Western Digital: Fiscal 3Q17 Financial Results
Revenue increased 65% Y/Y including integration of SanDisk, down 5% Q/Q.
This is a Press Release edited by StorageNewsletter.com on April 28, 2017 at 2:38 pm| (in $ million) | 3Q16 | 3Q17 | 9 mo. 16 | 9 mo. 17 |
| Revenues | 2,822 | 4,649 | 9,499 | 14,251 |
| Growth | 65% | 50% | ||
| Net income (loss) | 74 | 248 | 608 | 117 |
Western Digital Corp. reported revenue of $4.6 billion, operating income of $525 million and net income of $248 million, or $0.83 per share, for its third fiscal quarter ended March 31, 2017.
The GAAP net income for the period includes charges associated with the company’s recent acquisitions. Excluding these charges and after other non-GAAP adjustments, third quarter non-GAAP operating income was $1.0 billion and non-GAAP net income was $716 million, or $2.39 per share.
In the year-ago quarter, the company reported revenue of $2.8 billion, operating income of $88 million and net income of $74 million, or $0.32 per share. Non-GAAP operating income in the year-ago quarter was $347 million and non-GAAP net income was $317 million, or $1.35 per share.
The company generated $1.0 billion in cash from operations during the third fiscal quarter of 2017, ending with $5.8 billion of total cash, cash equivalents and available-for-sale securities. On Feb. 1, 2017, the company declared a cash dividend of $0.50 per share of its common stock, which was paid to shareholders on April 17, 2017.
“We reported strong financial performance in the March quarter, enabled by excellent operational execution by our team in a healthy market environment with good demand for all NAND based products, as well as for capacity enterprise and client HDDs,” said Steve Milligan, CEO. “We also achieved targeted cost and efficiency improvements and improved our liquidity position with strong cash flow generation.
“With three consecutive quarters of strong financial results since completing the SanDisk acquisition, we are seeing continued validation of our growth strategy and our ongoing transformation into a comprehensive provider of diversified storage products and technologies. We have constructed a powerful platform with the broadest set of products, enabling us to be a leader in the storage industry. Our transformation provides us with the opportunity to not only compete in today’s marketplace but also to be positioned to grow and thrive into the future.”
Comments
Quarterly revenue increased 65% Y/Y including the integration of SanDisk and are down 5% Q/Q.
WD expects sales of $4.8 billion for next quarter - above consensus for $4.6 billion - and consequently $19 billion for current fiscal year compared to $13 billion for FY16.
Revenue in data center devices and solutions was $1.3 billion, client devices $2.3 billion and client solutions $1 billion for the quarter. Revenue for data center devices and solutions declined 2% Y/Y on a pro forma basis.
WD saw sequential growth for enterprise SSDs, offset by a decline in performance enterprise HDDs. Client devices revenue for the March quarter increased 23% Y/Y on a pro forma basis, primarily driven by strength in embedded flash, surveillance HDD and client SSD. Client solutions revenue for the more recent quarter increased 6% Y/Y on a pro forma basis due to strong demand for removable and other flash-based products
Total HDDs shipped decreased 13% quarterly at 39.1 million, with figures down in all categories especially in notebook drives (-23%). Total exabytes shipped diminished by 5%. The company has now shipped 15 million helium hard drives cumulatively since the platform's launch four years ago.
WD commenced shipments of 64-layer 3D NAND in client SSD form factor, and expects to further expand the usage of this technology across all its product portfolio during the remainder of calendar 2017.
It has already achieved cost crossover for 64-layer 3D NAND versus 15-nanometer X3 node, and now plans to produce more than 75% of total 3D NAND bit output based on the 64-layer architecture in calendar 2017.
The firm estimates for NAND industry bit growth rates for calendar 2017 are at the low end of its long-term industry outlook of 35% to 45%, and, for calendar 2018 somewhat higher than in 2017. When combined with the secular growth drivers for NAND flash, it believes that the NAND industry's supply-demand environment will likely remain favorable through at least the first half of calendar 2018.
