Good afternoon and thank you for standing by. Welcome to Western Digital's First Quarter Fiscal 2019 Conference Call. At this time As a reminder, this call is being recorded. Now, I will turn the call over to Mr. Peter Andrew.
You may begin.
Thank you, and good afternoon, everyone. This conference call will contain forward looking statements within the meaning of the federal securities laws, including business plans and strategies, industry trends and business and financial outlook. These forward looking statements are based on management's current assumptions and expectations and we assume no obligation to update them to reflect new information or events. Please refer to our most recent annual financial on Form 10 K filed with the SEC for more information on the risks and uncertainties that could cause actual results to differ materially. We will also make references to non GAAP financial measures today.
Reconciliations between the non GAAP and comparable GAAP financial measures are included in the press release and guidance summary that are being posted in the Investor Relations sections of our website. During the Q And A, we ask that you limit yourselves to one question. Before I pass the line to Steve, I want to alert everyone that in an effort to provide investors greater transparency into our business, and make our earnings related information easier to find, we've made a number of significant changes to the information in the earnings related materials posted on our website. All of these materials can be found in the Investor Relations sections of our website under quarterly results and earnings documents.
Please take a
few minutes to check out this new material and we look forward to hearing your feedback. With that I will now turn the call over to Steve Milligan, our CEO.
Thank you, Peter, and good afternoon, everyone. With me today are Mike Cordano, President and Chief Operating Officer and Mark Long, Chief Financial Officer. After my opening remarks, Mike will provide a summary of recent business highlights and Mark will cover the fiscal first quarter financials and wrap up with our second quarter guidance. We will then take your questions. For the first quarter of fiscal 2019 we reported revenue of $5,000,000,000 and non GAAP gross margin of 38%.
Non GAAP operating expenses were at the year ago level, and with the help of a capital structure that has significantly reduced interest expense, we delivered $3.04 and non GAAP earnings per share and over $700,000,000 in operating cash flow during the quarter. While our first quarter results were impacted by declines we experienced strong performance in capacity enterprise, surveillance hard drives and embedded flash solutions with each growing revenue are creating a more changes in monetary policy, foreign exchange volatility, and the corresponding economic impacts are causing our customers to be more conservative This softening demand in combination with increased splash supply has led to a market imbalance resulting in a deteriorating near term flash pricing environment. In response to these conditions, we are making an immediate reduction to wafer starts and delaying deployment still Q3 twenty nineteen. The goal of these actions is to better align our output with the projected global demand will depend upon market conditions and will not impact our ability to meet nor will it impede our ability to deliver the most innovative and cost competitive solutions to the market Longer term, we remain focused on technology leadership, the broadening of our product portfolio, and continued operational improvements.
Highlights of our recent successes in these areas include leadership in bringing the highest capacity and lowest total cost of ownership solutions to cloud customers with our recently introduced 15 terabyte SMR based hard drive. Successful introduction of 96 layer Bix4 solutions including our latest SADA based client SSD in the industry's first UFS 2.1 embedded Flash derived, drive for high end smartphones. Ongoing growth in data center systems and industry accolades for our active scale object storage systems. Gartner has recognized active scale as a challenger in the 2018 Gartner Magic Quadrant. And operational improvements that include the rightsizing of our hard drive manufacturing footprint.
We remain well positioned to capitalize on the long term opportunities associated with I want to thank December 4th to provide further insight about our plans to deliver long term shareholder value through ongoing growth and leadership in today's data driven world. With that, I will now ask Mike to share our business highlights.
Thank you Steve and good afternoon everyone. As Steve mentioned, we are taking aggressive actions to align our supply of flash to current end market demand. I'd like to provide some additional insight into our actions announced today. Our immediate reduction in wafer starts and delayed deployment of capital equipment is a reflection of the adjustment to bit supply growth needed to improve is a reduction of With these adjustments to our supply we expect our bit growth in calendar year 2019 to be in line with our view of end market demand growth of between 36% to 38%. We will continue to monitor market conditions and make additional adjustments either up or down as the situation dictates.
As we enter the 2nd fiscal quarter, we are faced with a number of market factors that will impact We expect to be negatively impacted by the widely publicized CPU shortage industry analysts have estimated the PC unit growth will be constrained between 5% We are experiencing a temporary slowdown in data center capital spending, particularly by large cloud service providers, after several quarters of growth above are in the midst of adjusting to a more normal growth rate. For the calendar year of 2018, we now project capacity enterprise exabyte growth of approximately 55%. Based on discussions with our customers, we expect stronger growth to resume in the second half of calendar year twenty nineteen. Steve has already talked about how global business environment is contributing to a risk averse orientation with our end markets. These dynamics are having a disproportionate impact on certain end markets outside the U.
