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Western Digital Corp. (WDC)

F1Q07 Earnings Call

April 26, 2007 5:00 pm ET

Executives

Bob Blair - VP IR

John Coyne - President and CEO

Steve Milligan - CFO

Tim Leyden - EVP of Finance

Analysts

Rob Semple - Credit Suisse

Rich Kugele - Needham & Company

David Bailey - Goldman Sachs

Jeff Brickman - UBS

Mark Miller - Brean Murray

Christian Schwab - Craig-Hallum Capital

Andrew Neff - Bear Stearns

Paul Mansky - Citigrou

Presentation

Operator

Good afternoon and thank you for standing by. Welcome to Western Digital's Fourth Quarter Financial Result for Fiscal Year 2007. Presently all participants are in a listen-only mode. Later we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this call is being recorded.

Now I will turn the call over to Mr. Bob Blair. You may begin.

Bob Blair

Thank you. We will be making forward-looking statements in our comments and in response to your questions concerning our expectations regarding supply and demand conditions in hard drive industry, and growth in the market for hard drives. The anticipated closing date of our acquisition of Komag and our beliefs regarding the advantage of the synergies of sourcing media internally, continuation of our plans to enhance our ability to compete as a full line industry leader, our plans for upgrading and extending our Fremont wafer facility, and the expected production date of our first 8 inch outlined.

Our expectations regarding environmental and other benefits of our new GreenPower drive technology. Its effects the seasonality in the September quarter, our capital expenditure plans for fiscal 2008; and our current financial outlook for revenue, gross margin, operating expenses, earnings per share, and other key metrics including a possible non-cash tax charge in the September quarter.

These forward-looking statements are based on management's current expectations and are subject to risks and uncertainties that could cause actual results to differ materially. Including those listed in our Form 10-Q filed with the SEC on May 8, 2007, as well as the additional risk factors reported in the press release included as Exhibit 99.1 to the Form 8-K, we furnished the SEC today.

We undertake no obligation to update our forward-looking statements, to reflect new information or events and you should not assume later in the quarter that comments we make today are still valid.

I'd now like to turn the call over to John Coyne, Chief Executive Officer and President of Western Digital. John?

John Coyne

Thank you, Bob. Good afternoon and thank you for joining us. With me here today are CFO Steve Milligan; and Executive Vice President of Finance, Tim Leyden.

Following my remarks, Steve will provide the financial report for the fourth quarter and the full fiscal year 2007, and Tim will provide our outlook for the September quarter.

Fiscal 2007 was another great year for Western Digital, capped off with a solid fourth quarter financial performance reported earlier today. Customer satisfaction with WD's broad product line, superior quality and reliability, service excellence and overall value proposition continues to drive our business growth. We are very pleased with the continued consistent performance of the efficient business model that we have built and refined over the last several years.

The FY '07 numbers provide further evidence of steady financial performance and continued excellence in execution by the WD team. I will take a few moments to review these achievements and I will then move on to our view of the storage markets bright future, and the actions we are taking to position WD for continued success.

Revenue in fiscal 2007 was $5.5 billion, an increase of 26% from last year. Earnings per share of $2.59 compared with one $1.76 per share in the fiscal 2006, a 47% increase. We generated over $600 million in cash from operations during fiscal 2007, a 68% improvement over 2006, and ended the year with $907 million in cash and short term investments, an increase of 30% over the prior year.

Fiscal 2007 represented our fifth consecutive year of substantial growth in our Research and Development and capital spending. They support a significant deepening and acceleration of our technology capability and a broadening of our product portfolio.

Over the five year period we have grown our investment spending 270% from $170 million in 2002 to $630 million in fiscal 2007. While maintaining our focus in the high volume desktop business, we have made major strides in growing our footprint in non traditional markets, such as 2.5 inch notebook drives, branded products, consumer electronics, and Serial ATA drives for the enterprise space.

