Western Digital Corporation (WDC)

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UPDATE: Western Digital Posts Strong Quarter Amid Acquisition, Recovery

Jul 25, 2012 18:36:12 (ET)


--Western Digital posts 4Q results that top its estimates

--Hard-disk drive maker also provides strong earnings guidance for the fiscal year though 1Q expectations are softer than Street estimates

--Western Digital is benefiting from its recent acquisition and recovery from flooding

--Shares soar after hours

(Updates throughout with guidance and comments from conference call.)



By Shara Tibken

Western Digital Corp. (WDC) reported surprisingly strong fiscal fourth-quarter results and projected bullish earnings for the new fiscal year as the hard-disk-drive maker benefits from its recent acquisition and its recovery from severe flooding.

The company said its revenue and earnings set all-time records for the quarter and year, helped by contributions from Western Digital's $3.4 billion acquisition of Hitachi Ltd.'s (HIT, 6501.TO) hard-drive operations. The fourth quarter marked the first full period of contribution from Hitachi, and adjusted earnings and revenue were stronger than Western Digital had projected.

During a call with analysts, Western Digital also projected aggressive results for the new fiscal year. Chief Executive John Coyne said the company could report adjusted earnings of $10 a share this year, well above the $8.06 a share expected by analysts, according to Thomson Reuters.

The company took into account many broad and company-specific factors, Mr. Coyne said, including a soft economy and the growing use of tablets and smartphones.

"Storage continues to be at the center of the evolving digital universe," he said. "We believe a strategy of delighting customers, focusing investments on faster growing market segments, and driving strong execution in both internal operations and our supply chain will continue to deliver consistent and superior financial performance."

The guidance and results sent shares up 19% to $38.61 in after hours trading. The stock had fallen 25% over the past three months through Wednesday's close.

Rival Seagate Technology Inc. (STX) also got a boost, climbing 11% to $29.10.

For the current period, Western Digital projected adjusted earnings of $2.45 a share to $2.55 a share on revenue of $4.2 billion to $4.3 billion. Analysts most recently projected earnings of $2.50 a share on sales of $4.46 billion.

The hard-disk drive industry was hurt by severe flooding in Thailand late last year, and Western Digital was one of the hardest-hit manufacturers. The industry has recovered from the flooding quicker than anticipated, which is positive for the broader technology industry that relies on disk drives. But sliding prices and ample supply have been weighing on some of the hard-drive makers, as has continued weak demand for PCs.

Seagate, Western Digital's biggest rival, earlier this month cut its projections for its fiscal fourth quarter, which it attributed to quality issues at a supplier and a faster-than-expected recovery in the hard-disk drive market.

Mr. Coyne on Wednesday said fiscal 2012 was "one of the most challenging and exciting years" in Western Digital's history, with the company making its biggest acquisition and being hurt by flooding in Thailand.

For the quarter, both the Western Digital and Hitachi units performed ahead of plan, he said, and average selling prices and volumes were stronger than anticipated. Industrywide demand, meanwhile, was in line with Western Digital's forecast, Mr. Coyne said.

He noted hard-disk drive shipments reached 157 million units. Western Digital in April estimated the market for hard drives would total 155 million to 160 million units in the June quarter.

The company said Wednesday that current-quarter shipments should be about flat, while total year unit growth should be about 5%. Western Digital expects its market share to be roughly flat in the fiscal year.

Western Digital said it shipped 71 million drives in the fiscal fourth quarter, up from 53.8 million a year ago. The figure is much better than the 44.2 million drives shipped in the fiscal third quarter.

For the period ended June 29, Western Digital reported a profit of $745 million, or $2.87 a share, up from $158 million, or 67 cents a share in the year-earlier period.

Adjusted per-share earnings rose to $3.35 from 81 cents.

Revenue nearly doubled to $4.75 billion from $2.4 billion.

In April, the company projected fourth-quarter adjusted per-share earnings of $2.35 to $2.55 on revenue of $4.2 billion to $4.4 billion. The guidance was above Wall Street estimates at the time but wasn't as strong as some were hoping.

Write to Shara Tibken at [e-mail]

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(END) Dow Jones Newswires

July 25, 2012 18:24 ET (22:24 GMT)