Good morning and welcome to the Third Quarter Fiscal Year 2017 Earnings Conference Call for Dell Technologies Inc. I would like to inform all participants this call is being recorded at the request of Dell Technologies. This broadcast is the copyrighted property of Dell Technologies Inc. Any rebroadcast of this information, in whole or in part, without the prior written permission of Dell Technologies is prohibited. As a reminder, the company is also simulcasting this call at investors.delltechnologies.com. A replay of this webcast will be available at the same location. Following prepared remarks, we will conduct a question-and-answer session. [Operator Instructions] I would like to turn the call over to Rob Williams, Senior Vice President of Investor Relations. Mr. Williams, you may begin.

Thanks, Regina. Good morning and thanks for joining us. With me today is our Chief Financial Officer, Tom Sweet; our President of Infrastructure Solutions Group, David Goulden; and joining us from Europe is our Treasurer, Tyler Johnson. We posted our third quarter press release and web deck on our website at investors.delltechnologies.com and Q3 financial results will be filed on Form 10-Q on Friday, December 9. I encourage you to review these documents for additional perspectives. I would like to highlight key changes to our financial statements due to the recent merger with EMC and the announced divestitures. On September 7, we completed the EMC transaction, combining the two companies. The consolidated results of Dell Technologies fiscal third quarter includes 52 days of EMC and VMware’s results. Going forward, we will report EMC and VMware on Dell Technologies fiscal year. The standalone results of VMware will continue to be publicly reported on a calendar year end basis through December 31, 2016. Thereafter, VMware will publicly report on the basis of Dell Technologies fiscal year which starts on February 4, 2017. On October 31, we closed the Dell Software Group transaction and received approximately $2.4 billion. On November 2, we closed the Dell Services transaction and received consideration of approximately $3 billion. And on September 12, we entered into a definitive agreement to divest the Dell EMC Enterprise Content Division, or ECD, for $1.6 billion. Subject to regulatory approval, we continue to expect the transaction to close before the end of our current fiscal year. Accordingly, for Q3, the results of Dell Services, Dell Software Group and ECD were presented on a discontinued operations basis. As assets and liabilities of these businesses were reclassified into the held-for-sale asset and liability categories on the balance sheet and on the income statement, the…

Thanks, Rob. First, I will cover the consolidated financial results for the third quarter and Tyler will share our cash and liquidity performance. David will then provide details on our Infrastructure Solutions Group, or ISG business before I cover the results of our Client Solutions Group or our CSG business. This is our first quarter reporting combined company results. Our GAAP revenue in the third quarter was $16.2 billion, with a GAAP operating loss of $1.5 billion. As Rob mentioned, our GAAP results were significantly impacted by purchase accounting in transaction costs. Switching to non-GAAP, revenue in the third quarter was $16.8 billion. While consolidated year-over-year compares are not meaningful, top line results were driven by a 3% increase in CSG, which outgrew the industry in both consumer and commercial PCs. Our ISG business was mixed as strength in our emerging solutions, including all-flash arrays, hyper-converged systems, scale-out NAS and software-defined storage was offset by pressure and traditional external storage and softness in certain areas of servers. Gross margin was $5.3 billion or 31.7% of revenue. Gross margin was impacted by an incremental $2.7 billion from the acquired businesses, which have a combined gross margin of over 60%, an $80 million vendor settlement and a richer product mix in CSG. OpEx was $3.3 billion or 20% of revenue as we continue to execute on our cost initiatives while balancing spend across sales, marketing and R&D. Operating income was $2 billion or 11.8% of revenue. Our near-term priorities are straightforward, successfully integrate our sales force and channel partner programs, seize top line synergies through cross-sell opportunities and focus on our ongoing business and cost activities. Executing against these priorities supports our de-levering effort, where we have already reduced our debt by $5.8 billion post deal close. Now, let me turn it over to Tyler to go into more detail on our capital structure.

