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Executives

Steve Luczo – Chairman, President & CEO

Pat O’Malley – EVP & CFO

Dave Mosley – EVP, Sales, Marketing and Product Line Management

Bob Whitmore – EVP & Chief Technology Officer

Larry Sonsini – Wilson, Sonsini, Goodrich & Rosati

Analysts

Keith Bachman – Bank of Montreal

Mark Moskowitz – JPMorgan

Katy Huberty – Morgan Stanley

Ben Reitzes – Barclays Capital

Rich Kugele – Needham and Company

Sherri Scribner – Deutsche Bank

Aaron Rakers – Stifel Nicolaus

Kevin Hunt – Hapoalim Securities

Jason Nolan – Robert W. Baird

Seagate Technology PLC (STX) F1Q2011 (Qtr End 10/01/10) Earnings Conference Call October 20, 2010 5:00 PM ET

Operator

Good afternoon ladies and gentlemen and welcome to Seagate Technology’s Fiscal First Quarter 2011 Financial Results Conference call. My name is Stacey and I’ll be your coordinator for today.

At this time all participants are in a listen-only mode. Following the prepared remarks, there will be a question-and-answer session. (Operator Instructions). As a reminder, this call is being recorded for replay purposes. This conference call contains forward-looking statements including, but not limited to statements related to the company’s future operating and financial performance in the December 2010 quarter and thereafter, and includes statements regarding customer demand for disk drives and general market conditions.

These forward-looking statements are based on information available to Seagate as of the date of this conference call, but are subject to a number of risks and uncertainties and other factors that could cause actual results to differ materially from those anticipated by these forward-looking statements.

Information concerning additional factors that could cause results to differ materially from those projected in the forward-looking statements is contained in the company’s Annual Report on Form 10-K and Form 10-K/A as filed with the US Securities and Exchange Commission on August 20, 2010 and October 6, 2010 respectively.

These forward-looking statements should not be relied upon as representing the company’s views as of any subsequent date and Seagate undertakes no obligation to update forward-looking statements to reflect events or circumstances after the date they were made

I would now like to turn the conference over to our host to Mr. Steve Luczo, CEO. Please go ahead.

Steve Luczo

Thank you, Stacey. Good afternoon everyone and thanks you for joining on the call today, sorry about the delay. On the call with me from Seagate are Ken Massaroni, our General Counsel, Pat O’Malley, our Chief Financial Officer; Bob Whitmore, our Chief Technology Officer and Head of R&D and Manufacturing Operations and Dave Mosley, Executive Vice President of Sales, Marketing and Product Line Management.

Also on the call today are Larry Sonsini of Wilson, Sonsini, Goodrich & Rosati and Joe Perella of Perella Weinberg Partners. Today, we are continuing with the new format that we began last quarter and we have posted detailed supplemental information about the quarter on our Investor Relations website.

Due to the announcement we made on October 14th, 2010 concerning the preliminary indication of interest regarding a going private transaction, there are some additional requirements with respect to today’s call. First, the company will not at this time be providing any additional information regarding the aforementioned announcement.

Second, in order to comply with regulatory requirements, the company will not provide, discuss or answer questions regarding the outlook for the December quarter or any future fiscal periods. And, finally, the company will not be participating in individual meetings with investors or analysts either in-person or via conference call until further notice, again due to the regulatory requirements.

Seagate entered the September quarter with the following key assumptions for planning purposes. First, that we would not see any additional slowdown in consumer spending on technology generally. Second, that we would hold the market share levels of approximately 30% with which we entered the quarter. Third, that we would not see attempts by competitors to ship share through aggressive pricing. Fourth, that inventory on hand would remain flat quarter-over-quarter. And, finally, that the corporate technology refresh that we had been experiencing going into quarter would continue.

We did experience some additional weakness in the consumer markets particularly in the United States and in Europe early in the quarter. Primarily as a result of this weakness, the total available market for the quarter was approximately 165 million units, which was the low end of our expectations at the beginning of the quarter. We did however see some early signs that consumer activity is beginning to improve in early September. Additionally, industry market share remains substantially unchanged. However, pricing remained aggressive across all of our product lines, customers, and geographies.