S, particularly China. As a management team, we are well aware of the current macroeconomic and industry conditions and are taking appropriate actions to respond while ensuring we invest for future growth and leadership across the markets we serve. Examples of our progress in the first quarter were we maintained our leading position across all the brands in our Client Solutions portfolio including Gtech, Spandisc and WD. Client devices experienced healthy demand in both surveillance hard drives, and embedded mobile flash solutions versus a year ago. Leading smartphone providers continue to increase the average capacity per device which is driving ongoing growth for year over year driven primarily by continued demand for our we experienced record revenue in our emerging data center systems products.
A strategic growth area we will discuss in more detail at our upcoming Investor Day in December.
Thank you, Mike, and good afternoon, everyone. As Peter mentioned earlier, we've updated our disclosures to provide investors with additional transparency into our business. In particular, we are providing a breakdown of our total These disclosures are included within the I will now review Revenue for the September quarter was $5,000,000,000 a decrease of 3% on a year over year basis and below our original outlook for the quarter. The shortfall was primarily driven by weaker than expected flash pricing. Specifically, our Flash based products had revenue bit growth of 28% sequentially, while the average selling price was down 16%.
The September quarter revenue for data center devices and solutions was $1,400,000,000, an increase of 6% year over year. Our data center revenue growth continues to be driven by cloud related storage. Client devices revenue was $2,700,000,000, which was essentially flat year over year. We had significant growth in embedded flash and surveillance products, offset by client compute hard drives. Client solutions revenue was $932,000,000, a decrease of 18% year over year.
Driven by the normalization trends for the in Flash ASPs. Non GAAP OpEx for the September quarter totaled $820,000,000, consistent with the prior quarter. On a non GAAP basis, net income for the September quarter was $906,000,000 or $3.04 per share. In the September quarter, we generated $705,000,000 of operating cash flow. We continue to reinvest in our business with $248,000,000 in capital investments resulting in free cash flow of $457,000,000.
In the September quarter, we had a sequential increase in inventory primarily driven by a return to normal operating levels for capacity enterprise products. Flash inventory grew slightly contrary to normal seasonal trends as a result of of which $148,000,000 was in dividends and $563,000,000 was through share repurchases. These share repurchases put us on target of our goal to repurchase $1,500,000,000 of our common stock during fiscal and demonstrates We closed the quarter with cash, cash equivalents and available for sale securities totaling approximately $4,800,000,000. Before I provide our guidance I would like to describe the financial impact of our decision to reduce our flash output through reduced wafer starts and delayed deployment of capital equipment. We expect to reduce our planned flash output by approximately 10% to bring our calendar year 2019.
Based on our current plan to temporarily reduce our flash output, We expect to take fiscal year 2019. This charge is driven by our fab capacity decisions and does not reflect an incremental cash payment. As Mike indicated, we may adjust our plans based on market conditions and this could impact the extent of any charges. I will now provide We expect revenue gross margin in the range of 32% to 33% operating expenses between 760 and $780,000,000 interest and other expense of approximately $105,000,000 an effective tax rate of 10% to 12%, diluted shares of approximately $295,000,000 As a result, we expect non GAAP earnings per share of $1.45 to 1.65. I will now turn
questions. Our first question comes from Aaron Rakers of Wells Fargo. Your line is now open.
And I appreciate the additional disclosures given tonight. I just want to try and dissect a little bit the guidance that you just laid out. Help us under and the variables to consider between the hard disk drive revenue assumptions and that of the flash assumptions. And then also on the gross margin line, it looks like just simple math is that you're able to take your costs down by a high teens percentage rate on a year over year basis this last quarter. How are you thinking about the cost down equation and what's the assumption you're making for flash gross margin in this current quarter?
Thank you.
Why don't I let Mike talk about the the product side and the cost side first. And then I'll finish with the modeling question.
Yes. So on the cost down, just as we think about costs, we've talked about the long term range of between $15.25. We've been operating in expect to be operating near the low end of that. We continue to see that as our expectation and obviously we'll update this further with more perspective at the Analyst Day in December. Relative to the product impacts, it's roughly impacted equally on both sides between the HDD and the Flash business relative to the impacting question.
