Western Digital Corporation (NASDAQ:WDC) Citi 2022 Global Technology Conference September 7, 2022 12:15 PM ET
Wissam Jabre – Chief Financial Officer
David Goeckeler – Chief Executive Officer
Conference Call Participants
Jim Suva – Citi
Hello everyone. Thank you so much. And welcome to the Citigroup Global Technology Conference here live in New York. This is also being webcast, but attendance is off the chart. So thank you for coming in person or joining in on the webcast. This session is hosting Western Digital, stock ticker, WDC, a few housekeeping items, no media and no press are allowed. Disclosures are available at the Citi check-in desk and on Citi Velocity.
We’re going to have the company Western Digital read their Safe Harbor statement, but also if you’re happen to be an investor who is subject to MiFID II, please ensure you have the applicable research agreement in place. And with that, just let you know, we’re going to have about 15 minutes of prepared Q&A that I’ve done with Western Digital, and then we’re going to open up to investors and the audience. The one rule is you have to make sure you raise your hand, so the microphone will get to you as this is being webcast.
So Wissam, can you please go ahead and talk about your Safe Harbor.
Thanks, Jim. We will be making forward-looking statements and I ask you to refer to our SEC filings for the risks associated with these statements. We will also be making references to non-GAAP financials and the reconciliation of our GAAP and non-GAAP results can be found on our website.
Great. Thank you. Joining me here on stage in the center is David. He is the Chief Executive Officer of Western Digital and to your right is Wissam. He is the Chief Financial Officer. And David and I were just catching up a little bit, before we started, I’ve actually known him for two decades, 20 years, so a very long time. But amongst all this, I would have never projected COVID, what would hit us, but during COVID you became CEO, talk about an awkward, interesting, unique time to join the company. Can you talk a little bit about that as well as you’ve done some changes to your management team during COVID, where we haven’t been meeting in person that probably investors should be aware about your hiring and changes.
Yes. So Jim, thank you for having us here and it’s good to see you again and has been a long and productive relationship. So yes, I joined Western Digital on March 9 and I think the WHO declared pandemic on March 11 in 2020. So it was a fast start but a good start and all the reasons I joined Western Digital and I think the technology opportunity that I saw to provide storage across the cloud and clients has come true. And I think it’s been for me personally, it’s been a great move.
We have made a bunch of changes in the two and a half years I’ve been here. And I guess, I’ll summarize them this way. The first thing was my observation coming in the company, we really needed to focus more on innovation and really make sure that we had the best products in the world and the markets were in, that led to a reorganization of the company around business units and bringing into new general managers, one for the HDD business and one for the Flash business.
And that was really about just driving focus in product development. I have a deep background in product development myself and having somebody that’s just thinking about the roadmap, how we’re making investment decisions, making sure we’re building the right products and getting the most out of the market we can is absolutely essential. And so we made that change about two years ago this time, and I think it’s worked extraordinarily well. This last March, we launched a whole suite of market leading products that were now in qualifications and bringing to market.
Subsequent to that, we also have reorganized the operations organization on the same type of model. Now, this just happened in the last three months. We brought in a new leader to lead all of global operations, gentleman Irving Tan out of Singapore. And we’ve now organized the operations organization around HDD and Flash as well. So really to bring this focus on execution, make sure we have the best products in the world. The investments we’re putting into these businesses, we’re making sure we’re getting the most out of them.
So that was one big arc of change in the company. I would say the next big arc of change in the company was to change the focus of our business model, really focus on gross margin generation. How do we get the most out of these franchises that we have? I think the franchises we’re in have good demand. How do we get more out of those markets?
It’s a little bit different on each market, in HDD it’s a business that’s been persistently oversupplied in the industry for the past 15 years actually given the decline of client and the rise of the cloud, that’s changing so we had to think about the business differently, how we invest in it, how we get supply/demand to match. How we think about things like value based pricing, so big change there.
And in the Flash business, how do we generate better through cycle margin? How do we get more out? We know it’s a cyclical business, how do we get more gross margin out of the business throughout the entire cycle? We laid out a plan at our Investor Day earlier this year for incremental five plus points of gross margin on a through cycle basis through better execution, better mix, entering better markets.
And so we’re driving that, that included bringing in we saw, upgrading our financial talent in the organization and just thinking differently about how we invest in these businesses. And then the third big arc of change over the last two years has been really investing in the foundation of the company. De-leveraging our balance sheet, focus on debt reduction. And we’ve done a lot of work there. We retired $2.7 billion worth of debt. We’ve achieved an investment grade rating for the company. So that was a very specific goal.