Thanks, Tom. Cash flow generation and ending cash balances for Q3 were consistent with our expectations and follows strong cash flow performance for Dell and EMC in the prior quarter. Adjusted EBITDA was $2.2 billion and as a percent of revenue was 13.3%. The increase in our adjusted EBITDA was primarily driven by the impact of the EMC acquired businesses. Please see Slide 18 in the web deck for more details on our EBITDA adjustments. In Q3, we had a use of cash from operations of approximately $270 million, including discontinued ops. This number includes approximately $1.3 billion of transaction and integration costs. Cash flow was also impacted by seasonal swings in working capital following our performance in Q2. For additional information, please see Slide 19 in the web deck for more details on our non-GAAP adjustments. Our cash and investments balance ended Q3 at $15 billion after taking into account the necessary debt related inflows and corresponding outflows required to fund the EMC transaction. As stated on the Q2 earnings call, our Q3 debt balances grew substantially in advance of closing the EMC transaction. We finished the quarter with $56.8 billion in principal debt, including $50.5 billion in core debt. The remainder included approximately $5 billion of debt, which funds our global financial services business and the $1.5 billion VMware bridge facility backed by a legacy intercompany node due to Dell Technologies from VMware. During the quarter, we made a $500 million optional repayment of our revolver. Subsequent to the end of the quarter, we received total cash proceeds of $5.4 billion from the previously announced divestitures of Dell Services and software businesses. Netting for expected taxes, transaction fees and payments received outside of the U.S., we apply the net proceeds to settle $4.3 billion of debt, which included…

Thanks Tyler. I will cover the results of our Infrastructure Solutions Group, which consist of the legacy EMC information infrastructure business and the legacy Dell Enterprise Solutions Group, which is now branded externally as Dell EMC. The IT spending environment is undergoing a big transition as customers continued to be challenged by the need to optimize infrastructure for traditional applications and build new infrastructure for cloud native applications. And with a wide variety of workloads, both on-premise and off-premises and in private and public clouds, most customers will operate in a hybrid on a multi-cloud world. We believe the deployment of infrastructure in this multi-cloud environments will continue to move towards all-flash and converged solutions, which brings servers and storage together. With this industry dynamic as our backdrop, Dell EMC is well positioned to help customers in their digital transformation. Our unparalleled solution sets spans a full stack of cloud building blocks that include our leading server and storage product families, our pre-engineered converged and hyper-converged portfolio and our enterprise and native hybrid clouds, which includes technology from VMware and Pivotal. Before we get into more detail in these categories, let me provide an overview of our consolidated ISG results. The Q3 overall ISG revenue was approximately $6 billion, with operating income of $897 million or 15% of revenue. Our server and networking revenues of $2.9 billion declined 8%. We saw softness in our hyperscale service business, where demand is lumpy and we maintain a selective deal process. Additionally, we saw some weakness in our mainstream PowerEdge business due to evolving buying patterns and back end loaded demand. We remain focused on our server business model to ensure we have the right offerings at the right cost points to match customers’ buying trends. Our storage revenue of $3.1 billion was…

Thanks David. Let’s move to the client business. The overall market was slightly better than expected for calendar Q3. According to IDC, worldwide PC unit shipments declined by 4.6%, an improvement from their forecast of negative 7.1%. For the calendar quarter, Dell outperformed the worldwide market and grew the fastest among the top three vendors according to IDC. This is the 15th consecutive quarter of year-over-year unit share gains as we gained 160 basis points of PC unit share. For fiscal Q3, CSG had a strong quarter with revenue of $9.2 billion, up 3%. The revenue growth rate was the highest we have seen in eight quarters, driven by continued strength in consumer, which grew 12%. While commercial was down 1%, we have seen a steady improvement over the past three quarters with solid share gain. Operating income was $634 million, up 65% to 6.9% of revenue. The improvement was primarily driven by a favorable cost environment, a richer product mix of premium notebooks and workstations and approximately $80 million from CSG’s portion of the aforementioned vendors’ settlement. Consistent with last quarter, we saw strong performance across both consumer and commercial high-end notebooks, which includes XPS, Alienware, mobile workstations and latitude. We continue to receive strong reviews and are seeing great momentum with our updated latitude portfolio. This includes our thinnest and lightest business class notebooks and our recently launched Latitude 2-in-1 option. We were also pleased with the performance of the workstation business. Our focus on this business is driving solid results with the latest IDC data for workstations showing Dell in a 2-way tie for number one worldwide unit share while we remain number one worldwide in unit share for mobile workstations. Attached services revenue grew in the quarter, primarily driven by the mix of higher premium products,…

Thanks, Tom. Let’s get to Q&A. [Operator Instructions] Regina can you introduce the first participant?

We will take our first question from the line of Thomas Eagan with JPMorgan. Please go ahead.

