Zeev,
Have you been following the WDC-RDRT marriage? WDC said in a CC today that the merger will be accretive in the Dec Q, 9 months ahead of schedule. Also says that they are tracking to the high end of their guidance from their previous CC.
Was RDRT that badly managed that WDC could turn it around so quickly?! Who is buying heads from WDC? Can they actually manage RDRT's operations as a captive source for their own heads and not have to sell any on the merchant market in order to make the heads economically efficient?
here is the Dow Jones story on today's CC. Looks like the stock is up in after hours trading.
Western Digital's Sept Qtr Tracking To High End Of Rev, Volume Guidance; Read-Rite Acquisition Now Expected To Be Accretive In WDC
Wednesday August 27, 8:04 pm ET
LAKE FOREST, Calif. (Dow Jones)--Western Digital Corp. forecast results at the high end of a range offered last month for its first quarter ending Sept. 26.
In a press release Wednesday, the company said it expects to break even on a net basis for the period, on revenue of $690 million to $700 million. Results are to include charges of $50 million relating mostly to an acquisition.
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The company's earlier forecast called for earnings of 22 cents to 24 cents a share, excluding acquisition charges, on revenue of $680 million to $700 million.
A per-share figure for the charges outlined Wednesday isn't available, a spokesman said, adding that the company is now calling for results at the high end of its previous forecast.
Analysts expect first-quarter earnings of 22 cents a share excluding items, according to Thomson First Call (News - Websites).
Western Digital Corp. (NYSE:WDC - News), which acquired Read-Rite Corp. July 31, now expects the transaction to add to earnings in the quarter ending December 2003, nine months earlier than its previous forecast.
Cost of the transaction is now estimated at $170 million to $180 million, including $95 million in cash, $60 million in assumed debt of Read-Rite's Thailand operation and $15 million to $25 million in direct costs and miscellaneous assumed obligations.
The transaction was funded with working capital. Existing bank obligations relating to the Thailand operations will be refinanced with a new term loan of $ 50 million.
Along with its new earnings forecast, the company offered what it called new guidelines for its long-term business model, in which it expects to be operating in the second half of its fiscal 2004.
Gross margins under the new model will average 18% to 22% compared with 14% to 18% under the previous model. Operating margins will average 7% to 11%, compared with 4% to 8% under the previous model.
The company will continue to generate significant operating cash flow; capital spending, averaged over several years, will increase by $70 million to $90 million to support new operations. The company's fiscal 2004 investment plan will allow it to produce up to 30 million heads per quarter at June 2004.
-John Seward; Dow Jones Newswires; 201-938-5400
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