We are in growing markets, but they’re cyclical markets. They’re capital intensive markets. We want to be in the best financial position. We have the most solid foundation. And I think we’ve made substantial amount of progress on that in the last couple years. So when you add it all up, we’ve really fundamentally restructured the company about how we build technology, how we monetize technology, how do we manage the company about 70% of the executive team is new in the last two years. So at some point, you just realize the pandemic exists and we need to get on with the level of change. And we’ve driven a lot of change in the company, and we feel really good about where we are.
Speaking of which, with 70% new management change in the past two years, how do you stack yourselves up amongst the other competitors in the HDD and Flash storage industry? Are you positioned solidly equal, above, still some catch up to do? Of course, you’ve had a plant contamination and some other issues, just kind of wondering how you made a lot of changes. How do you feel yourself? Have you caught up leapfrogged still a little bit of work to do?
So let’s take those each business at a time. So in HDD, when I came into the business, we were in around the 16 terabyte era and we were clearly behind. We had seated the lead that we had in 14. And now we’ve over the last two years. We’ve completely made that up, in March at our product launched the day before our Investor Day, we launched a 22 terabyte CMR drive. We launched a 26 terabyte UltraSMR drive. Here we are six months later and there’s been no competitive response to those drives at this point. Those drives are growing through qualification, they’ll be deployed over the next year. So we feel really good about where we are from a technology perspective. In the drive business, we’ve brought a series of innovations to the market, ePMR, OptiNAND, UltraSMR and when you add it all up, we’re bringing a very predictable roadmap to our customers of better and better TCO drives for them. And we’ve now separated ourselves from the industry on what we’re offering in the market.
On the NAND side, I think when you start on competitiveness in the NAND side, in our business, you have to start with the JV. We have a tremendous JV relationship with Kioxia. I just spent last week in Japan actually, and spent some good quality time face to face with my peers there. We think it gives us together, we are the largest provider of merchant NAND and the industry and it gives us a tremendous technology position. Our base technology, we’ve always been the most capital efficient supplier in the market. It’s a fundamental goal of our technology roadmap to be very capital efficient, be able to build high quality products, do it in a very capital efficient way.
We’ve done that year after year, continue to do that. We’re now on BiCS5, which is the most capital efficient node in the lifetime of the JV. So very good underpinning of position there that allows us to drive the consistent 15% cost downs in our NAND portfolio. And that’s really the foundation of the business. Now, once we get the NAND, then what are we going to do with it? Where are we going to sell it? What products are we going to build? That’s where you get into what the business unit is doing. And again, in the last two years, we’ve had some really big breakthroughs.
A big goal of the company has been to enter the enterprise SSD market amongst the hyperscalers. We broke through in that in early calendar year, last year, now we’ve got qualifications at three of the big hyperscalers. We got qualifications at OEMs at our enterprise SSD. So that really is rounded out the portfolio. We’ve always had a good position in client SSD. We have a great consumer franchise. I think everybody knows SanDisk. Everybody probably owns some type of SanDisk product, whether it’s in your camera or it’s in a client SSD that you use to store all of your personal files. And then we’ve introduced brands like WD Black and Gaming, and really established a leadership position there.
So we feel really good about where the mix of the portfolio is. We can mix into multi – we have a lot of optionality with the portfolio, and I think that’s what we want to have to get the most out of it, depending on where we are in the market.
Any thoughts, industry forecasts are talking about data growth rates, ballpark 40%. I think what trends are you seeing, is any headwinds or digestion that has to happen from cloud or PC makers or anything like that? Or are we on that growth rate?
Well, let’s – I mean, let’s step back. I mean, there’s always like where we are in the market, like this quarter, next quarter. I’m sure we’ll talk about that in a little bit more detail, but when you step back, we see consistent 20% or greater annualized growth rate. I think that’s where the analysts will put it. When you look at the cloud growth rate, we see 30% exabyte growth for hard drives. We see a little bit north of that for enterprise SSD.
So we have really good growth markets. I think it seems like no matter how much data we’re able to store, there’s more opportunity. There’s opportunity to store more. Our customers tell us if it was more economical to store data, we’d store more. So that’s a big opportunity for us to continue to drive the cost of storage down and expand the TAM. So we feel really good from a macro perspective that we’re in the right markets, that there’s going to be consistent. All of us are going to consume and store more data in the future.