We more than doubled our 2.5 inch drive shipments year-over-year to 12.3 million units. Our branded products business grew revenue by over 180% year-over-year to more than $870 million. In enterprise SATA, the fastest growing segment of enterprise storage, we led the industry in introducing 3.5 inch SATA solutions in 2003. Our share in this segment is now similar to our position in the desktop and CE markets. As a result of this activity in newer markets, we have seen our revenue from non desktop PC drives expand to 43% of revenue in fiscal 2007, compared with 29% in fiscal 2006, and we exit the year with almost 50% of revenue derived from non-desktop applications.

Reflecting the continued return on our technology investments, we began shipping a bevy of new products based on three new WD technology platforms during the quarter. These include a 125 gigabytes-per-platter, 2.5 inch series of products resulting in a WD Scorpio drive with 250 gigabytes of capacity. A high performance 3.5 inch platform for desktop CE, branded and enterprise applications offering up to 750 gigabytes, and the new AV family of 3.5 inch drives specifically developed to address the requirements of DVR, PVR and surveillance video market places. The new 250 gigabyte, 2.5-inch WD Scorpio notebook drive is the clear time to volume market leader, with significant OEM and distribution shipments in the quarter. This is our third generation 2.5-inch drive and second generation utilizing PMR and incorporates proprietary WD head technologies as well as significant feature innovations.

WD branded products is also shipping this drive in the popular four ounce USB WD passport portable drive. Our first 3.5 inch WD Caviar drives that implement PMR technology store up to 750 gigabytes and have a unique combination of WD features that maximize performance, optimize power, operate at low temperatures, and offer high shock and vibration tolerance.

Off the same platform is the WD RE enterprise drive, which offers three-quarters of a terabyte for higher duty cycle applications, such as servers and capacity intensive network storage.

Branded products, new My DVR Expander also incorporates this drive to solve the growing need for capacity for high definition TV entertainment. This device adds as much as 60 hours of high definition recording or 300 hours of standard definition TV programming.

Now, I would like to turn to the future. This is a great time to be involved in the global hard drive industry. Application for hard drives continue to proliferate in both computing and consumer markets, as both workplace and lifestyle changes continue to generate massive volumes of content to be stored securely, conveniently and cost-effectively on hard drives.

The HDD market in 2006 generated revenues in excess of $30 billion, with 435 million hard drives shipped. Forecasted demand for 2007 exceeds 500 million units. On a unit basis the hard drive market is looking at a five-year compound annual growth rate of approximately 13%. The strongest growth segments are expected to be Enterprise Serial ATA, forecasted for nearly 40% growth, 3.5-inch CE at more than 30%, 2.5-inch note book and 2.5-inch CE each above 20%.

Branded products, a category which has surged to industry prominence in the last year is forecasted to grow at 25% over the next five years. As consumers and increasingly mobile workers continue to seek intuitive, well designed, external storage applications, to securely store and access their digital content.

At WD, we are very excited about all of these opportunities for growth both for the near term, as we head into the seasonally strong, second half of the calendar year. And as we address for longer term prospects, represented in these industry forecast.

I'd like to highlight some of the important steps we are taking, to ensure our continued success and addressing these outstanding market opportunities. We have made and continue to make investments in the technologies, the infrastructure that will enhance our ability to compete as a full line industry leader. With the product portfolio required to capitalize on these growth trends and the capacity and cost structure to do so efficiently and profitably.

Our previously announced plan to upgrade and expand our Fremont wafer facility is underway. Our first 8 inch pilot line is expected to be in production by the end of calendar 2008. We are highly focused on bringing our recently announced acquisition of Komag to provision. We remain confident and the advantages and synergies that will accrue to WD over the long-term in having an internal media operation. We expect to close the transaction within this quarter and will hold a separate conference call at that time to provide further perspectives on this important step, and to clarify the impact of an integrated media business on our model going forward. To date we have commenced our tender offer we have submitted our requests for regulatory approvals with the appropriate authorities, and the waiting period under U.S. anti-trust regulations has expired.

A joint WD Komag integration planning team has been established and is making good progress in preparation for plan closing. In another strategic initiative, we recently completed the acquisition of Senvid, a software company well known for its MioNet software product,

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the innovative remote access and sharing service that distinguishes the WD MyBook World Edition from competitive offerings.

