Seagate Technology Holdings plc (STX) Earnings Call Transcript & Summary

All right. Good afternoon, everyone. I'm Sidney Ho. I cover semiconductor, semi-cap equipment and IT hardware at Deutsche Bank. The next company we have is Seagate. Seagate supplies hard disk drive to both the enterprise and consumer markets that is increasingly becoming a key supplier for the growth of the public cloud. So today, we are very excited to have Seagate CEO, Dave Mosley with us. Welcome, Dave.

Thanks, Sidney.

So before we start, for those investors who are listening to the webcast at our portal, if you want to ask a question, there is a box on your screen where you can type in your questions. I will try to ask those questions as we go through our discussion. So with that out of the way, maybe I'll just start off with a few near-term questions on the market environment.

There's no better place to start with the nearline demand. The industry saw a record nearline demand in calendar Q2 and some of the largest cloud service providers transition to 18-terabyte. Enterprise demand improved and there was demand for cryptocurrency called Chia. How do you think about the sustainability of this demand? And can the industry grow from these levels in the near term? Or was it just a situation of a bunch of tailwinds converging at the same time?

Yes. Good question. Thanks, Sidney. Thanks to everyone for joining us today. And before starting, sorry, a quick reminder that I'm going to be making forward-looking statements, and you can learn all about the risk factors on our website with the SEC filings on our website. Exactly to your question, I feel really good about the demand trends. It's consistent with what we said in our earnings call. We see healthy cloud spending. The enterprise on-prem demand continues to improve and their strength in the VIA markets that we saw in last quarter, but also seasonally, we usually see the back half of the calendar year going up as well for that. So at the same time, we are mindful of all the resurgence in COVID cases around the world and the associated disruptions that are happening to people and the businesses in this environment. We just continue to make sure we stay focused on the health and safety of our employees and the people in our supply chain, making sure we can all manage through it together. So with a few weeks to go in the September quarter, we expect no material impact from these slight disruptions. So we see revenue coming in at about the midpoint of our guidance range. And at the same time, we expect non-GAAP EPS to trend towards the high end of our guidance range given all the favorable pricing environment that continued from last quarter and strong execution against all of our cost reduction plans. The mix in nearline is changing considerably favorably, I think, continues to, and that's helping us quite a bit. The resurgence in the VIA markets just -- which is a seasonal thing. So it is driving mass capacity as well. And we can swap to those products as customers need more. So these trends are continued with the same vectors pointed the same way as what we talked about in our last earnings call. Specifically to the crypto, we could talk about this for a long time. I do think it's a really innovative space, very interesting. Probably didn't drive as much demand as what the net space growth is being on the various different types of crypto. But exciting nonetheless, it's settling out to a lower [ clip ] rate, but super interesting to us. So I don't know that it's a primary driver, as you say, but it is material. So that's great.

Well, thanks for the update for the quarter. So staying with the nearline side, when I think about nearline drive, the cyclicality of that business, in the past, the industry has seen some periods of volatility when cloud service providers work down the inventory levels, do you expect similar cycles in the future? Or has the market adjusted and diversified enough where future digestion period from some of these larger companies may be less pronounced?

Yes, boy, I sure hope so. I think there's a lot of factors that play in here. And there's -- and if I look at some of the previous "digestion" phases, there were a lot of different reasons for them. Sometimes it was stuff that we as a hard drive industry had shipped, was sitting on a dock for a long, long time as data center build-out was occurring. I think most of the people that are building large-scale data centers now have solved most of those problems, and they get the materials relatively just in time. I think the customer base is a lot more diverse and the entire space is a lot bigger in exabytes than it used to be. So we talked about 2 or 3 quarters ago about how the replacement cycle drives that we're aging off after 5 or 6 or 7 years as well being a part of the predictability as well. So I think all of these factors are -- and the massive upswing that we see in mass capacity data are kind of contributing to shallower digestion phases, not as much dependency on 1 or 2 customers to your point.

Got it. Now going to the enterprise market, we have been seeing signs that on-prem enterprise IT spending is improving and should continue to improve through the back half of the calendar year. While the cloud seems to get more attention, on-prem is still an important part of your business. So can you talk about what you're seeing from with your enterprise customers. And how much of the overall business is driven by traditional on-prem spending?