Well, David, you actually brought it up, you said, a little sooner or later, we’ll get to kind of what’s going on in the industry because one of your competitors preannounced negative, I think last week. So kind of where we’re at on that trajectory and where we at.
Yes. So let’s – again, we’ll look at the – let’s look at the whole market. And then we’ll break it down into the individual pieces and we talked about this on our earnings call on August 5. It’s a very dynamic market right now. I don’t think that’s a big surprise to anybody in the room or anybody listening. It’s we talked about it back then. I mean, I think if we would’ve forecasted the business two weeks earlier, we would’ve had a different number. And so we always take what we have at the time and we roll it into where we’re at.
The market continues to be very dynamic. I mean it continues to change on a day by day, week by week basis. We talked about it, it started in consumer. We saw weakness in consumer, way back when the war broke out in Ukraine, we saw it first in the European consumer that has now – it moved globally. Then of course, now it’s moved into PCs and we’re all seeing that, that the growth rate that I think everybody was expecting for units this year is quite a bit lower than where we started the year. That’s caused a major inventory adjustment that’s going on right now across the industry. See the same thing on smartphones, units are down. Again, we’re coming out of a period of a pandemic, very unusual period of not only increased demand, but increased holding of inventory.
And now we’re resetting to a lower level of demand and not a need to hold so much inventory. We’re going through that in a very sharp way. I would say since we’ve forecasted, things have gotten incrementally a little bit tougher, we’re seeing a little bit more of the hyperscalers now being slightly more cautious on what the future holds.
I don’t think they’ve seen a major change in end demand, but little more cautiousness on willing to hold inventory. So we’re dealing with that. So again, when you add it all up, continues to be a very dynamic environment. NAND is a little bit tougher right now, given the demand characteristics and the sharp inventory reduction than the drive business, but even the drive business is as our peer talked about. I don’t have any debate with the way they see the market as well. It’s incrementally a little bit more difficult as we head into the back half of the year.
We’ve got a pretty full room here of investors. I want to make sure they get a chance to ask a question before I continue on my list of questions. So if you do have a question, please raise your hand and we’ll get the microphone to you right away. Please raise your hand if you have a question.
And I’m going to give a chance for Wissam to answer questions here as well.
I actually got an email question in asking about the business mix and what does that do to the company’s profitability? So we saw, I don’t know if that’s better for you about gross margins or the mix, whether it be HDD or Flash or cloud versus on-premise?
Maybe I’ll start with HDD versus Flash. I mean HDD versus Flash, generally flash profitability is driven by a lot of it is driven by the cycle and depends on where we are in the cycle. What the HDD business tends to be a little bit more consistent with respect to gross margins over time. Now to the second half of the question typically on the cloud side, we see better margins simply because of the nature of the business and on the client side or on the consumer side, the pricing tends to be at least in the overall I’m talking, it tends to be more dependent on supply and demand.
Now if you sort of dissect that by business I would say, what we’re experiencing today is a down cycle on the Flash side. So that’s short-term what’s putting a little bit more pressure on our profitability.
Questions from those in the audience. Please raise your hand, we’ll get the microphone to you. I got a question last night at our dinner. Can you give any discussions about what efforts you’ve kind of been doing, given the shareholder activism? And I know some of it, you kind of have to keep confidential until you make a decision, but people are asking kind of what type of efforts and my answer was, well, they’re probably assessing lots of different strategies, not necessarily like door number one or two, but any comments you can make.
Yes. I mean, we’re in the middle of the process, so I can’t really comment on the process because everybody involved and it is under NDA. But when Elliott got involved in our stock, we talked to them about their ideas of how they saw creating value in the company. We were very open to anybody that has idea about creating value in the company. And so we agreed to run a more public process about a strategic review, which basically anybody that had a point of view on our company, it was time to come talk to us about what that is. We were well advised on that process. We hired folks to help us drive it. It’s overseen by the Board of Directors, specifically the executive committee but the entire board is very active in the process.
And so it’s a very serious process, the folks that are involved in it are involved on an NDA basis. So I can’t really talk about all the different things that are being discussed there, but I think I’m a big believer and you have to trust the process. And so we agree to run the process. We’re taking it very seriously. There’s a lot of diligence going on by the people involved in the process and when we have a result to talk about, we will be very transparent about that, but we’re not at that process – we’re not at that point yet.
Okay. Additional questions from the audience. A lot of shy folks today, or maybe it’s my questions are just so good.