The Senvid team is being integrated into our branded products business unit and will further accelerate the development of innovative, simple, and elegant WD storage appliances and services for consumers. The terms of this modest but important acquisition will not be disposed.

This week we announced yet another significant WD Company and product line initiative. This is the industry’s first line of 3.5 inch drives designed primarily to reduce power consumption and help protect the environment, WD GreenPower hard drives. Our recently announced 1 terabyte drive introduces this new product category. Many of our customers have been asking for low power drive technology.

The WD GreenPower drives have been designed specifically to reduce power consumption far below other 3.5 inch drives in the market today as much as 40% less than 1 terabyte drives available from competitors.

WD branded products is now shipping My Book appliances, incorporating this technology that can store 2 terabytes of music, photos, video and other content. Subsequent applications for WD’s GreenPower drive technology will be in consumer electronics and the enterprise. Large enterprise data centers employing WD GreenPower drive technology will save hundreds of thousands of dollars annually in electricity costs and will reduce carbon emissions by thousands of metric tons.

We are very excited about the opportunities our customers will have to reduce energy costs and minimize their impact on the environment. I will now turn the call over to Steve Milligan for the Q4 financial report. Steve?

Steve Milligan

Thanks John. Revenue for the fourth fiscal quarter was $1.4 billion, and unit shipments totaled 24.9 million increasing by 26% and 30% respectively from the prior year. Average selling prices were approximately $55 per unit, down $3 from the March quarter and $1 from the prior year reflecting normal seasonal price declines and changes in product mix.

We shipped 3.8 million 2.5 inch mobile drives in the June quarter as compared to 3.7 million in the March quarter and 1.6 million in the year-ago quarter. Our growth in this important high volume market demonstrates a broadening acceptance of our products in mobile applications.

Turning to consumer electronics, we shipped approximately 2.7 million units for use in digital video recorders in the June quarter versus 2.6 million in the March quarter and 2.2 million in the year ago quarter.

Revenue by channel was 47% OEM, 36% distribution, and 17% branded products versus 47% OEM, 34% distribution, and 19% branded products for the March quarter. We had one greater than 10% customer for the quarter and that was Dell.

The Q4 geographic split of our business was 40% Americas, 26% Europe, and 34% Asia as compared to 36% Americas, 29% Europe, and 35% Asia in the March quarter. Our gross margin percentage for the quarter was 15.0% versus 15.8% in the March quarter, reflecting typical seasonal factors.

Operating expenses totaled $125 million. Operating income was $79 million or 5.8% of revenue. Net interest and other income totaled approximately $8 million. Income taxes for the June quarter netted to a benefit of $146 million and included a $147 million favorable adjustment to the company's valuation allowance for differed tax asset.

Net income totaled $233 million or $1.03 per share. For the full year WD reported revenue of $5.5 billion, net income of $585 million, and diluted earnings per share of $2.59. Full year net income included the $147 favorable tax adjustments.

Turning to the balance sheet, our cash and short-term investments at the end of the quarter totaled $907 million, an increase of $32 million from the March quarter. Cash generated from operations during the quarter totaled $154 million. For the full year, we generated over $600 million in cash flow from operations.

Capital expenditures for the quarter were $85 million. Non-cash charges for depreciation and amortization expense totaled $61 million. Capital additions for fiscal 2007 totaled $402 million and included investments in advanced head technology, new product platforms and capacity for broadening and growing product portfolio.

Depreciation and amortization expense for fiscal 2007 was $210 million. We repurchased 2.5 million shares of common stock during the June quarter for approximately $45 million. Since May 2004, we have repurchased 14.2 million shares at a total cost of $188 million, a total of $62 million remains under our existing stock repurchase authorization.

Our cash conversion cycle for the quarter was a negative 3 days, consisting of 46 days of receivable, 20 days of inventory or 18 tons and 69 days of payables outstanding, I will now turn the call over to Tim Leyden who will cover our outlook for our September quarter, Tim?

