WD: Fiscal 1Q12 Financial Results
Excellent quarter but next one to be disastrous
This is a Press Release edited by StorageNewsletter.com on October 20, 2011 at 2:57 pm(in US$ millions) | 1Q11 | 1Q12 |
Revenues | 2,396 | 2,694 |
Growth | 12% | |
Net income (loss) | 197 | 239 |
Western Digital Corp. reported revenue of $2.7 billion, hard-drive unit shipments of 58 million and net income of $239 million, or $1.01 per share, for its first fiscal quarter ended Sept. 30, 2011.
The company’s results include expenses of $21 million associated with the planned acquisition of Hitachi GST announced Mar. 7, 2011 and unrelated litigation accruals. Excluding these expenses, non-GAAP net income was $260 million or $1.10 per share.
In the year-ago quarter, the company reported revenue of $2.4 billion, net income of $197 million, or $0.84 per share, and shipped 51 million hard drives.
The company generated $352 million in cash from operations during the September quarter, ending with total cash and cash equivalents of $3.7 billion.
Comments
Abstracts of the earnings call transcript:
About flooding in Thailand
John Coyne, chairman, president and CEO:
"Full recovery will be a multi-quarter challenge. We believe the unconstrained HDD demand for the December quarter is flat to slightly down from September quarter ship levels.
"Since WD has greater direct manufacturing exposure to the flooded areas, we believe the impact on our business in the short term will be greater than to other HDD manufacturers.
"We carry flood insurance for both our equipment and inventory and we also have business interruption insurance.
"In terms of Hitachi's footprint in Thailand, we believe that their 2 facilities, significant (?). I think probably a little less to Thailand's output relative to total output than WD. And those facilities are outside of the current flood area. As to their supply lines and so on, we have no information."
Tim Leyden, COO:
"Now turning to the December quarter. We believe that the unconstrained HDD demand TAM will be around 170 million units. We also believe that the industry will be supply-constrained just the flooding in Thailand and the concentration of HDD suppliers in factories in various industrial states in the flooded and flood-threatened areas.
"We suspended production in all of our Thailand facilities from the beginning of last week in order to protect our personnel and to move as much equipment as possible to locations less likely to incur water damage.
"And we moved much of the equipment, which had been situated on the ground floors to higher floors.
"Despite the heroic efforts of our team, over the past weekend, rising water, which had first penetrated the Bang Pa-in Industrial Park flood defenses, inundated the company's manufacturing facilities there and submerged the remaining equipment on the ground floors. At the other company manufacturing location in Thailand, Navanakorn Industrial Park, the park's flood defenses were breached on Monday morning, local time, and water begun to flow into our buildings late on Tuesday night.
"The flooded buildings in Thailand include our HDD assembly test and slider facilities, where a substantial majority of our slider fabrication capacity resides. In Thailand with the intermittent slider shortages resulting from the above disruption, we're also experiencing other shortages on component paths from vendors located in several Thai industrial parks that have already been inundated by the floods or have been affected by protective plant shut downs.
"We estimate that our regular capacity and possibly our suppliers' capacity will be significantly constrained for several quarters.
"In our own case, we're impacted internally through the slider fab because the vast majority of our product, of our internal sliders are made in Bang Pa-in at the ground floor, which is now inundated with water. We also process small percentage of WD wafers through a slider fab in the Philippines, which we will be ramping up. And in addition, you'll recall that our long-term model for our finished heads is to purchase 10% to 20% from the merchant market. So what we see is, in our case, the slider fab is the limiting situation. And we see mechanical components and motors significantly impacted."
About September quarter
Tim Leyden:
"WD shipped 57.8 million units in the September quarter, up 7.4% sequentially and 14% from the year-ago period.
"WD shipped 41.2 million units into the compute space in the September quarter compared to 39.2 million units in the June quarter and 37.5 million units in the year-ago quarter.
"The near-line enterprise market was up sequentially from 6.4 million to 6.8 million units and up from 5.8 million units year-on-year.
"The traditional enterprise market at 7.9 million units was down from 8.3 million units in the June quarter, and was up year-on-year from 7.2 million units. WD shipped 2.4 million units into the combined enterprise markets in the September quarter, down from approximately 2.5 million in the June quarter and up from 2.3 million units in the year-ago quarter.
"HDD manufacturer shipments in the branded product segment came in at 14.4 million units, up from 12 million units in the June quarter and up from 11.6 million units in the year-ago quarter as a sequential demand increase followed typical seasonal patterns. Year-on-year unit growth in this segment was a strong at 24.1%. WD shipped 7.1 million units into this market in the September quarter, up from 5.7 million units in both the June and year-ago quarters.
"In the DVR market segment, shipments were an estimated 14.1 million units, down sequentially from 14.4 million units in the June quarter and up from 13.2 million in the year-ago quarter. WD shipped 7.2 million units into this market in the September quarter, up from 6.5 million in the June quarter and up from 5.2 million in the year-ago quarter."
Wolfgang Nickl, CFO:
"Average selling price was approximately $46 per unit, flat with the year-ago quarter and up $2 from the June quarter. Revenue from sales of our branded products was $489 million, up 15% from the year-ago quarter due to the continued strong customer preference for the WD brand. Branded products revenue was up 28% from the June quarter. There were no customer that comprised 10% or more of our total revenue.
"Demand in Asia remains strong at 59% of revenue, up from 54% in the prior year and down slightly from 60% in the June quarter. Europe came in at 22% of revenue, down slightly from 23% in the prior year but up from the 20% reported in the June quarter. Americas is 19% of revenue, was down from both last year's 23% and June's 20%.
"OEM sales represented 53% of revenue, up from 50% in the prior year. The OEM sales percentage was down slightly from June's 55%. Retail sales as a percent of revenue were 18%, flat to the prior year but seasonally up from June's 16%.
"We expect hard drive shipments of between 22 million and 26 million units (for December quarter). We expect revenue to be in the range of $1.05 billion to $1.25 billion."
About HGST acquisition
John Coyne:
"We now expect the European Commission to issue its decision on the transaction by November 30. We anticipate the other agencies reviewing our transaction will make their final determination within a similar time frame. Therefore, we are maintaining our target for closing the HGST acquisition by the end of the calendar year."