Wamsi Mohan : And maybe you already covered this, but if you wouldn’t mind, if you have covered it, then we don’t need to go in. But I was wondering if you could address if there’s anything abnormal that you’re seeing within pricing in the competitive environment, is there especially within the channel, anything that you’re seeing that might be abnormal? And when do you think if there is something when that would normalize?
Dave Mosley: At a macro level, no, I think everybody is seeing about the same demand environment. People are reacting fairly similarly, making sure they’re preserving their cash, not building things that they’re uncertainty of going out into the market. And so I think the industry has actually done a pretty good job of scaling way back over the last three, four, five months on our production capacity. It’s very, very painful for ourselves and our suppliers, of course. But — and our customers, I think I said this earlier, our customers understand that. But at a macro level, I don’t see that. I don’t see people building too much of the wrong stuff and trying to get into the market. There may be little pockets. But again, big picture, I don’t think that’s super relevant.
Operator: And our next question will come from Kurt Swartz with Evercore ISI.
Unidentified Analyst: Maybe just first, within the context of recent export restrictions and macro headwinds in China, I’m curious if you have — if you can share any color on your TAM assumptions for the VIA market, both in the near term and longer term, which I believe you previously said the longer-term market outlook remains intact, but just curious on those dynamics?
Dave Mosley: Yes, I’ll start and I’ll let Gianluca speak as well. I think the VIA market is changing quite a bit globally. There’s a lot of applications A few years ago, we would have talked about surveillance. Now there’s a lot of applications about consumer behavior and inventory management. A lot of people are worried about inventory. And so — the people are using all these new, say, smart edge applications in a very creative way. So globally, it’s an exciting market. I think the drivers in China, in particular, over time that’s been very muted for the last year, and we were kind of waiting for a recovery. And I think the recovery just hasn’t come. I think it will recover, but it’s going to be slow. And I think there’s new opportunities around the world in various geos as well happening.
Gianluca Romano : In the very short term, we see possibly a decline in the March quarter, mainly because of seasonality. March is always the quarter where we have the lower revenue from VIA and from some of the legacy markets also. So not a lot of increase in the short term. But in our view, the rest of the calendar year, we should see sequential improvement. And VIA is an important segment for us. And in a segment that is also generally generating a very good gross margin.
Unidentified Analyst: Great. That’s very helpful. And then maybe just a follow-up. Within the context of the operating margin target that you outlined last year, 18% to 22%, assuming this is still the right framework, can you just walk us through some of the levers and the time line for reaching that range and maybe thoughts on medium- to longer-term OpEx growth or intensity within that context?
Dave Mosley: Yes. I think to find the long-term demand, we’re still kind of assessing that. So I won’t be — I won’t predict it just yet. But I will say that this management team’s goal to get back in those models as fast as we possibly can. Obviously, demand is the fundamental driver to that. We’ve made operational improvements by cost reductions. And we’ve, unfortunately, had to cut some things that we’re working on. So there is a reason to suggest that we have a little bit more oxygen than we had going into this thing. But I think fundamentally, it will still be the demand driver. And one of the reasons we’re trying to transition products is as aggressively as we can is because we think we intercept that demand with a better value proposition that comes back to us faster, but we also go off and work our own internal operational metrics and then we get the best cost at the time, and that helps as well.
Operator: And our next question will come from Ashley Ellis with Credit Suisse.
Ashley Ellis : Gianluca, could you discuss how you’re thinking about working capital for the second half of the year? Our inventory days came down pretty substantially. Obviously, if you took production down. But they’re still above the year ago levels. And then as you launch HAMR, is there anything we should consider within that number? And then I have a follow-up.
Gianluca Romano : Yes. In the December quarter, our working capital was positive by about $50 million. We decreased our inventory by a lot, but we also paid a lot to our suppliers. So I think that is part of the positive working capital that will actually impact the March quarter. And after that, probably is fairly stable for at least a couple of quarters. .
Ashley Ellis : Okay. And then, Dave, you kind of touched on this in a prior question, but AI has become a much more common topic in the last few weeks. And I’m wondering how Seagate thinks about that opportunity, not just from data creation, but your product lineup? And is this coming up in customer conversations? Is it something that they’re asking for your help on?
Dave Mosley: Yes. Thanks, Ashley. So it’s underneath all of the demand for data growth that we see, I think this is 1 of the big trends that we’re watching because it affects not only what’s going on in the cloud, but it also affects what’s happening at the edge. And so that — I do think that over the long haul, we’re very bullish on this. If you think about it, early days of AI or training models and things like that, that needed access to big data sets. But I think as time goes on, big data sets have to be very real time to make decisions that are relevant in the moment. And sometimes they need to be kept at the edge because you have a lot of video data, for example, at the edge to make good decisions on consumer behavior or inventory, like I talked about before, all these new applications that are coming.
So our customers are quite excited about it. The good news, and I’ve been saying this for the last couple of years is that I see a lot of innovation that’s happening on that front because of the unsure footing that a lot of people have in the macro condition, people aren’t really leaning into it, but I really look forward to the days that they are and these applications come online because I think it’s going to contribute a lot to the data growth.
Operator: And our next question will come from Tristan Gerra with Baird.
