David Goeckeler: Yes. I think one of the things we’re seeing is one of our big enterprise SSD customers go through a digestion phase in our FQ3 and I think they’ll get through that in a quarter and be back to buying. So that should be — that will get back to a good guy instead of a bad guy as far as the volume. And then we’ll — this is a very seasonally weak quarter for consumers. So, we’ll see some step-up there. Client is a little bit TBD is now commercial and enterprise is a little weaker. The consumer side has stabilized. So, I don’t want to put too much of qualification on it. But again, we feel good about our ability to have a very diverse portfolio, very diverse go to market engine. We’ve talked about this from the channel to consumer to the big OEMs to the web players.
And I think, quite frankly, we saw last quarter that go to market engine performed really well. And when we get past a few seasonality things and a few things that are idiosyncratic with big customers, we’ll see it kick back in and perform well.
Operator: Our next question will come from Jim Suva with Citi. Please go ahead.
David Goeckeler: Hi, Jim.
Jim Suva: Thank so much, David. It sounds like with the charge of $250 million now, and you mentioned NAND underutilization starts to kind of go away in Q4. That kind of you’re seeing a bottom or the worst of the utilization charges kind of in the March quarter. Is that fair to say? I know you still have to do some adjustments for NAND and wafers based upon how the market goes. But is that fair to say kind of the worst of it and the digestion and equilibrium are kind of hitting in the March quarter?
Wissam Jabre: So, Jim, thanks for the question. My comment around underutilization going away was more related to the HDD side of the business. On the flash side or on the NAND side, I would say it is a dynamic situation. We will continue to assess as we see the demand signal coming. And so, the example I gave earlier was on the assumption that we don’t — that we have only one quarter of underutilization. I wanted to make sure that’s well described, so that — for modeling purposes. But yes, the comment around underutilization disappearing was mostly related to the hard drive side. And look, on the NAND side, also when we exited Q4, we — our inventory position was better than some of our peers. And we’re taking this action to continue to manage our inventory given where the demand picture is today. but that’s an evolving situation, and we will be — we can — as David said, this is a decision that we can take on a weekly basis if we need to change the approach.
Jim Suva: Thanks, Wissam and David for the details. Thank you.
Operator: And your next question will come from Karl Ackerman with BNP Paribas. Please go ahead.
Karl Ackerman: Thank you. I was wondering — I wanted to talk about NAND for a second. Does the capital infusion from the convertible stock and draw on your revolver change your approach to ramping BiCS6 and BiCS8. I asked because 90 days ago, you indicated you’d be pushing out to BiCS transition to reduce your CapEx for fiscal ’23. But today, you’re also indicating BiCS6 will reach cost crossover with BiCS5 in March, and you’re also currently in production of BiCS8. And so, I guess, specifically, when should we expect BiCS8 should reach volume crossover to your NAND business? Thanks.
David Goeckeler: Yes. I don’t think we’re that far along to say — to issue that kind of guidance, I guess, I would call that. But I think what we’re saying is BiCS8 is well along in its technology evolution and it’s reached production phase like I said — I wish we had — on video, I can show you the BiCS8 product I’m holding in my hands and playing with. But yes, I would say the investment doesn’t change the way we’re thinking about our supply situation. What we’re trying to do is match our supply situation to our demand and make sure we can manage our inventory and it doesn’t get out of control as we go through this process. We’re trying to be very dynamic. And obviously, when you’re slowing down the fab. And one of the ways to do that is to slow down the nodal transition.
It brings in this whole question of how long we’re going to stay on BiCS6, how fast do we transition to BiCS8. And we’re working through all of that. Again, that’s a bit dynamic. A lot of it depends on what BiCS8 looks like and how it’s being productized. And I think one of the things we’re seeing here today is it has reached the productization stage ahead of schedule. And so, we’ll have more to say about what that fab mix looks like as we go forward. It’s clear we’re going to have BiCS6 will be a shorter node. It won’t go into every single product if it will go into the products that it needs and then we’ll move other products straight to BiCS8.
Karl Ackerman: I appreciate that. If I may because you are discussing an improvement in HDDs beginning in March, could you discuss whether you need to take further action to rightsized your own inventory of components? Thank you.
Wissam Jabre: The quick answer to this, Karl, is we don’t see the need to do that. And so, this is why we don’t project it. We continue to manage the inventory situation on a dynamic basis. But as of the end of the quarter, we were comfortable on where we are. And from where I stand today, we don’t see the need to do that.
Operator: And our next question will come from Steven Fox with Fox Advisors. Please go ahead.
Steven Bryant: Thanks for taking my question. I just want to follow up on that last question about the inventories. Can you expand on the strategy from here? Because I’m looking at your inventory days and they’re up from 102 a year ago to 133 days. And you mentioned there’s still some demand question. So, I’m trying to understand why start ramping back HDDs next quarter versus taking an inventory write-down versus other strategies to sort of get your inventories in better alignment and generate some better cash flows? Thank you.
Wissam Jabre: So, let me maybe just clarify on the HDD side, to be clear, when we look at the inventory movement in the December quarter that just ended, we did reduce the HDD inventory quite a bit. In fact, the increase came from the Flash side. So, when we look at the numbers, I think quarter-to-quarter at the company level, we saw around $90 million reduction in inventories. And those were more than $200 million of reduction was in the HDD side. That was partly offset by some of the growth in Flash. And so, we don’t think the inventory situation on the hard drive side is bad. We obviously will continue to monitor as we do on a regular basis. We also are, as part of the $250 million underutilization that we talked about for the March quarter, there are some continued underutilization on the hard drive side, which would allow us to continue to manage inventory very tightly and maintain that discipline on the supply side until, obviously, the demand growth accelerates.
And that’s what my comment was about the next quarter, not necessary, in other words, the June quarter, not necessarily seeing as much of hard drive underutilization charges. I hope this clarifies.
Steven Bryant: Yes. No, that definitely helps filling some of the blanks. I appreciate that. Thank you.