Tim Leyden

Thank you, Steve. This outlook is provided on a WD standalone basis. It does not incorporate the impact from the potential acquisition of Komag. We will provide updated guidance after the planned acquisition closes. We currently expect a relatively typical, seasonal September quarter.

Demand always very back end loaded is expected to increase from the June quarter as we entered the seasonally stronger back half based from the June quarter, as we entered the seasonally stronger back half of the calendar year. We expect price declines to be within seasonal norms. Accordingly, we estimate revenue for the September quarter to be between $1.45 billion and $1.5 billion. We expect gross margin for the September quarter to be between 15.5% and 16%.

Operating expenses are projected to be approximately $126 million. Net interest and other income is expected to be approximately $7 million.

As Steve mentioned, we reduced our evaluation allowance for deferred tax assets during the quarter. Going forward this will result in a higher effective tax rate for financial statement purposes, because we have now substantially recognized the future benefits of existing NOLs, tax credits, and other tax deductions. That's our fiscal 2008 effective tax rate is currently expected to increase to approximately 10%. However, on a cash basis, we expect payments for income taxes to remain around 2% of our pretax earnings until tax assets are fully utilized. Our share count for the September quarter is expected to remain flat. Accordingly, we estimate earnings per share are between $0.43 and $0.47 for the September quarter. I would emphasize that this EPS range reflects the increase in our effective tax rate, refer to above.

With respect to capital, we expect capital additions for fiscal 2008 to be between $600 million and $650 million including approximately $200 million for the previously announced expansion of our headway for fabrication capacity. Depreciation and amortization for the year is expected to be between $270 million and $290 million.

Again, all of the aforementioned amounts exclude any impact of our pending Komag acquisition. We will now open the call for questions.

Question-and-Answer Session

Operator

Ladies and gentlemen, we will now begin the question and answer portion of today's call. (Operator Instructions). One moment please for the first question.

Rob Semple you may ask your question and please state your company name.

Rob Semple - Credit Suisse

Thanks, Credit Suisse. Guys, if you could maybe talk a little bit more about the demand environment, it seems relatively bullish. We compare that to Seagate’s commentary about the TAM increasing 15%. Do you think that’s a reasonable assumption for the third calendar quarter?

John Coyne

Our view of the calendar quarter would be that it’s shaping up to be typically seasonal. That would imply to us a growth rate more in the 12% range based on the product mix that we have to offer and the segments of the market in which we participate.

Rob Semple - Credit Suisse

Okay and then just one follow-up. Where do you think industrial channel inventory is at this point?

John Coyne

Channel inventory, first of the industry has been in the four to six weeks range. That continues to be well controlled Rob.

Rob Semple - Credit Suisse

Okay thanks.

Operator

Thank you, Rich Kugele, you may ask your question, and please state your company name.

Rich Kugele - Needham & Company

Yes, Needham & Company. A couple of questions, first on the branded side especially since it’s so critical to your business now. Can you talk about what you are seeing as in the pricing perspective, we’ve been hearing from some other companies that how its increased in aggression. And from a margin perspective just looking at the segment, how does it compare to your other business lines desktop, mobile, etcetera?

John Coyne

I think, overall, branded is a great business, which on a global basis is growing rapidly. We've seen a lot attraction in the industry in branded over the last year. That's been reflected in, it's growth and importance to our overall business. I think that success has been driven not only by the demand in the market place, but by the Western Digital product offering and the Western Digital partners in terms of accessing that market. So, it continues to be of significant importance to us. We believe that’s our growth area for the future for everyone in the industry, as well as for WD. It has a positive margin profile. It's accretive to our business. And however like every element of the drive business, it remains a competitive space. And one needs the appropriate model from a business perspective to prosecute it successfully.

Rich Kugele - Needham & Company

Okay, and then I guess Tim just a couple of quick finance questions for the fourth fiscal quarter, if we are going to axe out this differed tax assets change here. What should we have assumed for the tax rate and then does that imply something like a $0.38 number? I just want to make to sure my math is right?

