WD: Fiscal 4Q15 Financial Results

(in $ million)	4Q14	4Q15	FY14	FY15
Revenue	3,651	3,191	15,130	14,572
*Growth*		-13%		*-4%*
Net income (loss)	317	220	1,617	1,465

Western Digital Corp. reported revenue of $3.2 billion and net income of $220 million, or $0.94 per share, for its fourth fiscal quarter ended July 3, 2015.

On a non-GAAP basis, net income was $356 million, or $1.51 per share. In the year-ago quarter, the company reported revenue of $3.7 billion and net income of $317 million, or $1.32 per share. Non-GAAP net income in the year-ago quarter was $445 million, or $1.85 per share.

The company generated $488 million in cash from operations during the fourth fiscal quarter, ending with total cash and cash equivalents of $5.0 billion. It utilized $198 million to repurchase 2.0 million shares of its common stock. On May 5, the company declared a cash dividend of $0.50 per share of its common stock, which was paid on July 15.

For the 2015 fiscal year, the company achieved revenue of $14.6 billion and net income of $1.5 billion, or $6.18 per share, compared to fiscal year 2014 revenue of $15.1 billion and net income of $1.6 billion, or $6.68 per share. On a non-GAAP basis, fiscal year 2015 net income was $1.8 billion, or $7.76 per share, compared to fiscal year 2014 net income of $2.0 billion, or $8.10 per share. The company generated $2.2 billion in cash from operations during the 2015 fiscal year and it utilized $1.4 billion for dividends and share repurchases.

“I am satisfied with our execution and performance in the fourth fiscal quarter in light of the weak PC market,” said Steve Milligan, president and CEO. “Our financial performance reflects our strong product and technology positioning coupled with solid execution. We remain positive about the opportunity to create long term value in the evolving storage ecosystem.”

Comments

This bad quarter for WD was expected as the WW market for HDDs hits bottom with only 111 million units shipped in 2CQ15 - a six-year low - down 11% Q/Q and 20% Y/Y, the reason being essentially the weakness of the PC market waiting for a revival with Windows 10 and Skylake.

As total units shipped plunged to 48.5 million (-11% Q/Q and -23% Y/Y) and the average price by disk drives slightly decreased, from $61 to $60, the company recorded a sequential decrease of 10% for global revenue and net income of $220 million (-43% Q/Q and -31% Y/Y.)

For all the categories of HDDs shipped by WD, the numbers are decreasing but for CE drives.

Nevertheless CEO Steve Milligan said: "We saw strong demand for our high-capacity helium (from HGST) and 15,000rpm 2.5 inch performance hard drives."

Enterprise SSD sales continue to be modest, at $244 million or 8% of total sales for the most recent quarter, but up 9% sequentially.

Wait for the same trend for Seagate revealing its fiscal 4Q15 financial results in two days, meaning that WD will continue to be the number one HDD manufacturer in front of Seagate and Toshiba.

Milligan updated the relation with China's MOFCOM that continues to oblige a separation between two companies, WD and HGST, this situation costing a lot: "Based on our conversations with MOFCOM we believe that they are working steadily on several fronts and we are hopeful that they can conclude their evaluation of our application to lift the hol separate in the near future."

Concerning the guidance, CFO Olivier Leonetti stated: "We expect revenue to be in the range of $3.2 billion to $3.3 billion, excluding the amortization of intangibles we expect gross margin percentage to be roughly flat with our June quarter", with TAM supposed to increase sequentially from 111 to 115 million.

WD's HDDs
(units in million)

Enterprise

Desktop

Notebook

Branded

Total HDDs

HDD share

Exabyte
Shipped

Average
GB/drive

ASP

4Q13

7.9

16.2

24.0

6.5

5.3

59.9

44.9%

47.7

797

$60

1Q14

7.8

17.3

22.9

8.5

6.1

62.6

62644.7%

50.8

811

$58

2Q14

7.8

16.8

22.7

8.8

7.0

63.1

44.4%

55.1

874

$60

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