As noted in the Western Digital conference call yesterday, the week 13 industry shipments in the September quarter were significantly higher than the prior 12-week average. While we believe this to be an accurate description overall, Seagate was under represented during week 13 and week 12 as compared to a level of the first 11 weeks of the quarter. Dave Mosley can provide more details during the Q&A session if required.

Turning to our September quarter results, we reported first fiscal quarter revenue of $2.7 billion in non-GAAP diluted earnings per share of $0.37 on shipments of 49.2 million units. Gross margin of 20.4% was below our target range due to the aforementioned market dynamics, which impacted our ability to deliver earnings within the target range we provided at the beginning of the quarter.

Our balance sheet remains strong. Cash, cash equivalents, short-term investments, and restricted cash totaled $2.2 billion. Long-term debt include current portion was reduced by $328 million to $2.2 billion at the end of the quarter with the redemption of the Maxtor convertible notes.

Stacey, we’re ready to open up the call for questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions). Your first question comes from the line of Keith Bachman with Bank of Montreal. Please proceed.

Keith Bachman – Bank of Montreal

Hi, good afternoon, gentlemen. I wanted to try to get two questions if I could. Could you just give your views on how much incremental inventory? You guys, I’m sure listened to WD last night. What’s the channel look like? What’s the inventory status look like as you look out across the industry? And then, I had a follow-up, please.

Dave Mosley

Hi Keith, this is Dave. Inventory was below four weeks and channels as we usually model and we made reference to the assumptions going into the quarter of inventory, exit’s being about that same level. So we feel pretty good about that.

Keith Bachman – Bank of Montreal

And what about at the OEMs?

Dave Mosley

Well, we don’t have a whole lot of visibility into JIT hubs and the like. And we’ve talked about that before. But we have no reason to believe that their inventory issues.

Keith Bachman – Bank of Montreal

Because I’m sure you heard WD last night say there was probably an extra 5 million units that was sitting at the OEMs. It doesn’t sound like you would agree with that line of reasoning.

Dave Mosley

I think what they talked about was a big shipment week in week 13 and as Steve – Bob talked about in the comments, we were under represented in that.

Keith Bachman – Bank of Montreal

Okay.

Dave Mosley

And so even actually into the week 12. I think there’s a few different dynamics which is going on that we see. One is golden week in China, if that’s somewhat. There is also some shipments that are done within say some of our competitors too there mother ships if you will to with some of their internal customers. So we’re still trying to triangulate that.

But what we definitely feel is that as far as notebook in particular where we saw one of the big shipment weeks there in week 13, we were dramatically underrepresented versus what we had seen in the prior 11, 12 weeks of the quarter, even if you go back to week 12. And then, we exited with our inventory under two weeks going into October something.

Keith Bachman – Bank of Montreal

Okay. Well, I wanted to sneak one in with Pat then. On the CapEx, Pat, it was a little higher than – that we were thinking for the September quarter. I know you said it would be up due to some slippage from the previous quarter. But is there any color you can give us about that? Or is there any comments you can make as it relates to your anticipated CapEx plans?

Pat O’Malley

Yes, so let me address that. One, the number you see of the 358 is the cash. We sort of hinted at that last quarter that what you saw coming at our CapEx last quarter was the cash in that bubble rollover. So just was the number that we or just to give a clarity. Our actual receipts were only $195 million.

Keith Bachman – Bank of Montreal

Okay.

Pat O’Malley

And that was done significant from plants, so we are decelerating. I won’t go into the forward looking for the rest of the year. But just for the quarter, those receipts were $70 million less, so we – it is in a deceleration mode, so that was really the cash bubble that came through on the Q4.

Keith Bachman – Bank of Montreal

Okay, thanks Pat.

Operator

Your next question comes from the line of Mark Moskowitz with JPMorgan. Please proceed.

Mark Moskowitz – JPMorgan

Yes, thank you, and good afternoon. There is a couple of question if I could. I just want to get a sense in terms of where Seagate views the opportunities for cost takeouts or the need for further investment where there is an SSD or other adjacent markets. I’m just trying to get a sense just given the recent announcement last week where the LBO or the PE folks would see the value proposition line?