I mean, they’re just so comprehensive.
So here we go. End markets. Can you talk about your end market mix today and how it’s kind of changed over the years and looking forward how should we think about your end market mix? I know at your Investor Day that you held in San Francisco and I was there in person. You talked about the cloud being a bigger piece of the pie.
Yes. I mean, I think that one thing that really attracted me to Western Digital is that we can play across – I just have this general view of the architecture, the technology architecture that the world is building, which is a very powerful cloud driving ever more intelligent endpoints connected by high speed networks. This is a platform which every company in the world and anybody that has a technology franchise, they’re adapting their technology for how does it run on top of that platform. And Western Digital can play in the cloud and it can play storage in the cloud and storage in the client. And how storage plays in each of these markets is different across the franchises we have. So clearly on the client, you have a substitution that’s been happening where NAND has been replacing hard drives.
This is the whole transition of your PC from hard drives to NAND. That transition is well along, we’ve talked about in our business on our last call that the decline of client hard drives is now back to pre-pandemic trajectory or even better. And we’re going to restructure that business to reflect that. But we’ve played that transition to capture the world’s second leading client SSD franchise. So that’s a huge part of the business.
Now, the cloud is where we have a real opportunity in that. In the cloud, both hard drives and flash are growing. Like the cloud is growing, I think anybody in the technology world would like to be proxy to cloud growth and we’re proxy to cloud growth in two ways. One is capacity enterprise hard drives, which is the vast majority of hard drive revenue now. And we just talked about that. We have market leading products, we’ve invested a lot in our roadmap to differentiate ourselves and be able to present to our customers, which are the biggest, most sophisticated data center operators in the world, the most compelling technology and TCO proposition for storage on hard drives, which is the vast majority of storage in the cloud. That market is growing. Let’s call it 30% high 20s, 30% on an exabyte basis.
We also have now entered as we talked about the enterprise SSD market, which is another big growing market in the cloud, growing even faster on an exabyte basis than hard drive. So we can play cloud growth, both with hard drives and SSDs where they are complementary technologies. They’re not substitutes. And then, so when you add this all up, you’ve got – we play in three markets. We play in client, we play in cloud and then we have a consumer business where we basically sell storage directly to consumers.
If you look at the arc of time, the portfolio is transitioning to be more concentrated in the cloud. If you go back to our FY2019, we are about 35% of the portfolio was in the cloud, last fiscal year about 42% of the portfolio in the cloud, FY2025, where we put out our Investor Day about 49% of our portfolio in the cloud. So the portfolio as the cloud grows faster than everything else, and we’re able to participate in it, in both hard drives and flash you’re seeing that segment to the business become a bigger piece of the pie, whereas three years from now, it’ll be roughly half the business.
After that, of course you have the client business where we have a very big franchise and then really a big gem of a business of the company is the direct to consumer business. We operate in every country in the world where we can sell every retail platform. We sell hundreds of millions of devices per year under brand – under some of the best technology brand in the storage industry. SanDisk, SanDisk Professional, WD Black in gaming and the WD brand. So we were able to have this large dynamic range as a company of selling hundreds of millions of devices to individual customers all around the world. And on the other end of the spectrum selling literally billion – multi-billion dollar relationships with the biggest customers in the world, in the data center space.
Any questions from those in the audience. We have one here in the front, wait for the microphone please to get to you.
Thank you. How do you think about the rising, the competition landscape in China because obviously there’s a lot of report about YMTC entering into Apple supply chain? And at the same time the different question is what do you think about potential restriction out of U.S. government on the – there has been a lot of news about like Nvidia and AMD potential restriction on YMTC.
Yes. So on the first question, I mean, it’s a – we watch all of our competitors very closely. We have a lot of respect for anybody that’s in this business. It’s a technology very challenging business. And so we watch all of our competitors very closely. Certainly YMTC in China is investing heavily in the business. They’re making some progress. We don’t tend to see them in the accounts we’re in. I read the rumors. I don’t know if they’re true or not. I guess we’ll find out over time, but we’ll continue to watch them closely.
Your second question, I think the world’s getting to be a more complicated place. Every country is worried about its own national and economic security. I will leave that to the policy makers in each country. But as those – as new laws and rules come out as a company, we will follow all of them in the countries we operate.
There’s a question here in the back of the room.
A question on the NAND business. So in the last cycle, I think NAND margins, gross margins about high teens in the last downturn. As you look out towards this cycle, and obviously you mentioned tighter market conditions what are some of the structural differences now versus then? And if the market does get that severe on the downside, does the business position in such a way that it can make higher lows this cycle?