Tim Leyden

The tax rate assuming or excluding the evaluation allowance would have been like the 1% to 2% range, so you are right it would been around $0.38 from an EPS prospective.

Rich Kugele - Needham & Company

And then looking at the full fiscal '08 year, should we assume this 10% throughout the year?

Tim Leyden

Well, what's important to remember there is that our cash effective tax rate is still at 2% and we remained at that level for a number of years. We continue to evaluate the tax turning opportunities that could help navigate the increase in the cash tax rate, once our tax assets are fully utilized and this tax planning will also need to incorporate any effects from the Komag acquisition. And will bring you up-to-date once the tax planning has been settled upon. Currently the 10% is a pretty good number to use for planning purpose.

Rich Kugele - Needham & Company

Okay. And then just a last question is about this Green line. What tradeoff did you have to make to make these lower power? Is there any type of performance differences or what was the give and take from a technology prospective?

John Coyne

Right, I think the objective of the GreenPower product line is to provide customers with choices. The particular optimization in the GreenPower series is focused on power consumption while delivering solid performance characteristics in our other product lines. In 3.5 inch, we are offering high performance the 750 gig products announced in June, and shipping in June has the highest performance in the market place for a 750 gig drive. So, those are the optimizations that we do to address specific market characteristics, specific customer requirements, and we will continue to offer multiple choices to customers in terms of what characteristics are important to them.

Rich Kugele - Needham & Company

Okay. Thanks very much.

Operator

David Bailey, you may ask your question and please state your company name.

David Bailey - Goldman Sachs

Yes, Goldman Sachs. Just a quick question. Your volumes of 2.5 inch drives continue to increase and you are rolling out more PMR here. What progress have you made on the gross margin side and then and are your notebook gross margins equal to your desktop drives at this point?

John Coyne

David, we continue to see the gross margin profile in the notebook space improve, despite the fact that that remains a pretty competitive space from a pricing perspective. Still we are making good progress from a cost perspective, and I am sorry, what was the second part of your question?

David Bailey - Goldman Sachs

It was just on the ones equal to the desktop margins yet?

John Coyne

Our desktop margins, they still are below their corporate average, but they are improving.

David Bailey - Goldman Sachs

And then a while back you talked about entering enterprise in gaming segments. Can you give us an update on this and has that taken a lot or priority, now that you have the Komag integration in front of you?

John Coyne

No, I think our commitment to provide our customers with full line support remains our commitment to profitably grow the business remains. We have many current opportunities with the current products left to continue to grow the business, but we are as we indicated previously looking at the remaining areas in which we don’t currently participate and as our judgment of opportunity and fit to our business model matures, we'll go at that.

I think we've -- in terms of the impact of the Komag integration, while certainly that will require our attention; our track record of integrating component businesses has been that they fuel rather than hinder the prosecution of the overall business first.

David Bailey - Goldman Sachs

Okay. Thank you.

Operator

Thank you. Jeff Brickman you may ask your question and please state your company name.

Jeff Brickman - UBS

Great, thanks, UBS. I just want to ask a couple of questions. One on desktop growth being very solid on the quarter, please talk about those, the price in unit demand environment that you experienced?

John Coyne

Yeah, I think as an overall statement both in notebook and desktop environments, pricing in the last quarter continued to be competitive. I think as we look forward into the traditional stronger seasonal period in the next couple of quarters, we have already begun to see evidence of our customers understanding that supply is a critical element as well as pricing. And so, I expect that we will see our customers at placing more value on supply and the ability of companies to reinvest in the technologies and the product breadth that will support their future needs.

Jeff Brickman - UBS

And just from a demand perspective, I mean, it seems like obviously it goes back now to above 10%. Did you see kind of an uptake specifically from them in desktop or is it more a statement of just overall growth being there?

John Coyne

I think it was a pretty healthy quarter for the industry, and modest movement in our overall product mix affects that largest customer issue. So, I wouldn't see any really significant movement there, it is a very marginal thing.