Bob Whitmore

Yes, sorry we can’t. As I’ve mentioned in my preamble we can’t reference anything with respect to any possible transaction with the private equity firm.

Mark Moskowitz – JPMorgan

I guess, and maybe another way to ask the question is, given the recent secular slide within hard disk drives over the last six months, we don’t know how pricing when it does [inaudible] for a while unless demand picks up. It seems like this could have last a little longer just given what we’re seeing in the marketplace and also with the competitive dynamics a lot more tenacious than years passed and certainly there is no a disk drive manufacturer who can’t compete right now. Is there any sort of impetus on your part where you think that you need to accelerate investments into different markets, i.e. SSD and maybe with your Samsung announcement back in August?

Bob Whitmore

I think that we have indicated that we think there’s plenty of area of potential for growth in the drive industry with respect to R&D investments and whether or not it’s SSD or the announcement last quarter of our hybrid drive. Those would certainly be examples of that, yes.

Mark Moskowitz – JPMorgan

Okay. And then my other question revolves around the enterprise business right now. Just in terms of the recent changes with Microsoft Exchange 2010, it seems like fiber channel drives do not need to be the cornerstone if you will for serving Microsoft Exchange environments. We keep seeing more and more SAS and SATA drives underpinning NAS and SAN deployments. How should we think about the enterprise profit profile going forward for Seagate and for the industry? Is it something that could be undercut going forward?

Bob Whitmore

No, and again, we can’t make any forward-looking statements about profit pools or as it might impact Seagate.

Mark Moskowitz – JPMorgan

Have you been seeing changes recently though in the mix?

Bob Whitmore

I think historically we’ve – I don’t know if we’ve talked about or if that we’ll be prepared to talk about shifts amongst our customers in terms of interfaces. Dave, is there any kind of general color you want to add?

Dave Mosley

I will just answer it, over the last few quarters, no. Macro trends is what we can’t talk about going forward.

Mark Moskowitz – JPMorgan

Okay, thank you.

Operator

Your next question comes from the line of Katy Huberty with Morgan Stanley. Please proceed.

Katy Huberty – Morgan Stanley

Yes, thanks. I wonder if you could provide your thoughts around whether you think that industry can put on the brakes around some of the CapEx orders that were put in place back in the fourth quarter of last year and first quarter of this year. Do you think that some of that can be cancelled and/or pushed out enough that that the industry can manage through a better supply and demand environment over the near term or does that equipment have to ultimately be accepted?

Pat O’Malley

Kathy, this is Pat. Fortunately or unfortunately we’ve been through these cycles and we’ve worked with our vendors. We certainly have strategic relationships with them. We try to give them long lead time but we do push out do cancel and manage that to get to the right size of the business. So the industry is capable, Seagate is certainly capable and I believe the industry and Seagate have put plans in place to handle it to get the demand and supply what we believe closer inline.

Katy Huberty – Morgan Stanley

Okay, and then WD had somewhat of a negative bias as it relates to the week 13 activity into the OEMs. But if you take another view, if OEMs are willing to accept inventory, if they’re doing more airfreighting heading into the fourth quarter, there may be a more positive read that they’ve seen something on the demand front that’s more encouraging going into the holiday period, not asking as it relates to CA but just the overall demand environment for IT.

Pat O’Malley

Yes, I’m not exactly sure what the question is, I think in general I would confer with the way that Western Digital characterized it is probably over edge in week 13. And that’s my general read on it.

Katy Huberty – Morgan Stanley

Okay, so more a function the OEMs taking advantage of pricing, not necessarily seeing a demand uptick?

Steve Luczo

Well I think it’s a broad brush to say the OEMs. We’ve got a tick and tie exactly where all the units and I think its maybe too broadly speaking to say it’s the OEMs.

Katy Huberty – Morgan Stanley

Okay. Thank you very much.

Operator

Your next question comes from the line of Ben Reitzes with Barclays Capital. Please proceed.