Thanks for taking my questions. I have two. The first is, Tom, you talked about the consumer products doing pretty well this quarter in the CSG side and it was good last quarter and the quarter before that. It seems to be one of the things that’s holding up that side of the business. But on the legacy business, desktop, it feels like that’s been a drag for the last couple of quarters and you laid out a couple of things that you are going to do to try to make that better. But I was wondering is it a drag for – is it your sense that it’s a drag for Dell, because of what you have been doing to sell that product or is it a drag in general on the industry and Dell is actually doing better than other folks on that side?

Hey, Tom, thanks for the question. And look, it’s a fair question and we have highlighted over the last couple of quarters, quite frankly, our displeasure with our performance in the desktop space, particularly on the commercial side. So look, the desktop form factor, as a general category, is growing slower than the mobility platforms and so I was very happy with the growth I saw in our mobility platforms and our notebook form factors, and we had strong growth in our commercial notebooks, particularly the Latitude line, which I think was the unit growth of over 10%. The OptiPlex form factor has not – has performed, quite frankly, below from a desktop perspective, has performed below the IDC sort of growth rates that have been – that we have talked about over the last couple of quarters. So, couple of factors there. One, I, quite frankly, think that we have won a pretty strong position in desktop overall. And so we have a relatively large share position in desktop. So, that does create some little bit of headwinds relative to growth trajectories. I do think that we focused our sales organizations more on mobility of late as consumers have generally been more interested in that form factor. And as a result, I think we and I think the IDC data would show it that we have underperformed the market a little bit on commercial desktop. And that’s an important category for us. It has good profit characteristics and so we have been focused over the last couple of quarters on how do we turn that trajectory around. So, what you have heard me talk about was one is making sure that we had the right appropriate mind share with the sales organization management; second, making sure that we had…

Okay, that’s very helpful. And then my follow-up is and I am going to ask this question, I know it’s going to be hard to answer and it would be for either you Tom or Tyler. You talked a little bit about evaluation and a balanced approach to what you are going to use your free cash flow for. Could you maybe just give us a little bit more color and how you think about what plans are for free cash flow in terms of what you look to pay down since you made optional payments on the revolver, you made optional payments on the VMware stock and I don’t want to pin you down to a price on that, but how do you think about prioritization of it, where you want to pay down stuff, is the plan that if the VMware stock hangs out where it’s been hanging out that you will just take out down a little at the time and at the same time, pay down some of your term loans or is it if the stock goes up to certain price, it’s off limits and then you just go to pay down debt?

Hey Tom, it’s Tom Sweet. Let me start and then I will ask Tyler to jump in. So look, you are essentially asking a capital allocation question in terms of how do we think about where we are going to apply capital and from our perspective, we have been pretty clear on this in terms of our primary focus is going to be de-levering the balance sheet. That was our commitment to the market. That was our commitment to the analysts and I think it’s the right commitment from a long-term positioning of the company. What you have seen us do, quite frankly is be a bit opportunistic around that DVMT stock and where that’s been trading on a relative discount to the VMware stock. And so if you were to think about it, we are going to keep our eye on that trading range and you may see us from time-to-time introduce some share buyback, much like we did in Q3. But I don’t want anybody to be confused about where the primary use of our capital and free cash flow is going to go, which is to de-lever the balance sheet over the near-term to intermediate-term. And Tyler, I would ask if you have got any other comments or any other thoughts you would like to give Tom on that.

I mean look, I think you pretty much summed it up. I mean we are thinking about how we act and follow OBO and really nothing has changed in that approach. And Tom, you nailed it when you talked about we do recognize there is good value there and we do want to take advantage of it. But if you look at – even if you look at what we did in Q3, relatively modest in the scheme of things and as it relates to buying back the Class V. We were prudent in paying down the revolver, $1 billion there because obviously, that provides us not only do we de-lever, but it provides us flexibility if we need to use that to fund short-term working capital needs. And as it relates to prioritization, I mean we will follow through as we complete the ECD asset sale relatively swift to the remainder of the A1 and the A3. And then we will focus on the next tranche. So I think it is fairly straightforward. I do think we have been pretty open in how we are doing this and I think we follow through on it.

Great. Thank you.

Your next question will come from the line of Arun Seshadri with Credit Suisse. Please go ahead.

