Question-and-Answer Session
Operator
Your first question comes from Mark Moskowitz – JP Morgan.
Mark Moskowitz – JP Morgan
Yes, thank you. A few questions, if I may. It is somewhat of a loaded question for you, Charles and Bill. You describe pricing has gotten much worse, during what is probably the best time of the year historically. Given the hard disk drive industry’s past, I would say that when pricing starts to slide it is usually a pretty slippery slope. So I wanted to get your sense in terms of what is lending to your confidence that you get this material snap-back in your outlook in the March and June quarters of fiscal ’07, given that we are in a pretty tenuous pricing environment right now? And the slower period of the year is just around the corner.
Bill Watkins
Tell you what, Mark. I will let Charles answer it. If he doesn’t give you the right answer, I’ll add. Go ahead, Charles.
Charles Pope
Okay. Well, as I sat and looked at the back half of the year, the biggest part of the significant improvements in margins that was referred to in our remarks is really credited in products that are being introduced that have significantly reduced their cost structure. That is something that is within our control to be able to go and do that. We are feeling good about the products that are underway and will be coming out at the back half of the year. That is the biggest part of the lift.
Bill Watkins
Mark, as we’ve said a couple of times, getting rid of the Maxtor, after going through this quarter, once we get rid of the Maxtor products and transition to Seagate, we feel that we have not only now, but going forward with the opportunities that Dave and his team are working on, we have the ability to be in a pretty aggressive price environment, but our ability to reduce cost in this environment and continue to grow revenue and earnings – we feel pretty confident about.
The net of it is, is our ability to execute. You can’t always control pricing, but we can have a big say in our cost structure. We are feeling pretty good about some of the opportunities ahead of us.
Mark Moskowitz – JP Morgan
Then as an offshoot there, how should we think about this opportunity for Seagate to take advantage of the lower cost structure, in terms of how much ammo from that lower cost structure is going towards your meet the market approach, as you have described it? Versus gross margin improvements? Can we get a sense there?
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