WD: Fiscal 3Q12 Financial Results

(in US$ million)	3Q11	3Q12	9 mo. 11	9 mo. 12
Revenues	2,252	3,035	7,123	7,724
*Growth*		35%		8%
Net income (loss)	146	483	568	867

Western Digital Corp. reported revenue of $3.0 billion, hard-drive unit shipments of 44.2 million and net income of $483 million, or $1.96 per share, on a GAAP basis for its third fiscal quarter ended March 30, 2012.

On a non-GAAP basis, net income was $619 million, or $2.52 per share. Both the GAAP and non-GAAP results include the results of the company’s newly acquired HGST subsidiary from the acquisition date of March 8 through the end of March.

In the year-ago quarter, the company reported revenue of $2.3 billion, net income of $146 million, or $0.62 per share, and shipped 49.8 million hard drives. Non-GAAP net income in the year-ago quarter was $156 million, or $0.66 per share.2

The company generated $1.2 billion in cash from operations during the March quarter, ending with total cash and cash equivalents of $3.4 billion.

"Our third quarter performance demonstrates the potential of the new Western Digital, with just three and a half weeks of HGST results combined with the standalone WD business," said John Coyne, CEO of Western Digital. "Competing in the marketplace with our separate WD and HGST subsidiaries, we now have the product portfolio, technology resources and the people to fully serve the needs of a significantly expanded customer base and to better address the tremendous growth opportunities in the storage industry in the years ahead."

"I am also pleased to announce today that the recovery activities related to both WD operations and those of our supply chain partners impacted by the Thailand floods have reached a point where we now have the capability to adequately meet anticipated customer demand in the current quarter and beyond," Coyne said.

Comments

As expected, Seagate was largely the number one HDD manufacturer in the world in the first quarter of the year with 47% more revenues and 37% more HDDs shipped for WD - including Samsung HDD. Even if WD's CEO John Coyne said:" We have just delivered the strongest revenue and profit performance in the company's 42-year history."

But this ranking could be the opposite in the next quarters if you consider that WD's activity includes only 3.5 weeks of HGST results for the three-month period or $613 million in revenues. If you extend this figure to three months, it corresponds to global sales of around $4.9 billion for WD, to be compared to $4.6 billion for Seagate. But it will probably take more than one quarter for WD to come back to the top position. For the June quarter, Seagate's outlook is $5 billion for sales, in the range of $4.2 billion to $4.4 billion for WD including a full quarter of HGST. WD will progressively recover Thai operations and increase further its HDD production to surpass Seagate.

Bad news for end users: prices of HDDs remain high. All units included, average selling price during the first three months of the year was $62 for Seagate and $68 for WD ($69 the former quarter). It was $44 for the latter one a year ago. This situation could last during several months: Seagate expects high gross margins to continue for its June quarter: 34.5% vs. 37% for the former one.

Two other interesting comments on the period from WD's executives in earnings call:

"With the HGST acquisition now closed, we're working closely with China's Ministry of Commerce to finalize our operations plan in compliance with the remedy outlined in MOFCOM's approval decision last month. Concurrently, Toshiba is awaiting the completion of the regulatory review process, associated with its agreement to acquire certain WD and HGST assets, a process that is expected to be completed within the next 90 days," said Coyne.

"Flood-related expenses totaled $36 million, which was offset by $21 million in insurance recoveries and other cost reimbursements," added Wolfgang Nickl, SVP and CFO.

Seagate vs. WD

Financial figures

(in US$ million)

Seagate

Winner

Revenues

4,450

3,035

SGT +47%

Growth margin

37%

32%

SGT +5%