Hello Rob, Tom and Tyler good morning. Thanks for taking my questions. Just a couple from me, first wanted to get a sense for I think you mentioned that on the mainstream PowerEdge side, demand was a little bit back end loaded, so I am just trying to understand how is that looking post the quarter and are you seeing some signs of strength. And if you could also comment on whether there has been any impact from Lenovo’s recent efforts in terms of incentivizing their sales force and sort of doing things a little bit differently?

Hey, it’s Tom, Arun. Let me take that and then maybe David Goulden can offer some insights and so he now owns that business and can give you his own perspective. So look, PowerEdge was a bit back end loaded. But there is no question that there are some dynamics happening within that server space as customers are evaluating the types of form factors they want to buy and we are seeing shifts. To some extent, I don’t want to overstate that, but we are seeing – beginning to see much more interest in hyper-converged, where I – perhaps less of an interest in customers buying piece parts and versus a highly configured solution that’s ready to go. And so our hyper-converged trajectory has taken off pretty remarkably over the last couple of quarters, which we think is not surprising given what we have talked about strategically around cloud native applications and data center modernizations for some of the new applications and business models that are being driven. So it’s an area of focus for us. We are going to continue to refine our server business model and we will make the appropriate adjustments around cost structures, form factors and price points and feature sets dependent upon where we see the market going. And – but I think it’s there is a bit of a headwind out there and you saw IDC come in with Q3 market growth, where that was below expectations and you have seen some of the other server competitors having a bit of headwinds in certain areas. And so I think it’s an evolving market. From my perspective, we have not really seen much of an impact from Lenovo. You never want to underestimate a competitor and it’s a tough competitive market, but we generally have not seen sort of anything unusual out there. I don’t know David, if you would add anything on that.

Yes. Thanks Tom. Arun, yes let me just add to that. So I think if you just step back and look at servers in general as we said, it was the hyperscale lumpiness that really was the bigger impact to the overall number than what was happening within PowerEdge, PowerEdge being on the mainstream. As Tom said, there is a shift going on and you kind of look at the growth areas and cloud, both public and private is a very big driver of server growth these days. Converged, particularly hyper-converged and as Tom mentioned within a few weeks of closing the transaction, we actually had a new range of VxRail and VxRack converged, hyper-converged systems powered by PowerEdge. We see software defined everything driving server growth, so software defined storage, software defined networking. So we see some growth opportunities there and also things like security, where again with things like analytics and big data driving servers in that area. So we do see a shift going on. I think we are actually now better positioned to lead into that shift than we were before we came together. And as Tom said, the overall results is the transition that we are seeing in the marketplace right now. And I think everybody is kind of in the same boat to a certain extent. I think we are actually executing quite well, particularly against our traditional competition.

Okay, great. Thank you for that. And then maybe a follow-up for David, as far as storage itself, the right way to think about this is with all the integration process and the various changes, maybe you have a couple of quarters of sort of year-over-year similar trends as you saw in this quarter and then really hopefully a pickup beyond that, is that sort of the right way to think about that legacy EMC?

Yes. I mean clearly, we did see some impacts in the quarter from coming together. Actually we did a remarkably good job for the prior few quarters actually showing no impact, but always on the quarterly close of transaction like this, sellers get a little defocused, customers are asking a few more questions and we saw that through. What I would encourage you to do is not to read too much into the IDC data. I think that’s the kind of data point people may be looking at for Q3 performance. Just to kind of clarify what happens there is IDC is counting everything product revenue on a calendar quarter basis. Now obviously with us closing the transaction and essentially going private, we significantly changed the way that we convert or don’t convert orders into revenue at the end of the calendar quarter. So our results, which IDC reports are revenue results were impacted by that additional factor. And then of course the things I mentioned, which was the impact of the transaction close, integration process and I think this caused a pause in our customer base. If you kind of look through that lens just one more level down, basically the trend of growth rates of storage and all of our competitors basically unchanged. And in fact, the entire change in market growth from Q2 to Q3 in storage is really attributed to this thought we saw in the EMC customer base. So don’t read too much into that. There is a few factors going in, but I think that the way you characterize it Arun, is right. So obviously, we are going through a period of integration. We bring our sales forces together in fiscal ‘18. That will actually accelerate things once we complete that process in the VM terminal, short terminal cause a little bit of a pause for us. So we do see that happening. We think we are actually exceptionally well positioned from a portfolio point of view, but inevitably we have got a few moving parts here.