Yes. We've traditionally broken out nearline, and we've -- I think we've kind of set half major cloud service providers around the world and then half being the on-prem nearline. It fluctuates quite a bit. But to your point, there's growth in both places and steady exabyte growth in both places. And I think the on-prem nearline obviously, a year ago with COVID and the economy impact, the economic impact that occurred around that, it was really down. So I think you're seeing some reinvestment on that front. Look, data is growing everywhere. Applications -- smart applications to draw inference from that data are getting smarter, and they need more data. So everything AI and ML needs to be fed with data, sometimes that's on-prem. Sometimes that's in big clouds. Sometimes it has to be moved from -- the data has to be moved from on-prem to big clouds. All these trends, we think, are working out in our favor for mass capacity storage tanks. And I think that there's implications for a lot of other componentry and software and everything else based on what we're seeing. But strong demand trend is certainly on-prem right now.

Excellent. Maybe switching over to talk about the supply chain. Clearly, the global supply chain is -- has been the focus during this conference. Can you give us an update on what you're seeing in your supply chain? Is it mostly that you just need to pay more for components and maybe freight to make sure you meet the demand? Or is it the supply chain cost demand to outpace supply?

I'd say it's very, very complicated. So yes, our devices have a lot of components in them, and we have deep relationships with all these people, obviously. And we run factories 24/7, all quarter long. So we got to make sure that those factories always have parts sitting in front of them. I would say that there have been impacts from factories being shut down temporarily. There have been impacts from -- even inside of our factories, we've had issues where the community had COVID problems, and we had to help take care of it. From a vaccination standpoint, we worked really hard inside of Seagate to get more than 80% of our people now vaccinated. And we're still working on communities around us, suppliers that we are very dependent on. We're helping them get vaccinations. It's been a really, really difficult last quarter or 2 for the supply base that we have, largely in Southeast Asia, although it's other places in the world as well. Look, I think we're managing through this by positioning inventory, having dual sources, things like that. So we are getting through it. But it's tough. There are still freight and logistics concerns in various places. Not so much borders being locked down like what's happening at the front end of the pandemic. But more just things getting bottled up in various locations. And when you're relying on inventory, it has to be at the right place at the right time. I think relative to our business, probably the bigger impact is actually on our outbound supply chain. We're there for our customers. We're making the right products for them. Sometimes they can't get complete kits because of silicon shortages and other things and we have to make sure we maintain our flexibility for them. So it's a challenging time for all supply chain people worldwide. I think we're making through it.

Excellent. I'll throw in a couple of questions on the crypto. I think in your opening remarks, you talked about crypto is probably not as much as people expected when you look at the net space and all that. The question is, how does Seagate think about the opportunity, not just near term, but in both HDD and SSD and crypto over the longer term? And the second question is, when you start planning for these capacity, is this -- this is capacity that you can move around easily from serving the crypto market to some of the markets that are in shortage?

Yes. It's a really interesting and complicated question. I think we've seen for a while, people making investments in data centers, frankly, around crypto. This is not necessarily just 1 or 2 drives in a desktop machine where you're contributing. This is -- these look like major scale data centers. What you see is one type of crypto becomes in favor and another type may be out of favor or temporarily paused or something because you'll see the capacity shifting around. So not everything is just the drive [indiscernible] shift in the last 6 weeks or 12 weeks or whatever to -- that's being put online as these net spaces are growing. There's a lot of the same drives being redeployed. There's actually a lot of drives that were already previously in the field being redeployed as well. I think over time, as the net spaces grow, then ultimately, it comes back to new build, exactly to your point. And that we're going to have to answer the call for that exabyte demand with new build product. Relative to how we might do that, I think the drives look markedly similar to what we're already making, especially if they're some of the decentralized file system technologies that we're really excited about, those drive types are a lot like nearline drive. And so I think the componentry that we're making is redeployable into that. And I think I said on the last earnings call, we had over 100 million heads deployed into -- per quarter deployed into that. So we can transition product family to product family. It's one of the reasons we love that common platform that we have, and we can make those transitions quickly if we need to as we see the net space is growing.

Great. One last near-term question, I kind of know the answer, but based on how you updated Q3. Can you discuss the pricing dynamics that you're seeing in some of the key markets, especially as the spike from Chia in your recent quarter, what areas are you able to pass along these price increases?

Yes. Most of our business, as we discussed last quarter, is really the more predictable business. We're predicting to build up for, say, for example, cloud data centers with customers a long time in advance. And so I would say -- I would just characterize everything as fairly stable and predictable. Yes, there was in some small distribution channel demand, you could see the Chia spike, if you will. You can see the pricing spike and it came back down, but that didn't affect the large part of our portfolio. Most of our portfolios, the big customers that we have worldwide, whether they're VIA markets or nearline markets, on-prem enterprise markets, whatever, we have fairly predictable visibility and planning with those customers.