Yes. So I’ll address that question in two ways. I mean, so first of all, particular to Western Digital. So I think company is in a much, much stronger position than we were in the last down cycle. First of all, as I talked about earlier, just the balance sheet, the debt position, we have investment grade rating now our access to capital is very different than it was in the last down cycle. So that’s a better place to be.
More to your question, our portfolio mix is better now, specifically we’re qualified at the biggest customers of the world in the enterprise SSD market. We weren’t there in the last down cycle. And we still have all the other markets we’re in. We’re still have – again, we said the great consumer business, client SSD business, we’re still exposed to mobile and now we have the enterprise SSD pillar as well. So our ability to mix across those markets is better than it was in the last down cycle. So I think we fundamentally have a better mix, better opportunity to do just what you said, which is the way we think about the business on a through cycle that business – through cycle basis, execute better at every phase of the cycle and get higher lows and higher highs as we go forward.
Now what will it be on an absolute basis? That depends on the amount of oversupply in the market. One down cycle could be an oversupply of a 113%, another down cycle could be an oversupply of a 106%. And so your opportunity to get profit out of that changes from one down cycle through another. Where is this down cycle going to be? I think it’s too early to tell. I think we’ll know in maybe another quarter or so when we start to see – we get some more data from calendar Q4.
Clearly this was a demand driven down cycle, it was not a supply driven. In the past, we’ve had nodal transitions that put a lot more bits on the market and it takes a while for the market to absorb those. That was not the case here. This is a sharp correction in an expectation of demand that’s driving an excess of supply. So we think the industry was more discipline coming into this, but clearly the bit supply we’re putting in the market now is higher than what the demand is. And so what is everybody doing, including us we’re adjusting.
So we will adjust our CapEx. We will push out our nodal transitions. We will delay startup of new fabs, and we will bring the bits supply down to match where the market is. And then we’ll eventually we’ll clear out the inventory that’s created in the process. So a little early to say, where is it going to be relative to the last down cycle, because we just don’t have that visibility yet. But I suspect we will in the next quarter or so.
Additional questions from those in the audience. David, we did hear about big box electronic retailers working down inventory, whether it be PCs or I assume that also means external storage and stuff like that. Is that the case? And if so, when should you expect kind of more equilibrium in that end market?
That’s the first place we saw the – we saw the excess supply in the market. I mean, this is I think one of the things that I’ve really enjoyed about Western Digital is visibility into the market. As I said, we sell globally into the consumer market at a multi-billion dollar scale. And we also sell to anybody that’s building a data center in the world and pretty much everybody in between. So we have a lot of visibility into what’s happening in the world.
And consumer was when we first saw the weakness in the market that is now flowed through to other parts of the market. And some of the behavior you’re bringing up is exactly what we see, customers built up inventory, they’re now working that down. So they’re not buying anything new to replenish. We are seeing – as we talked about on our earnings call, we are seeing more consistent sell through or sell out in the retail channels than we did, let’s say last quarter. So that’s a good sign. It hasn’t translated into them replenishing inventory just yet. So there’s still a lot of price pressure in the market, especially in the NAND market, but these are the exact behaviors we’re seeing.
We have a question right here in the middle of the room.
Two questions, thanks so much for giving us time today. First one is, how do you guys philosophically think through carrying inventory on your balance sheet? Obviously it’s a dynamic environment. You’ve started to see weakness in consumers, a couple quarters now and now we’re seeing incremental weakness maybe in some hyperscaler and data center enterprise and so forth. So it’s an interesting dynamic there. I just know that some of your competitors have a certain view that they want to hold on inventory. Can you talk through a little bit of that please?
You want to start on that one?
Yes, let me start on that. So on the flash side obviously it is a demand driven down cycle. And as the supply continues to come out of the fab, we will be holding onto some inventory. On the on the hard drive side, the dynamics are a little bit different and we would be – we’re still seeing a good balance there from a supply demand perspective.
Now it’s – a little more color on that. I mean, the way we’re reacting to it right now is we’re going to take down bit growth next year, right? As the way I say, we’ll slow down nodal transitions, we’ll slow down starting of new clean room space. We’ll think about utilization changes, but we’re not there yet. So we’ll see where we are in a couple months. But we’re not there yet. At this point, we’ll build inventory and we’ll get through the downturn.