Ben Reitzes – Barclays Capital

Yes, I have two questions. First of all, could you just talk a little bit more about pricing on the client side? How was it particularly towards the end of the quarter or why were you underrepresented in that surge of units, was it due to pricing at the OEM level being super aggressive or was there something you didn’t like out there in marketplace with regard to pricing. If you could just talk a little bit more about that the price trend throughout and quarter and why you didn’t participate at the end and then I follow-up proceed if you don’t mind.

Steve Luczo

Yes, let me characterize a little bit differently, I mean there may have been some deals that were done at the end of that contribute to week 13 that we didn’t participate in. I’d say it a little bit differently, we have line of sight of some of the OEMs that we service and those are the ones that we were tied off with pretty well. There were couple of other dynamics that happened. I think given some factory slowdowns in Golden Week in China. There were some natural next quarter activities that were actually pulled in because of that. Then there was actually some deals that happened and as I made referenced to this earlier before where people in some sense had to buy full model or they shipped to other places inside of their old corporation.

So it’s really hard for us to triangulate back through all those things and say which contribution means what part of it. But in general I would say that Seagate made an effort not to participate in some of those quarter end deals to – because we’d seen competitive pricing all quarter long, we realized that we don’t want to do that at the end of quarter, so.

Pat O’Malley

Ben, this is Pat. The pricing as you know you heard yesterday and you obviously see there is financials today whereas aggressive the whole quarter. So not participating in pricing for a certain deal is probably not a fair characterization. We talked to begin in the quarter, we’re going to hold share, we did hold share. I think there was much – not much movement in share but we got a fair look at our business and we made what we think is the proper decisions to maintain share and get the right coverage in each of our OEMs and district channel partners but it was aggressive through the quarter.

Ben Reitzes – Barclays Capital

Through the quarter and not necessarily more so at the very end.

Pat O’Malley

That’s correct.

Ben Reitzes – Barclays Capital

Then Steve, I just wanted to ask you philosophically I mean I got to ask about Apple, today they announced the $999 64 Gig MacBook Air and Steve Jobs made a comment that he thought all notebooks were going to move this way. And I think he was referencing without the disc drive. And I was just wondering, is he right, is he early, is he just and are you seeing any other on the main stream PC market anybody kind of adopting Apple’s curve which seems obviously as usual they’re early on and early adopters. But I was just wondering what your thought on that announcement and whether you thought that would change the adoption curve for the industry or its wishful. Thank you.

Steve Luczo

Well look, I mean obviously Steve sits in a position that only Steve sits in, in terms of the offering that they provide to their customers and its obviously pretty competing. I would say though that from what we know of the offering for example Apple, the percentage of their units that they sell with SSDs versus HDDs is a tiny fraction. I think it’s under 3%, certainly under 5%. Obviously this isn’t the first product that they’ve had. I have and Air book with an SSD unit that I’ve had for I guess a year and half now. And I think, there are certain things that are certainly very nice about it. And other things that are little bit frustrating and a little bit frustrating parts are the cost and the lack of capacity.

I spend a lot of time cleaning out files so I can make room for not a lot of content to be honest with you. I think are there some users that can operate net environment and be happy, I think the answer is yes but I think as Seagate introduced hybrid drive last quarter, you get basically the features and function of SSD at more like disc drive cost and capacity. And in fact with the additional layer of cashing we believe that, downstream from a product perspective there will be performance advantages to SSD whether or not that has to do with instant on or application load or what a load looks like year or two after you, you have your product versus that day you buy it.

I can tell you that my SSD drive takes about 25, 30 seconds to boot now versus the 12 seconds when I bought it. And that’s just an issue more related to OS than it is specifically to the technology but again with the hybrid there is things that you can do it alleviate that so your boot times are actually as compelling one and two, three and four years down the road.

So I think that’s where mainstream notebook computing is going if that’s what your question is no I don’t, do I think that Apple will be successor with that product absolutely, because Apple is successful with all their products. And so it’s a very compelling company and a compelling value proposition within their value chain. But again we just view it as more devices that are computing in eating data and if they’re low capacity on the edge that means they need a lot of storage pipe and down close to the edge and whether not that’s in a mash box or code in the cloud or in a local cloud. Those are all markets that we serve. So the more that people do creative things with computers and devices were all four and Steve certainly at the forefront of that.