You did say Q3 -- calendar Q3, the pricing is a favorable factor for earnings, right?

Yes, that's right. That's right. Continues, yes.

Got it. Maybe switching gears to talk about some longer-term strategy, I got to start off with the technology road map. Can you give us an update on your road map past 18 terabytes? When should we see 20 terabytes in high volume? How do you think about capacity past 20 terabytes on traditional CMR technology. I'm sure we'll talk about HAMR in a second.

Yes. 20 terabytes is very predictable because the heads of media that we need for that is already in high-volume manufacturing, and we're going up the ramp on numerous types of 20 terabyte devices right now. So I feel very confident about that. I mean some customers will last for 18, some still last for 16 depending on what their qualification cycles look like and how much software work they would need to do to make a pivot on the products. But we feel very, very good about where we are on 20s, and we'll get up these ramps in a hurry with a lot of confidence. After that, I'm not going to talk about new product announcements, but I will say that PMR still -- we can still turn the crank if we wanted to a little bit. That's not really the overriding story on our technology all-in, it's not about giving another 2 or 4 terabytes out. It's about how do we make big breakthrough learnings. We can do small modifications to our existing common platform that we talk about a lot to just get a little bit more capacity out, but we're really focused on how do we make breakthroughs in the technology so that we can get another 10 terabytes on a drive or beyond that. I want 30 and 40. And we are making progress on that, and I'm very optimistic about it. So there will be 30 and 40 terabyte drives in the world. Someday, we have a lot of work to do to make them work, but I'm super confident about it.

Which is a segue to HAMR. So can you give us an update on HAMR? I recall 20 terabyte is not supposed to be the volume part of HAMR, but we'll love to get an update from you -- from you.

Yes. We -- basically, we got HAMR out for a couple of different reasons. First is there are customers who want to start learning about the -- they want to start learning about 20 terabyte drives, frankly. I mean how that drive might behave in the data center and how exactly they want to deal with that drive over a long life that's going to be in the data center is interesting. All the nuances about HAMR, there may be different fail modes and things like that, they want to learn those things. From our perspective, we continue the areal density push inside of our own labs, and it's going well. And so I'm very optimistic -- more optimistic every time I talk about what I'm seeing out of the labs. Disk drives are hard, hard products to come out with. HAMR is a tough technology. I think oftentimes maybe we gloss over it a little too much by just assigning acronyms, but it is really difficult technology. But I'm more and more confident that it's going to work. And I think our customers are, too. So that's why they want to start the learning process right now, get the volumes up so that they can get more of that learning. And as soon as we get drives that are 30-plus terabytes out or something like that, they're going to be buying a lot of them because the TCO proposition for that kind of capacity point versus what they had in there before, which is 12 or 16 or whatever that's replacing is huge, frankly. So that's what we're very focused on. Yes.

Excellent. Excellent. I want to switch gears a little bit to the surveillance, the VIA market. It's bounced back nicely in the second quarter, calendar second quarter. How do you think about the growth potential in that business going forward? And what type of investments are needed to support that growth?

Right. The markets around VIA are very interesting. Obviously, 5 years ago, things were growing largely with surveillance that was associated with security. But we're starting to see a proliferation of different applications, smart city, smart hospitals, smart factories. All these places where data is actually aggregated, even the building I'm sitting in right now is just arguably a factory is actually amassing a lot of data, and we look at it and we don't just draw an inference from it quickly and throw away the data, like might have been happening 5 years ago with some surveillance systems, by the way. Now we might actually want to look at it again and again and again or transport it somewhere else. And so just a tremendous number of different applications coming in the discussions that we're having with the customers. We're super excited about that. I would loosely call that micro edge or maybe metro edge type of applications. And I don't think they're necessarily nearline applications like the cloud service providers would need. But the data ultimately might find its way back to the cloud as well. So that's why we're excited. And it's a new place for mass capacity in a lot bigger -- in a lot bigger instantiation than what you have today. From a product perspective, it's a fairly easy pivot. I mean there's some subtle differences in how the products run, but heads of media behaviors and things like that, I think we can -- we can pivot from our nearline portfolio to the surveillance portfolio to the VIA portfolio to the smart factory portfolio fairly easily, I think so.