Great. And then the other question is in the same vein of the dynamic nature of the end markets where consumers weakness – much earlier data center enterprise now being weak. How does that inform your view on the ability for you guys to maintain profitability over the next couple quarters as it’s kind of the staggered weakness through different end markets?
Yes. I think, look, we manage very closely all the elements that we can control. So with respect to profitability, obviously, we take – we are looking very closely at our operating expenses, making sure we reduce to the minimum any discretionary expenses. We take other actions that are under our control to minimize the spend. And with respect to the gross margins, look, on the hard drive side, as I said, margins tend to be a little bit more stable. But on the flash side, as the margins are much more susceptible to the swings in the supply and demand and given that we are in a down cycle, there’s much more pressure there. But we look at this in a very dynamic way. We manage our business also in a very dynamic way to and focus primarily [Audio Gap] comments earlier, we saw weakness in consumer a number of quarters ago. And if you look at our expenses, we’ve come in. We started pulling in the reins months ago, we didn’t wait until now to react to this. So when we see the visibility, we adjust in the business and make sure we’re making all the right moves internally given what the marketing conditions are around us.
I got to ask the question, looking at the industry in general, data growth and data continues to be important. Why is revenue growth and margins not stronger and more predictable?
Well, it depends. I mean, that’s what we’re working to drive. I mean, one of the things we laid out at our Investor Day is a more predictable and better margins across the business and the route we are going to take to get there. I think in the Drive business quite frankly, it’s been – that the business has been oversupplied for a very, very long time. I mean the transition from client to enterprise or client to cloud is a very big transition. That’s literally taken 15 years and we’re now approaching the tail end of it.
From a unit perspective, the amount of units that were produced for client is enormous. So we’re now finally at the point where we’re actually going to have to invest in things like head fabs and media eventually to meet cloud demand. We haven’t had to do that as an industry for the last 15 years, it was simply cannibalizing demand, cannibalizing investment that was already there.
So how you think about the economics of cannibalizing that investment versus the economics of putting new investment in is very different. And I think that is driving a different level of profitability in the industry. I mean, just in the short time I’ve been at Western Digital my first year in the business, almost every earnings call more than 50% of the questions were around HDD gross margins. Now we’re far from out of the woods on HDD gross margins. But the question back then was, can you ever get to 30% again? Like, will you ever get to 30% on gross margins on HDD? Well, we achieved 30%, now we had the pandemic and we’ve come back because of all the cost, but we’ve just put a model in place where we committed to 31% to 34% over the forecast horizon. And the question is, how come it can’t be higher, right? So the question is changed quite a bit. And I love that question because I think it can be higher and we have higher aspirations that will continue to drive to it.
On the NAND side of the business, again, at our Investor Day, we laid out a very specific plan for how we can drive 5 points of gross margin on a through cycle basis better. So with a better portfolio, better mix, better execution, we have a path to driving better profitability to our business. And I think we now have the organization and the leadership in place to go make that happen.
David, we have 2 minutes left. Can you conclude with investors about what are the key messages you want that they should take away from today? Whether it be something that may be investors appreciate or something about the WDC story?
I think it’s what we talked about at the beginning. I mean we’re fundamentally a much different company than we were two years ago. And not just by the people that are in the executives, but by the execution, the innovation we’re driving, the innovation engine at Western Digital is on fire. I mean, we have – again, the drive industry is something where you tend to move in unison up the scale. And now we’ve really kind of separated ourselves with our 22 terabytes CMR drive, our 26 terabyte UltraSMR drives. Those are in process being qualified now.
We’re fundamentally a much stronger company. We’ve delevered our balance sheet. We’re an investment grade company. I think we have the leadership to drive that better through cycle profitability on NAND as we drive forward. And we’ve also rejuvenated the relationship with our JV partner. It’s never been stronger. I was just in Japan last week, we spent a lot of time together and it’s a great relationship that puts a very strong foundation of the best technology industry under our business.
So we’re really excited about where we’re at. I mean, clearly the macro situation is the macro situation we’re in, we were talking about we’re coming off of a pandemic induced demand. And also the way people manage the supply chain has been different. Now we’re coming out of it into a different demand environment, much lower. We’re going through a rapid change to that new environment, but we will work through that. And we’re set up to perform extremely well given where the technology is across the company.
I’d like to thank Western Digital for presenting today and all their meetings today. And ladies and gentlemen, this now concludes our fireside chat with Western Digital. Thank you.
Thank you, Jim. Thanks everyone.