[ Financial Results for Fiscal 2006 Performance Briefing ]HDD Head Business Outlook

Mr. Takehiro Kamigama
Director
Executive Vice President
General Manager
Data Storage & Thin Film Technology Components Business Group

I'm Takehiro Kamigama, general manager in charge of TDK's head business. I would like to report briefly on this group's results for fiscal 2006 and our forecasts for the current fiscal year. Regarding fiscal 2006 results, net sales were 315.9 billion yen thanks in part to a large increase in net sales in the second half to 175.6 billion yen. Our fiscal 2006 net sales forecast at the last earnings conference was 303.7 billion yen.

Next I want to discuss our forecasts for the current fiscal year. For the first half, we are projecting net sales of 141.5 billion yen. The second-half sales forecast is 141.2 billion yen. So our forecast is for net sales of 282.7 billion yen in fiscal 2007, which would represent a decline of about 10% year on year. The single biggest reason for this projected decline is the impact of the loss of Maxtor Corporation sales, as Mr. Sawabe discussed earlier. At our previous earnings conference, we stated that if unit-volume shipments to Maxtor in the second half of fiscal 2006 were 100, we were projecting shipments of 75 and 50 in the first and second halves of fiscal 2007, respectively. However, because the merger of Seagate Technology and Maxtor will take place quicker than assumed, we are now projecting an even greater impact than before on shipments. Our full-year forecasts for fiscal 2007 assume shipments of 45 in the first half and 0 in the second half on the same basis. This sharp decline in sales is factored into our fiscal 2007 projections, as I said.

We recorded a market share of 36% in fiscal 2006. However, we are projecting an average share of only 32% for fiscal 2007 because of the loss of Maxtor sales.

The final subject I would like to cover is the qualification schedule for new products for 3.5-inch and 2.5-inch HDDs.

Qualification of 160GB/P products for 3.5-inch HDDs is progressing smoothly. We therefore expect to begin limited mass production about next month. 200GB/P and 250GB/P products will come next, but we think that customers might skip 200GB/P products and go straight to 250GB/P products. In terms of the schedule, we expect mass production to begin in March or April next year, but it could happen a little sooner than that. January 2007 is a possibility using TMR heads based on perpendicular recording technology. But this depends on the media, the hard disks.

Regarding 80GB/P heads for 2.5-inch HDDs, some customers use longitudinal recording technology while others use perpendicular recording technology. Here too we think that mass production of these heads will start next month. Regarding 100GB/P and 120GB/P products, customers may skip 100GB/P products and opt for 120GB/P or 125GB/P products. However, we expect a slight delay in the launch of these products because qualification must use TMR heads based on perpendicular recording technology. We now expect mass production to begin in August or September at the earliest.

That concludes my brief presentation. Thank you.