Excellent. Maybe going back a little bit on the -- earlier, you mentioned the scalable platform, and it's something that you have been talking about for a number of years now. We've seen the 16, 18, 20. How should we think about these benefits start translating into benefits in your financials? Is it -- is that you should have higher margins than if you didn't have that platform?

Yes, that's exactly right. We have seen tailwinds specifically because of this. I mean we have headwinds because of other things in COVID, freight and logistics, we've talked about quite a bit and things like that. But we are seeing tailwinds because we have these common platforms, and we're able to redeploy from one, say, particular capacity point to another, one customer application to another so quickly. So we're using common parts across these platforms. And we have multiple sources against them. We don't have to make transitions from -- like in the old days, we had to make a transition from a 4-terabyte to a 6-terabyte drive. We had a bunch of end-of-life exposure on the 4 terabyte. We wanted to sell more of that. And then we have to pivot to a whole new material set that was coming up the ramp and pay for all new tooling. We don't have any of those problems right now. So it's way dampened down and -- and so we're very happy with the progress, and that's helping drive our margin performance.

Okay. If I skip over from the mass storage into the legacy storage, your business appears to have stabilized at least and recently. Do you think it's more a reflection of increased consumer demand during a pandemic? Or do you think we are just past the period of meaningful declines in businesses?

Yes. It's interesting over the years, as we look back and kind of think about what happened to some of the legacy businesses. So there are people who said they're all going to 0. And we never felt that way. We kind of felt at some point, some of the demand would go away and then some of the other legacy demand will stabilize, we've definitely seen it stabilize. So for example, in the consumer business, as the transition happened to the new economies as people went home and were working from home and so on and so forth, the consumer business did quite well, and that's a legacy business. I think mission-critical, there's -- I've said this many times, there's 100 million or more SaaS slots out in the world. Some of them were shipped empty. So as people want to upgrade those systems, they can put in an SSD, they can put it in a hard drive. There's still a fairly healthy demand to either improve those system performance or upgrade the systems performances. And so exactly to your point, I think we're seeing -- we've seen most of the erosion of what we call legacy markets, PCs and things like that. And now we're in the much more stable demand vectors.

Okay. Now maybe switching gears over to the non-hard drive business, which is still under 10% of your business -- of total business. But your non-HDD business saw a very impressive 40% year-over-year growth last quarter, with you pointing out strength in your system business. Can you talk about the strategy in your non-HDD business? And what do you expect that over time to become a more meaningful part of the overall business?

Yes. I think we'll be opportunistic. So we do have flash products. Some of them are out there in the market as a consumer, you can buy them. Others are more enterprise level, I think we'll be opportunistic on those depending on what our customers need specifically and what value add we can have and what -- whether it's supply chain or technology qualification chains, what opportunities there are and we'll take advantage of them. I think we've done a really good job of that recently. On the systems business, in particular, it's an interesting transition point because most of our big nearline drives, when they ship to the field, they're not alone. They literally ship and there's sometimes hundreds or thousands of their brethren right next to them, right, out there in the field. And so -- and a lot of times, the customers will have integration issues or something else, well, then that's where the Seagate Rack solution may be a solution for the customers. And it's actually -- exactly to your point, if you look at last quarter, demand was good. I think we're working that business really well. There are supply chain challenges there just like there are anywhere else. And -- but there's strong demand, and we foresee that those trends will -- those demand trends will continue. So we think this is a great way to add value up the stack as it were. We're trying to make sure that we make it so the qualification of all the newest drives are easier for everyone, that they don't have to do as much software, for example, and things like that. And some people are appreciating that, and we're able to ramp exabytes even faster into the market with that systems business. So that's why I think we see the benefits.

Great. I want to switch to talk about the Lyve platform, something that you were very excited about since maybe a couple of years ago. So you announced that when -- with Zoom last week to begin offering Lyve cloud to the customers. You've talked about your Lyve platform subscription revenue reaching at least $600 million in, I think, fiscal '25. Can you share your thoughts on the customer when and where you expect to see the most opportunity for this platform?