Jeff Brickman - UBS

Okay, and then just lastly, back to branded again, I think now it's kind of vast, but obviously growth here continues to be solid, but it seems like it slowed little bit from the previous quarter. Are you seeing anything specifically from a competitive perspective or even mark share of price perspective that’s driving that or is it just kind of the seasonal part of year or you think you would see may be little bit slowness?

John Coyne

I think the primary influence was the slowness, I think branded is more seasonal in the June quarter than most of the other business segments.

Jeff Brickman - UBS

Okay. Thanks a lot.

Operator

Thank you. Mark Miller you may ask your question. Please state your company name.

Mark Miller - Brean Murray

Mark Miller with Brean Murray. I'm just wondering, since we are talking about branded products, what do you attribute to your success to that market? It's certainly going very significantly for you.

John Coyne

I think Mark, the critical success factors have been our product line and that the product itself both in it's industrial design and in it's software embedded features make it extremely easy to use and extremely intuitive for our customers and then I think our channel partners who take that product to market I think our relationship’s there and our choice of those channels and the way we work with them has been a significant element of our success.

Mark Miller - Brean Murray

You are kind of projecting 12%, CE is projecting 12% to 15%. To me that's a very healthy September quarter. At the same time however I think implicit in your projections and also CE is a fairly stiff degree of price erosion and I guess historically when we've seen a quarter that's going 12% to 15% sequential growth, it's a unusual to see that much price erosion. Are you guys being conservative or you really feel we're going to continue in that vein.

John Coyne

We are putting it together Mark from our historical, seasonal perspective. Well, I have to wait and see how it shapes up but as you know this is a very backend loaded quarter, it's really September that decides the outcome.

Mark Miller - Brean Murray

One final question, can you give us any feeling of where you are at in the perpendicular in terms of percentages either in the June quarter or the next quarter, will it be up to 40, 50 or more percent in the September quarter as total drive shifts came perpendicular?

John Coyne

Well, Mark we don't focus on that element we focus on the performance of the business and tuning the business model to the customer requirements. What I can say is that virtually all of our 2.5 inch programs shipping today are on PMR, we have several programs in the 3.5 inch space that are shipping off PMR. And we will continue to blend the technologies in use to satisfy our business model and our customer’s requirement for capacity, quality and reliability.

Mark Miller - Brean Murray

Just now, I guess very soon after me and maybe other people, is that its general belief is that I should convert the PMR and other people reported it that better yields in growth. So we're just trying to factor in, how much upside there might be from the conversion of launched integral drives with the same density to appear more drive at the same density or capacity? See my point.

John Coyne

I understand your point exactly, I think you have to look to the bottom line performance of the company and its competitors to the German whether that’s a good metric to be monitoring.

Mark Miller - Brean Murray

Alright, thank you.

Operator

Thank you. Christian Schwab, your line is open. Please state your company name.

Christian Schwab - Craig-Hallum Capital Group

Craig Hallum Capital Group. I have quick question, do you think Steve that you have a decent opportunity for mix up in September as far as high capacity drives is in the desktop? Or do you think that we’ll follow historical standards and be more with December quarter event?

John Coyne

Right now we are mapping historical seasonal performance. I will say however that we have seen tightness, particularly in the 500 gigabyte 3.5 inch space. There appears to be significantly stronger demand around that capacity point than the industry is currently geared to support.

Christian Schwab - Craig-Hallum Capital Group

Okay. So that would be in line with what we have been hearing that your largest competitor has stopped discounting that drive and you guys followed suit. Did you -- are you seeing -- do you think that comes down to the 250 gigabyte or do you think it just remains at that capacity point? Can you explain why there would be so much stronger than anticipated?

John Coyne

I think we’re perhaps seeing an emergence of a series of strong capacity points to 5500 1 terabyte that are to some extent breaking the pattern of the 16320 pattern that was in existence previously. And so I think, we are seeing some conversion of what historically, if you trend it from a historical basis. Demand that would have been 320 demand has migrated up to 500. And so I think that’s why we are seeing a stronger than typical trend pattern on the 500 gigabytes capacity point. And the industry is adjusting itself to support it..

