WD: Fiscal 4Q11 Financial Results

in US$ millions)	4Q10	4Q11	FY10	FY11
Revenues	2,382	2,403	9,850	9,526
*Growth*		1%		*-3%*
Net income (loss)	265	158	1,382	726

Western Digital Corp. reported financial results for its fiscal year 2011 and fourth quarter ended Jul. 1, 2011.

For the quarter, revenue totaled $2.4 billion, net income was $158 million, or $0.67 per share, and hard-drive unit shipments were 54 million.

The quarterly results included total expenses of $35 million associated with the planned acquisition of Hitachi GST announced Mar. 7, 2011, and for unrelated litigation accruals. Excluding these expenses, non-GAAP net income was $193 million or $0.81 per share.

In the year-ago quarter, the company reported revenue of $2.38 billion, net income of $265 million, or $1.13 per share, and shipped 50 million hard drives. The 2010 results included $27 million of expenses related to litigation accruals. Excluding these expenses, the year-ago quarter non-GAAP net income was $292 million, or $1.24 per share.

The company generated $447 million in cash from operations during the June quarter, ending with total cash and cash equivalents of $3.5 billion.

For fiscal year 2011, the company posted revenue of $9.53 billion and net income of $726 million, or $3.09 per share, compared to fiscal 2010 revenue of $9.85 billion and net income of $1.38 billion, or $5.93 per share. The 2011 net income included total expenses of $44 million associated with the planned acquisition of Hitachi GST and unrelated litigation accruals. Excluding these expenses, fiscal 2011 non-GAAP net income was $770 million or $3.28 per share. The 2010 net income included $27 million of expenses related to litigation accruals. Excluding these expenses, fiscal 2010 non-GAAP net income was $1.41 billion, or $6.05 per share.

"In the June quarter, we were able to meet stronger than anticipated demand, especially from our OEM customers," said John Coyne, president and chief executive officer. "We believe the stronger demand was driven by increased use of sea freight in advance of the second half of the calendar year as well as supply continuity concerns in the aftermath of the Japan earthquake.

"In a challenging HDD market environment in fiscal 2011, the industry saw unit volume growth of four percent while WD achieved growth of six percent as customers demonstrated a continued preference for the WD value proposition.

"We remain focused on completing our strategic acquisition of Hitachi GST. We are continuing to engage in the approval process with all the appropriate regulatory agencies and thus far we have received clearance from Brazil, Taiwan and Turkey. We continue to work closely with the remaining agencies which are reviewing our transaction. As previously announced, we now expect that the transaction will close in the fourth calendar quarter of 2011, and our integration planning activities continue on schedule."

Comments

This quarter, WD continues to be ≠1 in units shipped with 54 million (52 million for Seagate) and ≠2 in sales with $2.4 billion ($2.7 billion for Seagate) with a slightly better profitability ($158 million vs. $118 million).

As TrendFocus remarks, $54 millon HDDs is a new shipment record for three month by a manufacturer, surpassing the short-lived record set by Seagate of 52 million for its most recent fiscal quarter.

Abstracts of the earnings call transcript:

John Coyne, president and CEO:
"In the June quarter, we saw stronger-than-anticipated demand with the hard drive industry shipping over 165 million units. This 4% quarter-on-quarter increase contrasts with historical seasonal patterns of 1% to 2% sequential contraction. We believe that the stronger demand was driven by increased adoption of sea freight in the PC supply chain, which creates a long-term leveling of seasonal demand patterns, as well as supply continuity concerns in the aftermath of the Japan earthquake.
"The industry grew fiscal year volumes 4% to 657 million units, while WD again grew faster than the market at 6%, shipping 207 million hard drives for the year, a 1% share gain.
"We believe that 2012 could be a stronger period for the industry and for WD for several reasons: An acceleration of the commercial PC refresh as part of an overall macro reinvestment cycle; the potential for better consumer confidence translating into stronger discretionary spending; the planned launch of redesigned, feature-rich PCs enabled by Windows 8 and our continued favorable standing with customers as one of the preferred suppliers of the world's most cost-effective storage solutions for the massive amounts of content being generated on the client and in the cloud."

Timothy Leyden, COO:
"We now see an industry TAM for calendar 2011 of roughly 670 million units, with the September quarter in the range of 170 million to 175 million.
"WD shipped 39.2 million units into the compute space in the June quarter compared to 36.3 million units in the March quarter and 37.1 million units in the year-ago quarter. And we grew market share by approximately 1% both sequentially and year-on-year.
"The near-line enterprise market was up sequentially from 5.6 million to 6.4 million units, and up from 5.1 million units year-on-year. Cloud computing continues to spur growth in this market. The traditional enterprise market, at 8.3 million units, remained flat with the March quarter and was up year-on-year from 7.1 million units as demand in the commercial market remained robust. WD shipped 2.5 million units into the combined enterprise markets in the June quarter, up from approximately 2.3 million in both the March and year-ago quarters.
"The HDD manufacturers' TAM in the branded product segment came in at 12 million units, down from 13 million units in the March quarter and up from 9.8 million units in the year-ago quarter, as a sequential TAM reduction followed typical seasonal patterns. Year-on-year TAM unit growth in this segment was strong. WD shipped 5.7 million units into this market in the June quarter, down from 6.4 million units in the March quarter and up from 5 million units in the year-ago quarter.
"In the DVR market segment, the TAM was an estimated 14.4 million units, up sequentially from 12.9 million in the March quarter and up from 13.2 million in the year-ago quarter. WD shipped 6.5 million units into this market in the June quarter, up from 4.8 million in the March quarter and up from 5.3 million in the year-ago quarter."

Wolfgang Nickl, CFO:
"Revenue from sales of WD TV Media Players, WD Livewire Network Kits and solid-state drives totaled approximately $33 million, up 23% from the prior year and seasonally down 34% from the March quarter.
"Hard drive average selling price was approximately $44 per unit, down $3 from the year-ago quarter and $1 from the March quarter.
"There was one customer, Dell, that comprised 10% or more of our total revenue.
"Our decision to strongly support OEM customers in the aftermath of the Japan earthquake resulted in OEM sales representing 55% of revenue, up from 47% in the March quarter, while the distribution and retail channels each contributed lower percentages of revenue.
"Our guidance for fiscal Q1 is as follows: We expect revenue to be in the range from $2.425 billion to $2.525 billion."