Operator: The next question is from Wamsi Mohan with Bank of America. Please go ahead.
Wamsi Mohan: Yes, thank you so much. Dave, if I could just go back to the qualification, any color you can share on the differences between these two qualifications at your CSP and non-CSP customer? And is there a meaningful difference in the product itself between the CSP and non-CSP customer? And if I could for Gianluca, with this Broadcom deal that you also announced, how should we think about both the OpEx trajectory and would this impact your gross margins, so should we expect your gross margins to go down because of this slightly and then OpEx also to go down, or what the dynamics — what dynamic should we expect? Thank you.
Dave Mosley: Thanks, Wamsi. To your first question, there’s no significant difference in the hardware. The qualification for cloud versus non-cloud, it’s not usually that much different. There can be some software features depending on which cloud service provider you’re talking about, that complicates the qualification and especially different customers, whether it’s cloud or non-cloud, might be going through other types of architectural transitions at the time, so we have to make sure we get that right. But by and large, it’s the same drive. I think that was your question.
Wamsi Mohan: Right, yes.
Gianluca Romano: So on the financial impact for the transaction with Broadcom, the major difference will be in OpEx where we expect a decline of about $40 million for fiscal ’25. Now, we have a very good collaboration with our partner, so we don’t expect basically any other change from the — from operations. So it’s mainly a reduction in OpEx due to the transfer of asset and people to our partner.
Wamsi Mohan: Okay, got it. Thank you so much.
Dave Mosley: Thanks, Wamsi.
Operator: The next question is from Krish Sankar with TD Cowen. Please go ahead.
Krish Sankar: Yeah, hi, thanks for taking my question. I had a question for Dave or Gianluca. A two-part HAMR question. Dave, you mentioned you might ship a few hundred thousand units of HAMR this quarter, kind of curious how to think about the HAMR unit shipment in the second half of this year or exiting 2024, how many units do you think you can ship? And just as a follow-up to that is, you mentioned about the gross margin exceeding the range longer-term, I’m kind of curious, as HAMR drives become more mainstream, say, a couple of years from now, do you think your gross margin can be over 40%? Thank you.
Dave Mosley: Yeah, thanks. We will continue to ship aggressively and go through the HAMR transition largely because we think it provides better value to our customers. Higher and higher capacity points, and then ultimately over time it allows us to get components out of the chain, which saves cost against these platforms as well. I mean, we’re in an interesting position right now because, say, six months ago, I think supply was ahead of demand and now supply is lagging demand, some of that’s just lead times on the product. So, balancing all these things is very important, I think, in today’s market, but we’re still going to drive very aggressively through the transition and we do believe that this is the way to get more margin into our business as well.
So I won’t go into specific numbers as we qualify customers, because right now, customers are seeking any kind of product that we can actually make, which then we may actually turn — our turnover to some products that are already qualified versus prior plans we were driving, but I view that as a good thing because now we actually have demand that’s helping our factories that’s getting us focused and so I’m very optimistic about that. But — so just we all are very clear, we’re going to continue to drive the transitions very aggressively.
Gianluca Romano: On the gross margin trajectory, we said before, we expect to be at 30% or higher during this calendar year. And as you know, there is only a part of the ramp of HAMR. So for sure, when we move higher-volume of HAMR, we expect to be now in the high part of the range or even higher, we will see as a point in that point of the ramp. But, yes, even without HAMR we can be into the 30% to 33% range that we discussed as our target in the past.
Krish Sankar: Thank you.
Operator: The next question is from Steven Fox with Fox Advisors. Please go ahead.
Steven Fox: Hi, good afternoon. Dave, I was wondering if there’s any more color you can provide on your experience with talking to customers about build-to-order plans for, say, the next 12, 24 months. I mean, it sounds to me like you have accelerating demand on the cloud side, Legacy, and VIA sort of recovering on a seasonal type of basis, and then you have channel partners that are going to need inventory in order to help even things out. So how are you balancing all that? What is going to be different do you think that we should consider if we’re looking out over the next few quarters with how you’re going to be doing business? Thanks.
Dave Mosley: Yeah, Steven, I think it’s a really good question because I think it goes back to what we’ve just been through — living through this downturn, one of the key lessons was just the sheer amount of supply chain inertia that we had can create problems when the demand stops so quickly, and so we need to be a lot more diligent. I mean, we can’t have volume shipments — exabyte volume shipments that where the revenues far under-running the exabytes. And I think part of the — part of what we can control is control the builds and make sure we don’t overbuild and make sure we’re not trying to push stuff into the market, especially when the market’s soft. Now that it’s a little bit stronger, exactly to your point, which is a nice trend in the last 90 days that we’re really encouraged about, then we can go back and say, okay, which ones will we actually build more for and we’re having those conversations with the customers.