Yes. So from a modeling standpoint, when you think about the HDD side, the capacity enterprise and client compute, contribute to the decrease in revenue. And then on the flash side, we have, the pricing environment, reducing revenue as well as mobility declines. The margin changes are largely a function of the flash pricing environment and then the lower mix of capacity enterprise on the hard drive side.
Thank you.
Thank you.
Our next question comes from Wamsi Mohan of Bank of America. Your line is now open.
Yes, thank you. Steve, appreciate the incremental disclosure on the flash side. That's very helpful. Clearly you're taking some actions here to curtail flash output to be in line with demand, but can you give us some sense of how long do you think that it might take to get the supply demand back into balance? Sounds like mid next year possibly in the way that you're currently thinking about it?
And why do you expect this action will be followed strategy of potentially share gains that is they keep pricing down and try to gain bit growth opposed to sort of reducing output similar to what you're doing?
Yes. So let me add color on that. Our the efforts that we're taking are intended to get our supply demand equation in balance by the middle of what the rest of the industry is going to do. And so your comment in terms of why do we think that the industry is going to follow that, that's not a quick characterization that's going to depend upon the behavior of our competitors. And so really what we're trying to do is if you want to call it that get our own house and order so that we are better positioned to take advantage of, let's call it the long term growth opportunities in the market.
And in particular, to kind of put a finer point on it, we would expect that demand from a seasonal perspective would pick up in the second half of calendar twenty nineteen and getting our inventory situation and better balance will position us better than we otherwise would have been if we had not taken these actions.
Yeah. And just to add a little color on that, our cuts are bring us in line with what we expect the end market demand to be so straight calculation there is it's obviously intending to maintain share.
Yes. And the other thing that I would add is that there is no intent or implied shift bit share loss in our numbers. In other words, as I indicated in my prepared remarks, we still intend to have enough bits or supply to demand our customer commitments. This is really a matter of has been outstripping demand for a variety of different reasons. We want to get that access out of the system and better position us going forward.
Thanks, Tim. Appreciate the color. If I could really quickly, when you think about the gross margin trajectory here, obviously, the flash margins have been compressing here a few quarters and going to continue. But as you think about these capacity reductions, coming ahead, should we expect gross margins to compress beyond the December quarter here like at least for the next couple of quarters at this point? Thank you.
Well, it's a great question.
And the reality is, is that I'll be sort of literal. We don't know for sure. We're going to have to wait and see. But we would expect that we would continue to face a challenging flash market through the first half of calendar twenty nineteen. And so that, that implies that there could be further margin compression, but at what rating, I mean, we'll have C.
But we don't. These reductions that we're making from a wafer start perspective will not begin to hit just because of lead time for us until the first quarter of 2019. It will primarily allow us to reduce our inventory. And then of course, we've got the demand environment that we're dealing with and whatever competitive dynamics we'll be dealing with. We do expect the first half of twenty nineteen to continue to be challenging, for us and for the industry.
Thanks a lot.
You. Our next question comes from CJ Muse of Evercore ISI. Your line is now open.
Good afternoon. Thank you for taking my question. I guess in light of the wafer start change and delay in CapEx, I would love to hear your thoughts on how you think about scale and other factors to enable, best of breed costs down in this highly competitive market So are there other avenues to lift that sort of low end of the range of 15% that you're focused on perhaps pulling in 96 layer or above or faster move to QLC Would love to hear your thoughts, particularly in light of 6 players plus YMTC entering the fold? Thank you.
Yes. Relative to the cost declines, you're on the points. It's tech transition. So rate in which we convert to the next node and the implementation of QLC over the longer horizon. That's a bigger lever.
The thing we are highlighting in our projections as of now is just the realities of the 3 d era, right? They're more capital intensive and the cost declines are going to certainly be less than they were in the 2 d era. So that's all part of how the market and the industry is having to plan differently.
Yeah. And we continue to because of the joint venture structure and that we continue to expect to benefit from scale despite the reduction in wafer starts because it's only our capacity that we're reducing those wafer starts. But if you look at the total output of the joint venture, we continue to have the broader benefit of a scale semiconductor manufacturing operations.
Very helpful. Thank you.
Thank you. Our next question comes from Amit Dariani of RBC Capital Markets. Your line is now open.
Hi. This is Amitesh Bajjad for Ahmed Theryanani. Thanks for taking our question. Just on the NAND ASPs decline, do you, at this point, see any risk of you having to cut pricing on the ACD side as well or actually at what point do you think that NAND ASP declines could pressure you to cut HDD pricing to prove to slow down the substitution of SSDs versus HDD?