Okay, great. Thank you very much.

Your next question comes from the line of Frank Jarman with Goldman Sachs. Please go ahead.

Great. Thanks Tom and Tyler. I am going to ask a question and Scott Wipperman will ask a follow-up if that’s good. So I wanted to focus, you guys have provided a lot of color with regards to the top line stories, so thank you for that. But wanted to focus on the synergy story, which in my view is probably equally important, you have talked about the $2 billion of merger synergies that you are targeting by mid-March 2018 and then the $1 billion of standalone cost synergies that you have been executing at Dell and EMC, so can you guys just give us an update on where you stand with regards to the run-rate? I know you are still early into the transaction, but obviously, we would like to get an update there.

Yes. Hey, it’s Tom. So look, the simple story is that we are generally on track there, right? So, we have been very focused on that. The leadership is behind it. Actions are happening. And so while I am not going to parse it for you, I would tell you that we are generally on track with where we thought we would be at this stage. So I think good progress there even as we are balancing, making sure that as we integrate these businesses that the synergy actions that we are driving are not disruptive to the overall value creation story that we are focused on.

So, as I think about that, that $1 billion that obviously is sort of more near-term, I mean, should we think of that as effectively already reflected in the numbers? How much should we expect with regards to a tailwind in 2017?

Well, look, we don’t give guidance. So let me start with that and it’s not reflected in the numbers at this stage given that some of these synergy actions are scheduled to happen now between – have started to happen and will continue to happen over the next between now and the next 8 to 12 months. So, it will feather in during 2017, but you aren’t seeing a fair amount of the actions flow-through at this point.

Now, Tom, I think the question was actually to do with the $1 billion of synergies in the baseline.

Yes, I am sorry.

The $2 billion of future synergies.

Yes. On the ones that are already that are the standalone synergies I should say, I mean, those have been actions and are flowing through the P&L. So, it’s hard to see it, because I mean, you have got so many unusual items flowing through the P&L right now. It’s a tough read so to speak, but those are on track. So I apologize, I misunderstood your question.

No worries.

Hey, this is Scott Wipperman. Hey, guys. Thanks for taking the question as well. Just as a follow-up to Frank’s question, can you maybe just talk somewhat related but on the working capital performance and how we should be thinking about that as you proceed with integration, particularly where are you in terms of getting the EMC business on the Dell supplier and payment terms and how should we be kind of thinking about that process over the next couple of quarters? Thanks.

Look, I think we made good progress there. Tyler, why don’t you – perhaps you can take this question since you are the guy that asked to run this for me. So, why don’t you take?

I can do that. Yes, look, hey, Scott. Look, we are making great progress on that. I mean, it was really a step process that we had kicked off prior to close in terms of just kind of getting everything positioned and then we were able to work and implement very quickly. So, some of this is going to gradually come in. You will see some benefit in Q4 and then some probably over the course of Q1, Q2, but I would say in terms of everything we were trying to achieve, we are well on target.

Okay, great. Thanks for the question.

Your next question comes from the line of Jeff [indiscernible] with Barclays. Please go ahead.

Hi, good morning. First, I was wondering if you would break out the Dell legacy either storage or ISG revenues? And then just on EMC, can you just talk a little more about what you are seeing with a lot of the new products, the new emerging storage solutions as well as the declines in traditional overall? And in the past, you talked about some increase in unshipped orders, deferring revenues, how are you looking at orders and backlog?

Hey, Jeff. Let me take the first question and then I will ask David to take the – with how are we seeing from the new storage platforms and products. So look, we are not going to breakout legacy form factors and platforms on a go-forward basis. So, I am going to decline to do that. I will tell you I do want to make sure everybody understands the nuances us in the business model as we go forward and then David can jump in and take the form factors. But what we have asked the leadership team to do, particularly David, is given the fact that they are converting from a calendar to a fiscal quarter is that we are running the model from a cash efficiency perspective in many respects. And so David alluded to it around the end of natural calendar quarter that our guidance to that team was look, I don’t want to burn working capital to drive shipments out on a September 30 date unless a customer needs it, that could otherwise naturally shift the first couple of weeks of October and therefore be able to fulfill that order in a timely fashion, but in a more efficient and cost effective fashion. And so you are going to see us continue to evolve the business models in areas like that, but that’s just more from a cash efficiency perspective even as we transition from a calendar to a fiscal quarter. So David, you want to jump in and talk a little bit about what you are seeing in some of the storage dynamics that are going on right now?

