Wissam Jabre: So, Tom, if you look at our numbers and you adjust for the underutilization charges, we’re almost there. So, what I would say, instead of giving a number or movement, let’s say, in quantifying it. What I would say is, I expect us to be at the 30% level, at a lower level than then our normal run rate that we’ve had in any priors through-cycle periods. We’ve taken quite a bit of cost out of our — cost structure as you very well know. And so, that will help us get there at a faster phase. With respect to underutilization, I do anticipate to probably have a bit more in other quarter of underutilization beyond this one and then we’ll see where we are in the June quarter. We can talk about it then.
Tom O’Malley: Thank you very much.
David Goeckeler: Thanks, Tom.
Wissam Jabre: You’re welcome.
Operator: The next question comes from Krish Sankar with TD Cowen. Your line is now open.
Krish Sankar: [indiscernible] the first one on NAND. Either Dave or Wissam, how do you think of the sustainability of NAND pricing into the back half, given that there’s a view that first half pricing could be up. In a calendar year base, calendar first half we have over 50%. How do you think about the sustainability and what would be the trigger point for you to start adding capacity in that? And then just as a follow-up on the hard drive side, you kind of mentioned Hammer adds cost, which kind of makes a lot of sense, given the laser and NFT. Kind of curious, if you — whenever you start doing it would you do it with 10 discs? And if the market wants a Hammer solution from WD, how soon can you get it?
David Goeckeler: Okay, there’s a lot in there. So on NAND, we obviously look at a lot of things in NAND, there’s a lot of stuff that goes into supply of NAND, from utilization rates, to nodal transitions, to CapEx investment, and it’s a complicated equation. But our current view is, we see NAND under supplied for quite some time in the market and that’s appropriate given where we are in the profitability of the business. As I said in the prepared remarks, we’re happy to see the inflection in pricing and the performance of the business and it’s ahead of where we thought it was going to be, but we’ve got a long way to go before we’re going to get to the profitability levels where investments are going to come back. I think the answer to your question, we need very clear visibility into through-cycle profitability numbers that match our model.
And we’re coming out of a deep hole and that would imply that you need to be above your through-cycle level for a while to get to that level over time. So that’s what we’re looking at, and we expect pricing to — pricing is notoriously difficult to predict and we’re very careful that we don’t forecast it, but clearly, we’re predicting good pricing increases into the next quarter and we will stay very disciplined of managing supply and demand in our business. We talked about that, bits are down sequentially. On HDD, I’m sorry, could you just repeat the HDD question again so that I make sure I got it?
Krish Sankar: Yeah, sure, Dave. I was just trying to figure out on the HDD side. A, number one, in Hammer would you be doing it with 10 disks? Second one is, if the market wants a solution from Western Digital a Hammer solution, how soon can you get it out.
David Goeckeler: Yes, so let me — we’ll defer the details of product launch on Hammer and how many discs it’s going to have until we get closer to that process. I mean, it’s a project that’s — we’re happy with where the progress of it is, given what I said earlier. We’ve got — we’ve built a technology roadmap that allows us to get to 40 terabytes on very well proven cost controlled, high manufacturing ability technology and we’re looking forward to delivering that to the market over the next couple of years. The reality is, there’s no customer like demands a particular technology. The customer wants a capacity point at a certain TCO, at a certain level of reliability, and a certain level of performance. And our technology roadmap is built to deliver that.
What’s inside the box is less important. The real thing is, you have to deliver all of those that we just said and you have to be able to manufacture it at a level of millions and millions of units per quarter to satisfy the market. That’s what our customers are looking for. Our EPMR and UltraSMR technology, that’s exactly what it delivers. The ability to deliver increasing TCO, which — if we can deliver increasing TCO, we can continue to drive pricing higher. We can produce it at very high scale, it can be qualified very, very quickly and it’s very highly reliable and high quality product. And our customers are increasingly adopting that technology as you see from our forecast.
Krish Sankar: Thanks, David. Very helpful.
David Goeckeler: Thanks. The next question comes from Wamsi Mohan with Bank of America. Please go ahead.
Wamsi Mohan: Hi. Thank you so much. Dave, I appreciate the answer you just gave around pricing, but if I could ask this in a slightly different way. How would you think about pricing, the runway that you have in Flash relative to past cycles? I mean, given that your commentary on how you managed your inventory, given your comments on expectation to be undersupplied for a long time, would you venture to say that the pricing runway that you have should be longer than what you had in past cycles? A – David Goeckeler On NAND. I’m sorry. Look, I mean, I think it’s the cycle we just — I guess we’re not out of it. We’re coming out of it. Like I said, like we’re just taking the first steps out of a cycle we haven’t seen before, I think in the 3D era.
So, what we’re doing, Wamsi, is just making sure we get our supply and demand matched and make sure we keep our inventory controlled and deliver the best profitability, given the portfolio we have and continue to optimize the portfolio that we can have the best mix and therefore the best profitability. It’s very difficult to predict future pricing and — but our general point is that, although things are going in the right direction, we’re not close to a point where the CapEx investment is going to come back and I think that’s the real number on what future supply is going to be. I mean clearly there’s some utilization that is going to come back, but it’s going to be needed, quite frankly. And we’re going to wait to see on — as I said through-cycle profitability where we have visibility to that, to reinvest more in this business.
Krish Sankar: Okay thanks. If I could, you mentioned about entering a multi-year growth period with Generative AI and especially at the edge, the demand for NAND bits. When do you thing that the industry will start to see this demand NAND bits at the edge start to reflect higher?
David Goeckeler: Yes, look, I think we’re going to see it as we start to go into PC refresh cycles. We admitted that, we’re still very early in this, right? Getting the cloud — I mean the big part right now is getting the cloud capable of delivering GenAI to all of us, and then drive that architecture, down to the edge. I think we’re starting to see in some of the markets some of the future specs of products where they’re increasing the amount of NAND, so we’re optimistic about that. As we go through the next couple of years when this architecture gets deployed and adopted. So I can’t like put it down to a particular quarter for you, but certainly as new technology launches or new technology adoption, it’s moving at a faster pace than any technology I’ve seen in the very long time.
Krish Sankar: [indiscernible]
David Goeckeler: Thanks, Wamsi.
Operator: The next question comes from Mehdi Hosseini with SIG. Your line is now opened.