Yeah. I think in the case of relative pricing there, that's not the direct impact. It really is the rate of cannibalization and we have seen that accelerate, we would expect we exit the year about 60% in terms of SSD versus HDD in the PC space.
Yes. And just to comment on that, because As painful as it is, the announced closure of our Kuala Lumpur Manufacturing Facility anticipated continued decline, particularly in terms of client hard drives. And so that expected uptake in terms of of SSDs for hard drives has been factored into our plans and we'll continue to look at opportunities at at how do we optimize our manufacturing footprint in light of that? But the KL activity that closure, not ticket likely, but was done in direct response to that anticipated uptick.
Thanks. And if I could just have one follow-up the cost downs of 15% to 25% range, do you think that could have like some kind of a downside by next year as you ramp up 96 layers?
So if your question is a downside bias to lower end of that range, I think we'll give you more commentary in December what we think next year will look like.
Fair enough. Thank you very much.
Thank you. Our next question comes from Mady Hosseini of Susquehanna. Your line is now open.
Thanks for taking my question. This is for the entire team. Inventories have been going up since earlier this year. And I'm just curious how you're thinking about the debt covenants, especially given your guide and your comment about the margin erosion. Is there any of the covenants that would be at the risk of default And is there anything other than the cost down, manufacturing cost down that you could do to improve cash flows and minimize the downside risk?
Thank you.
So in terms of our covenants, through our refinancings and the optimization of our balance sheet earlier in this calendar year. We put ourselves in a good position to manage through volatility. And we remain in good standing with respect to our covenants and our current forecast keeps us in a good position with respect to compliance. As it relates to managing cash flow. We are looking at all the levers.
As Steve pointed out, that's part of our overall review We look at our manufacturing footprint. We look at how we manage working capital. We look at our OpEx levels. And we are constantly pushing to both manage our business as efficiently as we can with respect to the current market environment and then make sure that we are also investing in the right ways for what we see as some very good long term opportunities and some very good growth potential, on the capacity enterprise hard drive side and in the flash business.
Yeah. And Mehdi, just add color to that because I think it's important to emphasize. When we looked at The decision to cut capacity, not capacity. I mean, ultimately, what we were solving was what did we think was a better answer from a cash perspective. And that action in and of itself, just as a for instance, provides us with a meaningful that we are constantly looking at mechanisms to optimize not only on a short term basis, but on a long term basis.
But what is it with
inventory? And it ties into my question. The days of inventory are up 30% year over year and up 2% Q over Q. And this is a kind of a repeat pattern that happens. And I'm just understand as you focus on cost down, is there something with the mix or is there something with your inventory hubs that is it still to be looked at.
Well, let me give some color on the inventory situation. The inventory the inventory is up It's up more than we want it to be. Okay. Let's put that out there first. But it's up for 3 principal reasons.
One is, is that we have more flash inventory than we'd like, right? That's why we're taking the wafer start cuts so that we get that inventory back down to a more acceptable level better matched in terms of supply and demand. So that, that will be corrected barring there being other changes in demand and that kind of thing. That will be corrected over the course of the next, well, through the middle of calendar 2019 because of those actions. The other thing is, is that we have built up a bit of more inventory, not excess inventory, but more inventory as we as we look to close our Kuala Lumpur facility and transition that manufacturing, we need some buffer inventory to enable that transition because you can't unplug it from one factory and plug it into another factory and not lose any manufacturer.
You have manufacturing downtime as a a consequence of that. That's the second reason. The third reason is that we have largely been running over the course of the previous 9 months, let's just say, at very high demand levels in terms of capacity enterprise. And so we've been a little bit let's call it hand to mouth without much buffer inventory in terms of capacity inventory. As that market well, not only begins to soften, but as it softens, we'll see a returning to a more normal level of capacity inventory for capacity hard drives because the demand predictability on the part of our partners or our customers is not necessarily that great.
They don't want to go down in terms of having drives And so we tend to hold a little bit more extra inventory for them in order to maintain high levels of service. So that's in brief the explanation of what's going on with our inventory balance.
Thank you. Our next question comes from Joe Moore of Morgan Stanley. Your line is now open.
Great. Thank you.
Sorry if I missed this, but could you give us a little bit more color on the non cash charge or the non GAAP charge or the GAAP charge, I should say, that you're taking to take the utilization down I guess my understanding of the way the JV fab works is that when it's underloaded, do you still pay the cash the higher cash costs for those wafers? Reflecting the under loading. So can you just help me understand what that charge actually is?