Considering the consolidation with HGST and SanDisk, WD remain on track to achieve the $800 million of annualized savings from the HGST integration by the end of calendar 2017.
For SanDisk, as of the end of its 3FQ17, WD has realized synergies of $150 million on an annual run-rate basis toward its 18-month target of achieving $500 million of total run rate synergies on an annualized basis.
Of course, we were waiting for comments during the conference call for the eventual acquisition of parts of Toshiba business. About that, CEO Steve Milligan said: "To protect and preserve the health of the JV [with Toshiba], which we believe is one of the most successful in the technology industry, and in which we have invested more than $13 billion over its 17-year duration. Second, to protect our interest with respect to any transaction involving the JV interest or assets, none of which could be completed without our consent. And finally, to explore potential long-term value creation opportunities for both Western Digital's and Toshiba's stakeholders. We are committed to continuing this storied partnership in Japan. As we have communicated directly to Toshiba, we believe WD is best positioned to lead and implement a transaction that will achieve the goals of all of Toshiba's stakeholders. And we are working with them to develop a win-win solution. We have been communicating with key stakeholders and partners to evaluate a full range of potential alternatives to this challenging situation."
Volume and HDD Share
| WD's HDDs (units in million) |
Enterprise | Desktop | Notebook | CE | Branded | Total HDDs | HDD share | Exabyte Shipped |
Average GB/drive |
ASP |
| 3Q14 | 7.1 | 16.6 | 21.8 | 8.6 | 6.3 | 60.4 | 43.8% | 53.6 | 888 | $58 |
| 4Q14 | 7.1 | 16.2 | 22.9 | 10.9 | 6.0 | 63.1 | 45.7% | 55.2 | 875 | $56 |
| 1Q15 | 7.8 | 16.3 | 23.4 | 10.5 | 6.8 | 64.7 | 44.0% | 64.9 | 1,002 | $58 |
| 2Q15 | 8.0 | 15.4 | 21.2 | 9.3 | 7.2 | 61.0 | 43.4% | 66.4 | 1,087 | $60 |
| 3Q15 | 7.5 | 13.5 | 18.8 | 8.6 | 6.1 | 54.5 | 43.6% | 61.3 | 1,123 | $61 |
| 4Q15 | 7.2 | 11.6 | 15.5 | 9.1 | 5.2 | 48.5 | 43.7% | 56.2 | 1,159 | $60 |
| 1Q16 | 7.2 | 11.7 | 15.8 | 11.5 | 5.6 | 51.7 | 43.6% | 63.5 | 1,228 | $60 |
| 2Q16 | 7.0 | 12.5 | 15.3 | 8.5 | 6.4 | 49.7 | 43.2% | 69.1 | 1,390 | $61 |
| 3Q16 | 6.4 | 10.7 | 13.6 | 7.3 | 5.2 | 43.1 | 43.2% | 63.7 | 1,443 | $60 |
| 4Q16 | 6.0 | 7.9 | 11.4 | 10.0 | 4.7 | 40.1 | 40.7% | 66.1 | 1,648 | $63 |
| 1Q17 | 6.5 | 9.0 | 14.6 | 12.3 | 5.2 | 47.5 | 41.9% | 80.0 | 1,684 | $61 |
| 2Q17 | 6.4 | 9.9 | 14.7 | 8.3 | 5.5 | 44.8 | 39.9% | 77.8 | 1,737 | $62 |
| 3Q17 | 5.8 | 9.4 | 11.3 | 7.7 | 4.9 | 39.1 | NA | 74.2 | 1,898 | $63 |
Seagate vs. WD for 3FQ17
(revenue and net income in $ million, units in million)
| Seagate | WD | % in favor of WD |
|
| Revenue | 2,674 | 4,649 | 74% |
| Net income | 194 | 248 | 28% |
| Average GB/drive | 1,800 | 1,898 | 5% |
| Exabytes shipped | 65.5 | 74.2 | 13% |
| HDD ASP | $66 | $63 | -5% |
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