Yes. It's kind of interesting because the way I think about it, maybe not the best marketing, but the way I think about it is kind of an external hard drive to the cloud. It's just a simple storage solution at the metro edge. And so we've announced who our partners are, what the availability is. There's not a lot of bells and whistles about applications around it. As a matter of fact, that data that resides there would just go into another cloud probably to be process for compute, but it may be stored there for quite a while. There's no ingress or egress fees either. So if you want to delete it, you go ahead and delete it, just let us know. And that's our business model. We have great customer conversations relative to that. And it's funny because a lot of people are asking how big is it going to grow? How I think we'll continue to have those conversations, and we'll be able to deploy exabytes in there as we see the growth. And as we have great customer wins, then those customers will teach us about what exactly their emerging trends are, how they want to use it for AI, ML, for just data that's legacy data that they want to park or for some kind of temporary data smoothing function that they have. We're talking to people about all these different things. I actually think that ultimately, especially given the data sprawl that will happen in the world, sovereignty, latency issues and so on and so forth, this will be a great option for cloud service providers as well.

Okay. So I have a few inbound questions to ask about hard drive versus SSD. I'm sure that's always what people are thinking about. So here are 2 questions. Number one, can you give us a long-term view regarding kind of the total cost of ownership of hard drive versus SSD and the potential market -- what does that mean to hard drive as a percentage of the storage market? I'll ask the second question later.

Yes. I think, generally speaking, it's probably where it has been for the last couple of years. So people get crazy about 7:1 or 10:1 or 12:1 or whatever. But the way I think about it is really there are well-defined tiers in the application space. Actually, I think SSDs have a lot of opportunities in the future in the memory tiers that hard drives probably never even had access to. And I also think the mass capacity tiers are well established. People know how to manage them, and we'll manage them to optimize cost and TCO of the entire chain. So -- and I really don't look at and I never have as an either/or discussion between 2 different technology types. I think there's a lot of work to do to make sure that the growing datasphere actually has the right solutions out of both. And we're pretty excited about providing those solutions.

Okay. The second question is your competitor across town recently introduced a technology called OptiNAND technology. It's a hybrid -- for those who doesn't know, it's a hybrid between SSD and HDD or some form of incorporating those 2. Does Seagate see value in hybrid NAND hard disk drive or HDD? And can you address that market without any internal NAND capacity?

Well, we've shipped over 40 million hybrid drives in our life. And we continue to, actually, we still have some product lines that are hybrid even to this day. So I think there -- in some applications, there's definitely value. I don't know that there's value in every application to the point of people optimizing save, for example, the mass capacity chain versus the memory chain. They may have already done that in their architecture of their software, so on. But there are places where there's definitely applications. And so as a technology vector, I welcome it. I think that -- and this is the way I think about the problem. All things will be balanced ultimately. If we need nonvolatile cashes, which we've been shipping for many, many years now on the drives like the technology solutions we're talking about, we can pivot there. We have the architectures that already do that. And I think it will -- if it makes a better product, then it will be -- it will be competitive, and that's great.

Okay. Maybe I'll switch over to talk about some of the financial questions. I'll start off with the gross margin. Obviously, very impressive. Last quarter, you guided gross margin to be within your long-term target range of 30% to 33% in the September quarter and well ahead of the last time you gave some sort of guidance. What are the primary drivers of the improved gross margin, is high volume better, makes better pricing? How do you think about gross margin trajectory through fiscal '22?

Yes. I think the primary drivers that we've seen in the last couple of quarters is obviously the well-controlled pivot on the mass capacity platforms that we're making, not just the highest capacity points, but we also have the midrange nearline drives, 8 terabytes, 12 terabytes things like that. As we continue to make transition, whether they're product transitions, we continue to come down the cost curve on some of the common platform architectures, then there's a lot of oxygen going back into the margins. And that's one of the reasons why we are so confident on the opening statements of today about where we're going to end up this quarter on EPS and how we feel about revenue and so on and so forth. We're working these trends ourselves. On the outbound side, we work with our customers on predictability, and they really value predictability in today's world. And so we're trying to plan multiple quarters in advance with them. And everybody needs their supply chains to be tremendously predictable, especially when you're talking about massive investments that they're making in cloud -- cloud data centers and things like that. So that's how we're really feeling about that on that side, and that's why we have confidence moving the product and making the investment that we have in CapEx and working capital and everything else.

Okay. Maybe moving down the financials, if I look at the operating margins, you talked about maintaining operating expenses at similar levels to fiscal Q4 over the next few quarters. How do you think about operating expenses as we hopefully turn the corner into pandemic when you have some of the costs coming back into the equation, maybe employee safety, maybe other pandemic-related costs. Is that at some point as it starts going back up?

