of the learning curve, something different from what we have done in the last several years. But as Dave said, Seagate is very good in the operation, in manufacturing. And therefore, we are very confident now we can have very good results, results that at a certain point will be similar to the PMR, but exactly when it’s a bit difficult to say right now. So we are going step by step. But we are actually growing faster than what we were expecting. And as Dave said, we are ready for launching the product in the June quarter, but is a little bit before what we were discussing just three months ago.
Dave Mosley: Yes, I think the data coming out of — just to pile on a little bit. The data coming out of the labs is really good, really encouraging. And to stave off some other comments or something that I would say that there’s — while there’s added features in a HAMR drive versus a garden-variety PMR drive. Even PMR drives are fairly complicated themselves, there’s no tectonic shift that causes major cost resets or things like that. There’s things we have to go work, and that’s what we do really well. We’ve worked these kinds of things over time to make sure we can stage other technology transitions, and we’re all over this. We’ve been planning this for a long time.
Operator: And our next question will come from Karl Ackerman with BNP Paribas.
Karl Ackerman : Yes. Two questions, if I may. As it relates to the March quarter guide, it’s great to see an improvement in revenue in March because seasonality is usually down a few points. But of course, nothing is seasonal at this point in time. But I guess, as it relates to that, you spoke about improvement within nearline. And so two-part questions to that. I guess, are cloud customers increasing or LTA baseline orders today going into March? And then second, are you beginning to see cloud customers procure orders for HAMR, would say, new or existing LTAs because I’m also curious how you look for signposts regarding the uplift of HAMR demand in anticipation of your launch?
Dave Mosley: It’s a really interesting question, Karl. Let me try it this way. Usually, when supply is behind demand considerably, then you’re having LTA discussions. But I think in the case of this, obviously, our suppliers have got challenges, we’ve got challenges. Even our customers have challenges. So I think it’s really an entire supply chain that needs to co-plan together. And we’ve — demand is low right now. There’s plenty of supply. But I think we’re all very mindful of cash and mindful of the financial outcomes that we want. Indeed, we are having LTA discussions still. The levels of the LTAs may not be reminiscent of what they were when you had demand for above supply. But I think the predictability is what we need to keep our factories running, to keep our people employed, getting paid and actually keeping the reinvestment so that we’re out there with the right products and the right costs in those right times.
Specifically to your HAMR question, I would say the answer is no at this point, but I think we could get there soon where we say HAMR is — this is the volume ramp of HAMR at this customer, and then that becomes part of the LTA, but we’re not there yet.
Gianluca Romano : We will have to go through the call. And then after the call, we start discussing about volumes with customers and eventually doing LTAs.
Karl Ackerman : Understood. Thank you. If I may ask one more. I was — one of the impression, your SMR drives were closer to 25% of your mix, you’re suggesting it’s close to 35% of your mix today, which is quite impressive. So I’m hoping you could discuss what sequential improvement you’ve seen in SMR drives this quarter and whether you are seeing better economics within this area of mass capacity?
Dave Mosley: Yes, thanks. I think there’s a lot of confusion in the space on this, so let me try this. We’ve been shipping SMR since I think 2014, into the cloud. We also have shipped hundreds of millions of SMR drives on the client side. So SMR is a great technology add. If you can adopt it for very specific cloud applications, it can be quite complex. And so some places, people choose not to do it. Redeployment of drives, for example, from application becomes limited or there’s a lot of inertia around it if you try to do that. So we have great SMR solutions. We’ve been working on this for years and years and years. If customers ask and if their applications desire, then we’ll go there for them. And so I really look at this as a customer by customer, sometimes application by application, specific ask for, say, a business unit or something like that, and we just react to it.
And that’s I don’t think there’s any big shift towards more SMR out of the Seagate portfolio. I think there are customers who, over time, are adopting more SMR, so that may be part of the reason for the trend that you talked about. But it’s not something that’s, I’ll say, deliberately being pushed on our front. We look at it more as let’s just solve the problem for the customer.
Gianluca Romano : Yes, I would say on a quarterly basis, the percentage change based on the mix of our customers. So depending in which quarter, one customer can be a bit higher than another one, we can have a bit more SMR or less. But for us, as Dave said, we have both is actually a fairly easy way for us to convert the PMR into an SMR. So just a matter of where the demand is in the specific quarter.
Operator: And our next question will come from Aaron Rakers with Wells Fargo.
