Western Digital Earnings Call Insights: Operating Expenses Outlook and SSD Category
Operating Expenses Outlook
Aaron Rakers – Stifel Nicolaus & Company, Inc.: When you look at your operating expense line, it was a little bit higher than what we had expected in the June quarter. Can you talk about where we stand as far as operating expenses, let’s say, beyond the current quarter? And how we should maybe think about the progression of that operating expense relative to your long-term target model of 10% to 12%? Then, I do have a follow-up.
Wolfgang U. Nickl – EVP and CFO: Yeah, Aaron, if you look to our investor summary, total operating expenses were $590 million. That included $8 million of other charges. There were $10 million or $11 million of amortization of intangibles in there, and there was another $7 million of restructuring charges. If you deduct all of that, you are at $565 million which compares to our guidance of $550 million, and the entire difference was due to incentive accruals that we took based on the performance of the teams. So, we pretty much came out exactly like we anticipated, and the real operational difference are incentive accruals. As it relates to the go-forward spending, we’ve been very successful to keep it around that $550 million, and we’ll be prudent going forward. We have said in the FAQ document that we issued alongside with the announcement of the sTec acquisition that that will increase the OpEx for the time being. We continue to be prudent, but will not forego investment opportunities. Then, of course, we will have to walk longer term on a MOFCOM decision which will then give us a catalyst to get into our 10% to 12% business model.
Aaron Rakers – Stifel Nicolaus & Company, Inc.: Then as a follow-up, thinking about that business model, and obviously, thinking about your capital allocation strategy, you’ve seen a fairly consistent trend on the free cash flow generation over the past several quarters. Given what you’ve laid out for the September quarters, is there any change in the trajectory or that trend as we look out over the next couple of quarters in terms of free cash flow generation?
Wolfgang U. Nickl – EVP and CFO: We’re very pleased with our free cash flow, $2.2 billion and each quarter, above $525 million. That is a sense of a pretty stable, well-managed business. We intend to keep it that way. We stand to our capital allocation strategy, 50% of free cash flow like we announced last year in September at the Investor Day, and we have no change as to that today.
Richard Kugele – Needham & Company: Just two questions from me. First, on the SSD front, I know you don’t want to get too much into comments on sTec, but is there any sense you have that you could give us now on, whether or not push deal, there’d be enough revenue where you could actually break SSDs out as a category. Right now, it’s basically a plug. But is there any way you could comment on that, and then I have a follow-up?
Stephen D. Milligan – President and CEO: So, Rich, that’s an interesting question. This is Steve. I mean, obviously, we’d like to that the revenue gets big enough so that we can break it out. I think we will have to wait and see how it works out. We’ve been encouraged – we’re limited because we’re still going through the regulatory review process and we’re two separate companies, but we’ve been encouraged by the customer reaction that we’ve gotten regarding our proposed acquisition and we’re comfortable that we think we’re going – that that’s going to be a sound investment for us, and we’re looking forward to working through the regulatory approval process in closing that transaction. So I hope that I can tell you after we get through a bit that we’re big enough to be able to disclose and separate that out.
Richard Kugele – Needham & Company: Then just lastly, in terms of that Appeals Court commentary, should this actually go against you, would you be able to use your full cash balance including the offshore, or would you need to use the domestic dollars?
Wolfgang U. Nickl – EVP and CFO: We would use offshore cash.
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