I think about it as relatively flat. I mean we can always make a little bit of adjustments as we launch a new product, and we want to be more aggressive going into the market with a new product or something like that, and that's more materials than it is anything else. But I think about it as fairly predictable right now. The team is doing great. We're redeploying a lot of people inside of our portfolio. So you asked about Lyve earlier, for example, we're doing that largely with people we're redeploying out of other product lines. I think one thing people don't appreciate about Seagate enough is that we actually have really good visibility into enterprise and cloud architectures around the world. So we know what the application spaces are required from various customers. And our engineers and our solutions providers actually are really well trained. And so we can go do some of the stuff ourselves as well. So from a general OpEx perspective, I think flat is the way I think about it, I mean plus or minus a little bit if we need to.

Okay. If you move over to fiscal 2022 outlook for the full fiscal year, you talk about high single-digit revenue growth in the year for Seagate. Can you talk about some of the assumptions you're making for that? Where do you think you might be conservative in this outlook? And where are some of the risks that you're monitoring?

Yes. As the weeks progress into the fiscal year here now, we always get a little bit better visibility, but the biggest driver is just the exabyte growth, right? So we continue to see people moving from 12s and 14s to 16s, 18s and 20s, that's great. There's people moving from 8s to 12s. That's great. And we -- they're moving into platforms that we've already demonstrated high volume capability on and we continue to work the cost down on. So that's why we're so confident about that, and I think we've got a great portfolio to really address that exabyte growth through the course of the year. There will be a little bit of seasonality. We talked about that before, and some of that's hard to see. The VIA markets traditionally have some seasonality. Some of the consumer markets do as well. So we're mindful of that. And then we're also paying very, very close attention to all the other supply chain risks, especially the ones that our customers have because we need to make sure we have the right -- we're building the right stuff for them all the time.

Okay. Last question, prepared question, I'll just say, you seem to be tracking very well versus your target model you introduced in -- only in February, especially on both the gross margin and operating margin line. Clearly, things have changed during -- since February with Chia and whatnot. Looking through the time frame of your target model of 3 to 5 years, what do you think are the major variables that will determine what do you meet or exceed your kind of target model?

Right. I think balance of supply and demand against the exabyte demand is always the primary driver, and you can see temporary adjustments downward because of macroeconomics or something like that. But we think the demand is -- the data demand is just exploding. And that's one of the reasons why we were so confident in February. We surprised people a little bit. But now I don't think anybody is surprised. They are people saying, well, how much better is it going to get? I think we've been talking about this on the earnings call for the last year, 1.5 years, about how the transition that happened between client server and mobile cloud was so much accelerated, the business models were accelerated during the pandemic, where are we going to land? And then I'd just love to see all these new innovative spaces around the edge and new technologies like the IPFS and Filecoin subsystems and the competitive technologies to that. Those are super exciting to me. And so I actually think the exabyte demand is even higher than what we had forecast back then. We'll see. I mean it's a volatile world, but from my perspective, we've got our products pointed at the right direction and ready to address these -- the demand that's coming out. So that was why we had the confidence back then. And I think as time goes on, we'll build that confidence.

Great. Maybe one last question from me. If you kind of look at -- if you look at what the investors have been telling you, what do you think are the areas that are -- seem to be less underappreciated than you would like to see from investors, whether it is your own operation, whether it's the market itself or something else that you want to talk about?

It's actually an interesting question. And I haven't really opined on this before, but I'll say that I don't think people appreciate the size of the client server peak that happened about 10 years ago. And underneath that, there were a bunch of notebook drives, single platter 2 heads. And we have huge supply chain dependence on us. Just the number of drives was just massive. And then this pivot over the last decade to mass capacity has been profound. And getting all the supply chain healthy to be able to go through that pivot and in some cases, lower demand for their individual products. These are tough problems. We've completed that pivot now. I think our technology is well positioned. And the key thing for Seagate is most of the products that we make now are full of heads and disks, which is the components that we actually control inside of our fab. So I think that's what people probably don't appreciate enough. And there were people playing the SSD versus hard drive thing in the whole time because that was very palpable inside of your PC, you can see one device going away and other device coming. But the reality is people are creating more and more data. The data is being copied more and more times. The data is becoming more and more business critical and data is growing like crazy. So I think our outlook is very strong right now, and people are coming along to the -- all this realization.

Okay. I think we just run out of time. Thank you for spending your time with us. And good luck with the rest of the meeting today.

Thanks, Sidney. I appreciate it. Take care, everyone.

Thanks, Dave. Take care.