Conf Call notes- beware- listened to using rose colored glasses
Market Share increased
8.2 Mill units shipped- both desktop and highend segments profitable
Year over year
Overall 15% marketshare vs 8% last year.
Gross Margin 14% for quarter, down from 14.7%
HighEnd: doubled units year over year, and 25% marketshare of intel based servers
Desktop: units 20% year over year increase, 3rd consecutive qtr of profitability 8 desktop oems
revenue drives
Desktop 675 mil 7.5 mil 10Gig LCT drive, 7200 rpm drives 20% of ship
HighEnd 738 tho 24% gross margin, turned profitable Q1
Consumer 250k units cumulative total shipped
16 million cash from operations during Q1
585 million cash an short term investments end of quarter
Bought back 3.2 million shares for 35 million
To date, bought back 7.6 million shares for 67 million
Inventory turns, 19- increased 37mill to 159mill
Clients > 10% of sales
Dell 13%
Ingram 11%
Desktop Margin decreased 11.3% from 13.4% from previous quarter, drive pricing dropping faster than bill of material pricing
Expect Desktop margin to continue to decline substantially during next quarter, hurting profitability in Desktop segment.
Conseveratively expect loss in HDDG next quarter.
Q&A (17min)
Dain Lewis Robertson & Stephens
Shortage of TI Preamp chip will limit high end build up to appx 10% of plan. Expected to resolve by end of quarter.
Internal Inv increased at end of quarter due to slowing PC sales and softer consumer sales. QTNM Channel inventory believed to be 5 weeks, worldwide inventory believed to be 6 weeks. Held some inventory back end of qtr.
500k unit run rate for consumer segment.
H&Q (21 min)
Desktop pricing decline into the end of qtr in the double digit percentage range.
High End segment price declines low double digits for qtr as projected. Not expeceting change in decline rate for that segment going forward.
Relative to last year, things are different. Inventory levels are improved, actually coming out of abnormally low inventory level period. Need to hold price declines to levels more in line with component cost declines going forward.
Projecting mid to low single digit gross margins on desktops going forward.
Last year clients pushing for lower cost drives to create $500 pc. Plus competition was pusing to double market share.
Factors driving pricing down currently? Somewhat seasonal, slight decline in demand.
Balance sheet constraint may limit all out competition for market share. Seagate going private may encourage rational pricing.
Kimberly Prudential Securities (29 min)
Breakout of Channel Inventory? Desktop vs High End
Not sure of high end inventory, likely to be zero. Allocation for high end shipping. Inventory numbers refer to desktop segment.
Adjusted desktop build plan next qtr due to pricing, but may still see a slight increase in units. Won't be capacity constrained in desktops.
10% unit volume decrease next qtr in high end due to component constraint.
John Dean SSB (32 min)
How do you expect component guys to suck it up when they are bleeding already? (my paraphrase)
Drive makers need to hold the line on drive price declines
Consolidation in component space allows dividing fixed costs over larger unit volumes
Have you changed your pricing in the last 30 days to manage inventory?
No significant pricing changes- need to work with component vendors to drive costs out. |