So the technical structure of the JV is not, as you described. It's actually that we make cash payments to our the JV, but they're not it's not for the purpose of purchasing wafers. As a result, it's what I referred to as the, we have no incremental cash payments But we do continue to make cash payments in connection with our JV agreement for to basically pay for the CapEx depreciation, etcetera, The
CapEx that we have not funded directly.
Exactly. And they
own the buildings. They do that. They have the labor. We have pay for the labor, things like that.
Right. So these are this is a true, underutilization charge that we are taking, not a it doesn't have anything to do with the purchasing of wafers.
Got it. Okay. Thank you very much.
Sure.
Thank you. Our next question comes from Manjal Shah of UBS. Your line is now open.
Yes. I had a question on the capacity drives. How broad based is the softness from your end customers? You mentioned outside of U. S.
Macro impacts, but is it more broad based on the capacity enterprise side?
Yes. So in the capacity enterprise side, it is quite broad based. We're seeing it sort of across all. Our comments relative to China were not specific to the cloud providers. It's really more broadly our assessment of the market in China.
So just to separate it distinctly broad impact on cloud service providers on a worldwide basis and then the China economy to broad market slowness and John. Yeah, just to add to that,
I mean, really what we're seeing and I don't want this to sound alarmist, but we've seen other people talk about it in terms of reports in that the simplest way of characterizing it in terms of what's happening from a broader demand perspective is there's a bit of a risk off kind of mentality in terms of our customers and markets, all that. So everybody is kind of leaning out in effect their supply chains. So if you look at the hyperscale guys, they're going to push up their utilization rates to higher levels than maybe what they were operating at. If you look at say it's PC cut. They're going to thin out their inventories or channel partners are going to channel.
So there's a but it's generally under this guise of kind of just taking a little bit of air out of the balloon from a risk standpoint, we are doing the same. We are absolutely doing the same. And taking actions from a cost, from a capacity perspective, from an expense perspective that is reflective of that environment.
That's great. Thanks. And just related, do you think that the cloud might have like double order. I know you mentioned that you keep extra inventory kind of wide service, but do you think that they might have given higher forecast or wouldn't more. That's why you have inventory?
No, I don't think we have any specific indications of that, but I think as Keith said, they are a more conservative posture. I think in some indications there continue to consume some inventory, but that's not the primary driver.
Thank you very much. Thank
Our next question comes from Jim Suva of Citigroup. Your line is now open.
Thanks very much. Given what the share price has done recently plus your outlook to earnings, any changes to when you think about capital deployment for your stock buyback or the cadence of it? Or do you need to keep that cash a little more handy for your closing of Kuala Lumpur and your shifting in other businesses. Just wondering if there's any change in the tempo. I'd know what you've done historically.
That's for sure, but thinking of getting a pulse in the sense currently?
Sure. There's no change, yes, there's no change to our capital allocation strategy. As we've said, We have a balanced strategy. We allocate the capital among our top priorities. So investing in the business, our CapEx, And then we look at, of course, the dividend and our share repurchases we had targeted $1,500,000,000 for repurchases in fiscal 2019 And as we said, we remain on track for that.
So there's really no change other than we do agree that with the current share price It is an attractive, use of capital. And we will factor that into our balance strategy going forward.
And then as a quick follow-up, you mentioned the word dividend. That was my follow-up is how should we think about dividend going forward? Do you use it as a percent of cash flow as a rate of change in earnings, could the dividend be reduced since the yield is going higher? How should we think about the dividend?
Well, dividend is a critical part. We're not that formulaic, I would say, number 1, but that you know, dividend is a key part of our capital allocation program, if you want to call it that. And we continue to expect it to be that way going forward. And we'll look at different factors and see if we want to modulate it. But clearly in the short term, we're not looking at anything that would, we're not looking to cut the dividend, I can assure you of that.
Thank you. Our next question comes from Karl Ackerman of Cowen and Company. Your line is now open.
Good afternoon, gentlemen. I had two questions, if I may. First question is just really perhaps trying to level set some things on what is your comfort level about hyperscale and demand beyond the December quarter? I think one of your primary memory peers spoke about some challenges in server demand, server memory demand for the first half of twenty nineteen. I'm just kind of curious how should we think about the impact on your nearline hard drive business.
Let me answer that.