Ben Reitzes – Barclays Capital

Okay, thank you very much.

Operator

Your next question comes from the line of Rich Kugele with Needham and Company. Please proceed.

Rich Kugele – Needham and Company

Thank you. Good afternoon. Thanks for the extra detail on the 13th week. But I did want to ask Pat one question, in terms of the I guess the ending of the early paid discounts with channel, did you have to come up with some other type of offset to be cost competitive, price competitive with your peers, you still offer those discounts? And did if effect gross margins at all in the quarter?

Pat O’Malley

No the – well the fact that we had extra carrying days of DSO, you could marginally argue there is little cost but clearly what we saved in our order pay was a positive financial in we didn’t have to add any extra programs to offset that. In face we were the only one at offered it before. So it was I’d say a net positive to us other than what’s manifested in the DSO.

Rich Kugele – Needham and Company

Okay and then obviously everyone keeps harping on the tell the angle and if we’re going to go on talk about what segment of the drives universe really plays within the netbook space and the low-end notebook space. You’re really talking about what, 250 gig and below, I mean do you – are you willing to provide a percent on how much of your business may go into notebooks. Do you have that kind of netbooks on say, do you have that kind of visibility and any comments on how we might be able to quantify the total TAM that’s at that low end?

Steve Luczo

I guess just to make sure I understand the question Rich is that so going forward what capacities, what netbook capacities would be offered by the market? Is that what.

Rich Kugele – Needham and Company

My understanding is that the maximum netbook capacity for Microsoft is basically 250 gig, right? I don’t know if there is even 160 shipping any more but 250. So you could argue that number of netbooks have at least 250 gigs so that you can add that in and then subset of new low-end notebooks. What do you consider a low-end notebook capacity points like for example.

Bob Whitmore

Yes, let me try it this way. So I think we obscure a little bit what we can net book and what we call low-end notebook to your point and what the capacity point is. I don’t think there is a unique value proposition for somebody who has say for example 250 gigabyte in a consumer device, sometimes people will fill up that up fairly quickly and other used cases they won’t.

I do think that that what you’re seeing in the tablet space is, is putting a lot of pressure on innovation, thinner, lighter, power savings, and to the point capacity as well to just value differentiate. I think there will be other also be lost cost sensitivities there.

So if you can continue with the productivity device to provide a value proposition at a price point, I’d pick up price band if you will that that we would call net books traditionally and people can innovate to still provide a compelling device there. It may have – it may have more capacity in it. And that’s I think from an innovation perspective what the devices are really driving.

Rich Kugele – Needham and Company

Okay. And, just lastly, on your own hybrid drives, there is a lot of interest around them. But traditionally in order to really have a large market you need to have multiple sources. Do you expect anyone else to launch a hybrid drive? And then, secondly, would you expect to license out your code that makes it so I guess workable in a system?

Bob Whitmore

Yes, we would certainly expect that there will be competitors launching hybrid drives. I guess the question which is what’s the nature of it? Is it – is it just the piece of silicon between the DRAM and the disk or is it more to that?

And I think that lends to your second question, which is, we have a lot of IP in this area and a lot of know-how in a lot of investment that’s occurred over several years and no we’re not planning on licensing that.

I’ll tell you when we’ve got – we believe that’s why our drives have performed the way they are and what the opportunity is as we basically take advantages of some of our algorithms with some of the people that are developing OS or applications on them.

Rich Kugele – Needham and Company

Okay. Thank you very much.

Operator

Your next question comes from the line of Sherri Scribner with Deutsche Bank. Please proceed.

Sherri Scribner – Deutsche Bank

Hi, thank you. It looks like you guys – your share was relatively flat this quarter. You commented that you thought your share was flat. Western Digital thought their share was down a little bit in the September quarter. Who do you think is gaining share in the market at least in the September quarter?

Bob Whitmore

I think all data points aren’t yet in Sherri. So obviously we’re watching the ones, the data that we have, and then the data that was announced yesterday. But I don’t think we really know all the answers just now.

Sherri Scribner – Deutsche Bank

Okay.

