WD: Fiscal 1Q10 Financial Results

(in US$ millions)	1Q09	1Q10
Revenues	2,109	2,208
*Growth*		+5%
Net income (loss)	211	288

Western Digital Corp. reported record revenue of $2.2 billion, record hard drive shipments of 44.1 million units and net income of $288 million, or $1.25 per share, for its first fiscal quarter ended Oct. 2, 2009. In the year-ago quarter, the company reported revenue of $2.1 billion, unit shipments of 39.4 million, and net income of $211 million.

The company generated $434 million in cash from operations during the first quarter, ending with total cash and cash equivalents of $2.1 billion.

"For the second consecutive quarter, demand for hard drives was stronger than expected as the positive industry conditions that materialized in the June quarter continued throughout the September quarter," said John Coyne, president and chief executive officer. "We believe this demand is being driven primarily by consumers as a result of the growing social media phenomenon. This is creating demand in mobile and desktop PCs, branded products and enterprise storage. Hard drive inventories remain at historically low levels, reflecting industry discipline in managing supply and demand. In the September quarter, we leveraged our organization-wide agility to respond to unexpectedly robust demand and again generated strong financial results. As we enter the December quarter, demand remains strong and our product line-up, availability and cost profile position us to benefit from continuing growth opportunities."

Coyne noted that WD continues to realize tangible benefits from its investments in technology, products, processes and capacity over the last several years, enabled by the strongest balance sheet in the industry:

The company continues to lead the industry in time-to-market volume shipments of leading capacity points in all segments of the ATA drive market with its WD Scorpio Blue 1 TB, 750 GB and 640 GB hard drives utilizing 333 GB-per-platter technology. Additionally, the company leads the market with shipments of its 2 TB 3.5-inch hard drives to the near-line enterprise, desktop, CE and external storage markets.
In branded products, WD continued to grow its business in fiscal Q1 even as it simultaneously refreshed its entire branded products line-up, positioning it well for continued growth entering the holiday season and in the year ahead. The company’s stylish, new offerings include smaller, smarter, more portable and secure My Passport and My Book solutions that feature new WD SmartWare backup, synchronization and content visualization software, hardware encryption and an innovative e-label display.
WD also expanded its line of media players with the introduction of the WD TV Mini Media Player, with support for RealVideo content playback, providing an affordable and convenient way for consumers to play their stored digital content, and the WD TV Live Media Player, featuring network connectivity and Full-HD 1080p resolution.

Comments

Seagate is slowly coming back against WD as it shipped 14% more HDDs quarterly compared to 12% for its competitor. But for the revenues, Seagate was down 12% on a yearly basis as WD is up 5%.

Abstracts of the earnings call transcript:

John Coyne, president and CEO:

"Inventory of ATA drives in distribution was down from 33 to 30 days quarter-on-quarter, while drive manufacturer’s inventory was further reduced from a historically low 7 days of sales ending the June quarter to just under 6 days at the end of September, reflecting both the unexpectedly strong demand and continued industry discipline in managing the vitally important supply/demand dynamic."

Tim Leyden, CFO:

"Revenue for our first fiscal quarter was $2.2 billion, up 5% from the prior year and 15% sequentially. Hard drive shipments totaled 44.1 million units, up 12% from the prior-year period and 10% sequentially. Non-hard drive revenue, including sales of WD TV Media Players, solid-state drives, media and substrates totaled approximately $36 million compared to $5 million in the prior year and $27 million in the June quarter.
"Average hard drive selling price was approximately $49 per unit, down $4 from the year-ago quarter, but up $1 from the June quarter.
"We shipped 19.2 million mobile drives in the September quarter, compared to 14.6 million in the year-ago quarter and 16.9 million in the June quarter.
"During the September quarter, we shipped 3.1 million drives into the DVR market compared to 3.9 million in the year-ago quarter and 3.7 million in the June quarter.
"Revenue from sales of our branded products, including WD TV, was $382 million, flat with the year-ago quarter and up 20% sequentially from $318 million in the June quarter.
"There were two customers, Dell and HP, that each comprised more than 10% of our total revenue. The geographic split of our revenue was 22% Americas, 22% Europe, and 56% Asia, as compared to 23%, 29% and 48% in the year-ago quarter and 24%, 22% and 54% in the June quarter.
"We expect current quarter revenue for WD to be in a range from $2.25 billion to $2.35 billion. We are modeling gross margins of 23.3%, flat with our September quarter. We estimate earnings per share of between $1.26 and $1.36 for the December quarter."