Western Digital Q3 profit falls, sees weak Q4

By @ibtimes on

Western Digital Corp posted lower third-quarter results as higher sales of tablet devices led to lower demand for its hard disk drive from PC makers, and forecast fourth-quarter adjusted profit below Wall Street view.

Computer sales in the first quarter of 2011 fell for the first time since 2009 as tablet devices attracted buyers in droves and Japan focused on recovering from the earthquake and tsunami, according to research firm Gartner.

The company forecast fourth-quarter adjusted profit of 60-65 cents a share, on revenue of $2.2-$2.25 billion.

Analysts on average were expecting earnings of 66 cents a share, excluding items, on revenue of $2.24 billion, for the fourth quarter, according to Thomson Reuters I/B/E/S.

Western Digital, which counts companies like Hewlett-Packard and Dell Inc among its customers, said hard-drive shipments fell 4 percent sequentially to 50 million units for the quarter ended April 1.

The weakness is in the consumer PC segment, not so much in the commercial segment, Wedbush Securities analyst Kaushik Roy said.

Also, it appears Western Digital has lost market share to Seagate.

On Tuesday, rival Seagate Technology Plc posted a third-quarter profit below market expectations on lower hard-drive shipments.

The March quarter in the hard drive industry was impacted by two significant developments, the delayed supply of industry central processing units to PC makers and the tragic events in Japan, Western Digital Chief Executive John Coyne said.

In February, shipments of Intel's new Sandy Bridge processors were interrupted after a flaw was discovered in a chipset used alongside them. Intel said the defect would mean $300 million less in first-quarter revenue.

However, after the March 11 Japan earthquake, the situation began to change for Western Digital.

In the last couple of weeks of March, some of the PC vendors scrambled fearing component shortages and pulled in more orders and pushed up the prices, analyst Roy said.

While demand for hard drives in the quarter got off to a slow start, it later picked up as availability of CPUs improved and as fears took hold of component shortages related to the events in Japan, CEO Coyne said in a statement.

The reported gross margins are better than what they had thought about. Western Digital had guided 17.8 percent and it came in at 18.2 percent, Roy said.

The company reported a third-quarter profit fell to $146 million, or 62 cents a share, from $400 million, or $1.71 a share, a year ago.

Revenue fell 15 percent to $2.25 billion.

Analysts on average had expected earnings of 66 cents a share, excluding items, on revenue of $2.26 billion.

In March, Western Digital proposed to buy Hitachi Ltd's <6501.T> hard disk drive business to create a global leader with the resources to develop costly next-generation storage technology.

Shares of the Lake Forest, California-based company fell about 2 percent to $40 in trading after the bell. The stock closed at $40.65 on Wednesday on the New York Stock Exchange.

(Reporting by Supantha Mukherjee; Editing by Gopakumar Warrier)

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