WD: Fiscal 1Q11 Financial Results

(in US$ millions)	1Q10	1Q11
Revenues	2,208	2,396
*Growth*		9%
Net income (loss)	288	197

Western Digital Corp. reported revenue of $2.4 billion, hard-drive unit shipments of 50.7 million and net income of $197 million, or $0.84 per share for its first fiscal quarter ended Oct. 1, 2010. In the year-ago quarter, the company reported revenue of $2.2 billion, shipped 44.1 million hard drives, and reported net income and earnings per share of $288 million and $1.25, respectively.

"In a quarter characterized by aggressive industry pricing, we remained solidly profitable, grew revenues and unit shipments year-over-year, and generated $390 million in cash from operations," said John Coyne, president and chief executive officer. "Our low-cost business model and strong balance sheet enable us to weather the seasonality and cycles of the hard drive industry such as we experienced during the last two quarters."

"We will continue to focus on quality, reliability, availability and profitable growth to maintain our industry leadership," said Coyne. "We remain excited about the significant opportunities being created by the unabated growth in digital content in the home and workplace."

Comments

We don't remember WD announcing its quarterly financial results before Seagate - just one day before. Maybe because now WD is the first HDD manufacturer in term of shipments the last three quarters.

Abstracts of the earnings call transcript:

John Coyne, president and CEO:
"The moderation and industry demand growth in the last two quarters came on the heels of an unprecedented four quarters of strong sequential growth coming out of the great recession.
"Expected year-on-year volume growth and calendar year 2010 of 15% brings the five-year industry compound growth rate, which includes the recession of late 2008 to about 11%, while the average growth rate over the last 10 years has been 12.5%.
"In the last two quarters, some competitors have made aggressive bids to recover market share."

Tim Leyden, COO:
"Despite weak demand for the first two months of the September quarter and a quieter than normal back-to-school season, industry shipments nevertheless climb towards the high-end of our 165 million unit forecast for the September quarter. But to accomplish this, shipment volumes in week 13 were over twice the average of previous weeks.
"In a non-compute space, we saw the CE market volumes decline marginally quarter-on-quarter as the market try to start a seasonal demand pattern. At the same time the branded products market showed seasonal demand strength for both 3.5-inch and 2.5-inch categories showing growth.
"We expect the non-compute space to be essentially flat in the December quarter. I can see volume increases in branded and CE are offset by the seasonal decline in gaining volume. Geographically, Asia has showed continued strength, Europe showed the best comparative improvement from the previous quarter helped by the currency appreciation, while the U.S. market is up modestly from the prior quarter.
"I think there will be more pricing pressure coming from OEMs because during the four quarters of unprecedented demand outstripping supply, the OEMs got nervous about supply - built up some inventory positions within their, their own internal inventory. And then we came on a little consumer softness, they let the inventory correct and then sat back and got some improved pricing conditions."

Wolfgang Nickl, CFO:
"The September quarter was characterized by unusually aggressive pricing that lasted throughout the quarter, with like-to-like prices decline in excess of 8%. Pricing pressure was most prevalent in the 2.5-inch segment.
"We do not expect any external media sales in Q2. Our price shipments totaled 50.7 million units, up 15% from the prior year period and 2% sequentially. Revenue from sales of WD TV Media Players, WD Livewire, Network Kits and solid state drive totaled approximately $33 million. Roughly flat with the prior year and up 22% from the June quarter.
"Average hard drive selling price was approximately $46 per unit, down $3 from the year ago quarter and down $1 from the June quarter. Revenue from sales of our branded products including WD TV and WD Livewire products were $425 million, up 11% from $382 million in the year ago quarter and 6% sequentially from $400 million in the June quarter. There was no customer that comprised 10% or more of our total revenue.
"Now turning to our expectations for Q2. Historically, industry shipment increased by 5% to 7% from the September through the December quarter. As Tim mentioned, we have seen approximately twice the shipments volume in the last week of last quarter than in average of the preceding 12 weeks of the quarter.
"We consequently assume that the December quarter industry TAM will be roughly flat with the September quarter at around 165 million units.
"Accordingly, our guidance for fiscal Q2 is as follows. We expect revenue to be in the range from $2.3 billion to $2.4 billion."