Pat O’Malley

There was some major shifts that like it was in the Q4.

Bob Whitmore

That’s right, that’s right.

Sherri Scribner – Deutsche Bank

Okay. And then, in terms of OEM pricing, which was determined in September for the December quarter, would you characterize it similar to Western Digital that it was competitive and OEMs were taking advantage of the fact that the market was a little bit softer?

Bob Whitmore

Yes, I think that would lead to a forward-looking statement in one form or another, so we’re going to avoid that one.

Sherri Scribner – Deutsche Bank

Okay, thank you.

Bob Whitmore

Yes, thank you.

Operator

Your next question comes from the line of Aaron Rakers with Stifel Nicolaus. Please proceed.

Aaron Rakers – Stifel Nicolaus

Yes, thanks for taking the questions. A couple as well. First of all, you guys had commented that desktop, your inventory and the channel was less than four weeks, what do you think the overall inventory looks like for the industry as a whole?

Bob Whitmore

It is slightly higher than four weeks I think.

Aaron Rakers – Stifel Nicolaus

Okay, slightly higher. And in the context of you being underrepresented in week 13 relative to Western Digital, when you look at that over the average of the prior shipments for the 12 weeks, how does that compare to what you’ve typically seen in prior September quarters?

Bob Whitmore

Sorry, Aaron, I didn’t say relative to Western Digital. I said relative to the rest of the industry. And we don’t have very good visibility into exactly what they shipped in week 13.

Aaron Rakers – Stifel Nicolaus

Okay, fair enough. But for you guys how would week 13 stack up to prior year’s week 13 for the September quarter?

Bob Whitmore

Right. Let me just give you a quarter-over-quarter. In my opinion, the industry had some behaviors like this in week 13 of the June quarter. And so that was about 15% shipped in week 13 in that quarter.

We believe about 18% of the 165 million unit TAM they’re about shipped in week 13 of this last quarter, again some of it because of golden week preparation in factory, logistics that are going on in week one.

Some of it’s because everybody phased up and the first was a Friday and so everyone’s end of quarter have effectively became the same day. I mean there’s little dynamics like that, but still, that’s why I – holding the central pieces, I just say, we are underrepresented.

Aaron Rakers – Stifel Nicolaus

Okay, final two questions. What is your current capacity in terms of production on a quarterly basis? And then, if you can help me understand just real quickly the fully diluted share count decline relative to what your guidance was for the quarter?

Bob Whitmore

So, from a capacity point of view, I think like we talked about we a few quarters ago we’re looking at a little bit higher output for these quarters. We’ve dialed that so that we’re pretty fully utilized at the production levels that we’re at. So that’s what our run rate is today.

Aaron Rakers – Stifel Nicolaus

Okay. So you’re effectively 95% plus utilization?

Bob Whitmore

Yes, in that range.

Aaron Rakers – Stifel Nicolaus

Okay. And then, the share count?

Pat O’Malley

Share count is the average price of the stock of the quarter.

Aaron Rakers – Stifel Nicolaus

Okay, fair enough, thank you.

Bob Whitmore

Yes. Okay, Stacey, why don’t we take two more questions?

Operator

Your next question comes from the line of Kevin Hunt with Hapoalim Securities. Please proceed.

Kevin Hunt – Hapoalim Securities

Hi, thank you. I have a couple of questions actually. First, on just to kind of can you drill down more into the gross margin, do you agree with Western Digital comment that 5% like-for-like price declines were occurred in the quarter? And if that’s true, it seems like you still have – you still sort of had a higher gross margin based on my math, so can you maybe break down what all the factors are contributing there?

Pat O’Malley

Western Digital referenced 5% for the next quarter, not this – the quarter just happened, they just discussed in excess of 8% for this current quarter just ended. So our pricing was –

Bob Whitmore

Just to be clear, WD referenced in excess of 8% for the September quarter. They talked about 5% for the December quarter.

Pat O’Malley

Correct. So with that 8%, ours was in that range, it was very like I said throughout the quarter that was the primary miss of our earnings and revenue. Primary was the pricing and then we expected the midpoint of the TAM for our volumes, so you can from 165 to 175 we had a shortfall there in revenue and gross margin, but clearly the biggest impact was the pricing in those ranges of that WD recorded for the September quarter.