So yes, as I said in my prepared remarks, we expect more robust growth to return to that sector in the second half of calendar twenty nineteen. So that's the way we're thinking
about it.
So the first half will continue to be certainly weak compared to what we saw last year, but that was we were the growth was above the longer term exabyte growth rate of 40%. But we expect this want to call it, stall from a buying perspective to persist through the first half and then, resume the more normal patterns in the back half of twenty nineteen.
Understood. I guess with that demand backdrop, you obviously run a fairly lean operation today, but how should we think about the trajectory of OpEx as the macro drives some lower revenue near term, but you're also going to rationalize your hard drive facility. Any commentary there would be helpful. Thank you.
Yeah. So as I think both Steve and Mike mentioned, we are very focused on optimizing our cost and expense structure, given the market environment, as we indicated, OpEx will be trending down in the current quarter. And we will look for opportunities to continue to improve that and reduce that going forward. So
While also making sure that we're not cutting our nose off in spite of our face in terms of enabling our technology and product competitiveness over a longer threshold.
Thank you.
Sure.
Thank you. Our next question comes from Ananda Baraju of Lake Capital. Your line is now open.
Hey, good afternoon. I appreciate you guys taking my question. Just sticking right there, Steve, if we could with nearline, should we think, I mean, what do you think is wise for us to do as you think about first half of twenty nineteen exabyte? Should we think of it as flattish? And I know the term growth, even though muted has been used.
So do you actually think we can get back to a little growth or should we think of it as this more flattish or actually just how should we think of it? Yes.
I think the best way
to think about it year over year is very flattish.
Got it for 1st half. And then the thinking is
on exabyte terms. In exabyte terms, correct.
Got it. Thanks. And then as Steve, you had mentioned sort of the risk off, broadly, is there any way to get a sense of or do you guys have a view on for nearline? How much of sort of the exabyte softening is risk off versus just sort of cycle winding down?
I'm not sure. I'm smart enough to dimension that. Sorry to see if Mike's got a sense for that. Yes.
I think it's a combination of the 2. I think obviously there's been a rapid build out that has been occurring different providers have had different drivers of their build out. So in some instances, they're one time things that are sort of behind them. And other instances, as you know, in addition to the risk off, once they do a large build out, they'll move into an optimization mode. So there's some of that going on as well.
So it's a combination of those things that are really creating the demand environment we're articulating here.
Thank you. Our next question comes from Kevin Cassidy of Stifel. Your line is now open.
Hi, this is John Donnelly on for Kevin. Thanks for taking my question. In terms of the CPU shortage, can you describe how you see your customers positioned? Are they waiting to buy the storage components or is there a potential for some excess inventory to build up there?
Our view of it would be this. First of all, depending on which part of our market it it's not, let's call it, proportionally impacting the market. So it's less in the 1st in the 1st tier and more elsewhere. And there's we actually see it as a constraint to shipments in the period. So that's how we are evaluating it.
Thank you. Our next question comes from Vijay Roshka of Mizuh Mizuho, your line is now open.
Yes, hi guys. Just looking at the 2019 guide, on NAND for to 38% bit growth. Just wondering how you spread it between 64% 96% layer?
We haven't commented on that. We'll give you more insight on that in December.
But I will add that we are making good progress I mean, very pleased with our ramp up 64 and 96 layer technology. So we feel that we are very competitively positioned in that regard.
Got it. And on the hard disk drive side, you talked about nearline being a little flattish year on near staff. But do you see what kind of cost declines could you get or in a density increases could you get next year in terms of when you compare to the cost declines on NAND side?
Yes. So relative to the data center side of the business, capacity enterprise, in particular, we think that cost decline runs roughly at the same rate. So in that sort of 15% to 25%. So it tracks nicely.
Thank you. And our last question comes from Nehal Chokshi of Maxim Group.
I wanted to get a sense as to what you felt the new entry Yixi Memory Technologies cost competitiveness is relative to your joint venture with Toshiba and whether or not they are absorbing some of the share given the trade tensions that you've talked about?
Yeah, they're having minimal impact at this point, minimal to no impact.
Okay.
All right. Thank you. Thank you.
Thank you.
So thank you, Greg. I'm sorry, proceed.
And this does conclude our question and answer session. I would now like to turn the call back over to Steve McGowan for any closing remarks.
All right. Thank you for joining us and we look forward to seeing many of you on December 4th at our Investor Day. Have a good rest of the day. Thank you.
This concludes today's conference call. Thank you for joining.