Yes, thanks, Tom. Jeff, absolutely. You asked about the legacy Dell Storage in part of your question there. The SC series actually do very nicely during the quarter and actually gained share very important, because we have two very strong platforms in the mid-tier Unity from ex-EMC, SC from ex-Dell, and good news is that we are committed and building out both of them as they are both early in the new off-cycle for both platforms. So, that was good. We did some cross integration with some of the EMC technologies for the SC customers. Relative to the bigger picture, the trends that we talked about for prior periods really are holding strong. In storage, the bigger shift, particularly for the higher end is the move to all-flash systems. And for the calendar quarter, as I mentioned in our prepared remarks, our demand or bookings for the all-flash portfolio on the legacy EMC side were in the very high double-digit growth and we had a nearly $2.5 billion run-rate for those all-flash platforms, which is more than 2x our closest competitor. And we continue to convert other things to all-flash. So, you heard us at Dell EMC World introduce an all-flash version of our Isilon Scale-Out file system that will start shipping next year. So, the whole portfolio is shifting to all-flash and all-flash is growing exceptionally well that even though we are 2x and sometimes 3x and 4x bigger than our competitors. We are actually growing at a pretty similar rate, which is really quite impressive. And then the other thing that’s being important on the ex-EMC side is this move to converged and hyper-converged, which continues to go exceptionally well. And as I mentioned on the hyper-converged side, we can now bring together solutions that are entirely Dell Technologies IP and that’s one of the real benefits and we saw both the VxRail is doing exceptionally well, but also the Dell XC Series growing triple-digits. So to answer your question, I think the things that we are going to focus upon from a growth point of view continued to do as well, in some cases, better than they did before we came together.

Okay, great. And just my follow-up, the client solutions operating margin was externally strong and I am just wondering what drove that and how higher DRAM prices may affect your margin or ability to increase prices, etcetera?

Hey, Jeff. Look, I mean, I thought the CSG business had just an extraordinarily strong quarter and I thought they did a nice job on pricing discipline. I thought that in terms of execution of the business model in terms of attached and positioning within the market, they did a nice job. The cost environment clearly was helpful in the sense of some of the component cost dynamics within the quarter. And so my comment to you, Jeff, is that we have generally talked about that operating margin in that business generally being targeted to sort of run in that approximate 5% sort of op inc range. And I think over the long-term, that’s where you see that business. So, I do think it was a little bit of both what our expectations were in terms of profitability, but obviously we are going to take that. That was driven, so that favorability was generally driven by component cost, the pricing, the ability not to price that all the way through and we also had that vendor settlement. So, I don’t want to gloss over that. We did have that vendor settlement that helped related to some past activity. As we think about the environment going forward from a cost perspective, there are some dynamics happening and we are seeing some pressures around certain cost component items. I mean, I think the real question is, is that as we get cost pressure can we adjust the pricing activities to our cost models to ensure that we uphold the margins? And so that’s our job and that’s our activity that we are focused on. So, while we might have some fluctuations, I do think that we will adjust our pricing appropriately to take into account any of the cost dynamics that we are seeing in the marketplace. And I think that cost environment will over the next couple of quarters will be a bit more challenging, I think.

Okay. Thank you.

Your next question comes from the line of Wamsi Mohan with Bank of America/Merrill Lynch. Please go ahead.

Thank you. Good morning and congrats on getting through the first quarter here of combined Dell EMC. So two questions, one on the client side, how are you viewing market growth outlook into 2017 and can you maybe share some of your view on how the current levels of channel inventory, are there some thoughts that 3Q had some uptick? And then on the storage side, David, I think you mentioned external service, you mentioned hyperscale lumpiness, any color on regionally where you saw that and do you think we are going to see a couple of orders of parts here or just episodic from a large customer or two? Thank you.

Wamsi, would you repeat the first part of that question for me please, on the client?

Yes. No problem. I was just wondering how you are viewing the market outlook into 2017 on the client side and what your view is on the current level of channel inventory, I think there was some concern that 3Q saw an uptick in channel inventory, so just wanted to get your thoughts around that?