Christian Schwab - Craig-Hallum Capital Group

And then, just on OEM pricing. The term is for the September quarter, was it anything out of the ordinary there in regards to certain OEM’s being any more or less aggressive than you typically assumed?

John Coyne

No, I wouldn’t, we haven’t seen anything out of the ordinary.

Christian Schwab - Craig-Hallum Capital Group

Great. I'll move for the questions. Thanks.

Operator

Thank you once again. If anyone does have a question. (Operator Instruction). Andrew Neff, your line is open, please state your company name.

Andrew Neff - Bear Stearns

Bear Stearns. Just to clarify two things, one, when you report your numbers going forward which tax-rate are you going to show, next year?

John Coyne

We are going to show the financial statement tax-rate.

Andrew Neff - Bear Stearns

The one time.

John Coyne

10%,

Andrew Neff - Bear Stearns

The (UE) has a 10% tax-rate.

John Coyne

Around 10%, yeah.

Andrew Neff - Bear Stearns

And then how long will that tax-rate run for?

Tim Leyden

Well as I indicated, we are evaluating tax-planning at the moment, which could mitigate the increase in our cash tax-rate, with our tax assets fully utilized and the Komag acquisition, the potential Komag acquisition will actually have to be taken into account in that tax planning and that will impact the amount of time, but right now it looks like about two to three years under the current situation. Okay, and the EPS -- so the EPS you gave were based on the 10%, okay. And then lastly just on a competitive basis, any sense of, with general common sense on competitive environment, any supply constraints to see out there?

John Coyne

I don't see any significant supply constraints. We are seeing good seasonal demand, and hopefully that will continue.

Andrew Neff - Bear Stearns

Thank you.

Operator

Thank you. And our last question today comes from Paul Mansky, your line is open. Please state your company name.

Paul Mansky - Citigroup

Yes, it's Citigroup. Best of my recollection, it’s the first time you've actually talked a little bit more specifically about your enterprise and diverse, and that you actually called out some rough market share mentions. Can you drill down a little bit further, may be even go so far, as to talk about absolute unit volumes there just provide us some context?

John Coyne

Well, we are not going to go there on this call, but yes, I think it's probable that in the future we'll see the industry categorize that enterprise side of space either as part of the enterprise or as a unique subside of the enterprise.

Paul Mansky - Citigroup

Okay, and then I apologize if you mentioned this, I was talking to a few different calls, but did you call out exactly what the stock base compensation was in the quarter?

John Coyne

It was similar to -- well we don't break that out separately Paul. But it's similar to what we've seen from prior quarters, which it gets disclosed I guess in our SEC fillings but then in the right $4 to $5 million range.

Paul Mansky - Citigroup

Okay, great. Thank you, very much.

Operator

And I'm sorry. We do have one more question, Christian Schwab. Your line is open.

Christian Schwab - Craig-Hallum Capital Group

Great. The movement on your desktop drives from 80 to 160 in the single platter solution. Can you give us an update on where you stand there?

Steve Milligan

Where?

Christian Schwab - Craig-Hallum Capital Group

As far as maybe a possible percentage of units that are shipping at the 160 level, where you would expect that to the end of the calendar year?

John Coyne

I think I can tell you that we are shipping a mix of desktop products that’s pretty similar to the mix in the industry, and that that’s being delivered of a variety of technologies that meet our business model.

Operator

Thank you. I would now like to turn the call over to Mr. John Coyne.

John Coyne

Thanks [Olive]. So in closing I am very excited about the outstanding opportunities for growth in the storage demand. I'm confident that the WD team values of passion, action, productivity, perseverance, innovation and integrity will continue to drive profitable growth for the company and create value for all of our stakeholders as we address the opportunities in the months and years ahead.

I thank all of you for joining us today, and look forward to reporting on our progress in the next call.

Operator

Thank you. This does conclude the conference call. You may disconnect at this time. Have a great day.

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