Kevin Hunt – Hapoalim Securities

And if you go back to – so I mean you indicated going into this quarter, you had expected a pretty aggressive pricing, so you are saying it was maybe incrementally above that, so you might have been looking say five or eight?

Pat O’Malley

Yes, it was probably closer to six, closer to eight. But, yes, that was little less than six, right, that’s correct.

Kevin Hunt – Hapoalim Securities

Okay. And then – thank you. And then the second question I had was I just wanted to kind of clarify and understand here on the comments about the 13 week here, [inaudible] you didn’t think there was any inventory you kind of give out various explanations of why there might have been an higher shipments. But I just want to make it clear, you are saying that it’s not because everyone just piled everything into inventory?

Bob Whitmore

I guess we – what I would say relative to everyone piling in an inventory, I mean we don’t have visibility in the OEM inventories at all. So we – all we know of what Seagate inventory and Seagate sell through is that makes sense? Inventory was under four weeks and where we can see our inventory.

And with respect to our participation in weeks 12 and 13, we were under represented versus the average for the first 11 weeks. We can only talk to Seagate. There was an industry and there is an industry dynamics that show that week 13 was substantially higher than the average for the 12 weeks and was higher than it typically is.

Kevin Hunt – Hapoalim Securities

Okay. But it sounds like you – sounds like – I mean Western Digital clearly made the conclusion that that was all into inventory. But it sounds like your conclusion is not that. Am I getting this right or –?

Pat O’Malley

It was clearly going into the sell-ins inventory. That last week I mean probably –

Bob Whitmore

I think we are making a different point. It’s our product.

Kevin Hunt – Hapoalim Securities

Okay. But you are saying that there is potentially a lot of inventory at OEMs. You know you don’t have visibility to that.

Bob Whitmore

The inventory went somewhere.

Kevin Hunt – Hapoalim Securities

Okay. And then, I will try this one, the last one, you said you won’t comment on the LBO talk, but can you – I mean there was talks two , three months ago that you had an LBO offer. Can you maybe help us understand what legally is your client have this whole production you’re going through now versus two or three months ago?

Bob Whitmore

I don’t think the company ever said anything two or three months ago about any sort of transaction. I think there may have been some rumor published in a publication which obviously the company never commented on. But the company has only made one statement with respect to indication of interest and that was the one that we made on October 14, 2010. Larry, do you want to answer the question as to the regulations around disclosure?

Larry Sonsini

I think it’s best that we have no further comment on that subject.

Operator

Your final question comes from the line of Jason NolanRobert W. Baird. Please proceed.

Jason NolanRobert W. Baird

Okay, thank you. Just two quick questions, Steve or Pat did you cut back on production in the September quarter?

Pat O’Malley

We aligned our production to head our customer demand. So obviously we were aiming for the midpoint of the TAM. We certainly missed on that element, so we aligned our supply. You could see our returns got better. So I think we managed our inventory pretty well.

Jason NolanRobert W. Baird

Okay, it makes sense. And then the last question from me is Steve you had mentioned competitive actions in the June quarter, I heard the market and I guess my question is, is the price aggression a function of competitors trying to take share or is it just a normal reaction to the supply demand imbalance?

Steve Luczo

I think it was a combination, I really do believe it was combination was I think the industry lining up for TAMs in the June and the September quarter that didn’t materialized. And then certain competitors being late to adjust production and therefore the movement of the product was facilitated by price. I think the industry is doing its best to adjust that as quickly as possible.

Jason NolanRobert W. Baird

That makes sense. Thank you.

Steve Luczo

Yes, thanks. All right, everybody I’d like to thank you all for joining us on the call today. We look forward to speaking with you next quarter and the before I depart, I want to make sure that I complement the employees of Seagate as always as well as our suppliers, our customers. Thanks for the effort. Thank you.

Operator

We thank you for your participation in today’s conference. This does conclude your presentation. You may now disconnect and have a great day.

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Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Seagate Technology PLC F1Q2011 Results - Earnings Call Transcript
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