Yes. Look, I think IDC would tell you that market next year is supposed to be roughly a minus 2 market. That seems relatively consistent with what we are hearing from our supply base at this point of time. Obviously, our focus is always on growing faster than the market, but I think what you are seeing as a gradual improvement in the PC market after hitting the trough, if you will, last year, beginning to see a better PC market in the second half of this year than the first half. And I think that trend continues on a marginal basis if you will next year. So our focus again is always going to be on outperforming the market and continuing to take share in the commercial space even as we grow our footprint. From a channel inventory perspective and by the way, the other thing you should think about next year is that we have had lots of conversations and you folks have asked a number of times around how do we think about Win 10 and what’s the dynamic out there with some of the new processors that are coming online. We are long-term bullish on Win 10, but I think our expectations on when we might see a refresh cycle are probably a bit more muted and probably more towards the second half of next year than the first half. But given everything we are seeing, there is lots of interest with lots of commercial customers doing pilots and thinking their way through implementation strategies there, but we haven’t actually seen or we have been able to attribute, I should say significant buying patterns changes as a result of Win 10 at this point in time. The industry continues to consolidate and I think IDC would report that the top three vendors had something like 59% shares at the end of Q3. We expect that that consolidation trend to continue, which I think is helpful for us and perhaps some of our larger competitors. So look I mean I think the dynamics that are setting up for next year look a lot like the end of this year and it’s up to us to just go execute to that marketplace. From a channel inventory perspective, maybe some increase in channel inventory, some selling by certain competitors into the – in Q3. Some of that as you know, would be normal selling related to the holiday season. Others of that are perhaps selling uncertain, lower value mobility products. From our own perspective, our channel inventories are right in line with where we run them historically. And so we are focused on executing our business model. So that would be my comments on the client and then David, maybe you can talk about the hyper...

Wamsi, I think you – hyperscale, I think you mentioned storage. I am sure you mentioned. The hyperscale business by definition because you are selling to a relatively small number of well-known household names, how is this lumpy factor and where there is a big boost from that segment last quarter so it’s not surprising to see of course, that segment this quarter. I think we are going to see that kind of on, off type of spending occurring for the foreseeable future. In terms of geo focus, so I think people know who these hyper players are. Most of them are in the North American marketplace, but there are some people in that category in Asia and China. So the impact would really follow the geo mix of those players, which is still buys more heavily to North America than the other segments.

Alright.

Great. Thanks Wamsi. Regina, let’s take one more question.

We will take our final question from the line of Jason Kilgariff with Bank of America. Please go ahead.

Hey, guys. Thanks for taking the question. Unfortunately, another one left on my list is a tough one and I think actions speak lot than words, but I will start out there anyway. Michael Dell was interviewed on Bloomberg Television in the quarter and made a comment about Dell being part of further consolidation in the IT industry and I don’t think anyone was surprised by that per se, but I think his follow-up comment that you guys currently have the financial capacity to make that happen, took me a little bit by surprise, so I would be curious to hear your thoughts on that and maybe how we should think about that relative to the commitment to debt pay down?

Yes. Look, I think what you heard to Michael really talk about is the fact that we continued to be mindful of what’s happening in the industry right now and there is a long-term consolidation turn happening. There is no doubt. It’s evidenced by what we are talking about today. Look, from a financial capacity perspective, that’s a combination I haven’t specifically talked to him about that comment. But from my perspective, we have an ownership structure that if there was an opportunity out there that makes sense to us, if there is incremental equity available to us from a leverage perspective and a debt perspective, it’s not our intent to lever the balance sheet. But if something ever were to come up that there is more leverage available out there in the market, it comes out of cost and you have to think about your long-term leverage ratings or credit ratings. But look, I mean we are focused right now on executing the integration that we have on hand and we – that’s a multi-year journey given the size and complexity of that and we got to do that in way that is focused on our customers and ensuring that we deliver the right capabilities and services to our customers. And so I will leave it at that, but I suggest you guys should – I think what Michael said is pretty consistent with what Michael said in the past, which is he is going to continue to be interested in what’s happening in the market and as evidenced by what we have done in the last few years.

Great. Thanks.

Okay. Thanks Jason. That’s going to wrap the call today. The Investor Relations team will be available for follow-up today and tomorrow and next week. So, please give us a ring if you need some additional follow-up and we will be at Consumer Electronics Show in January. So hope to see several of you there. Thanks.

This concludes today’s conference call. We appreciate your participation. You may disconnect at this time.