WD: Fiscal 4Q12 Financial Results

Back as ≠1 HDD maker for June quarter, beating Seagate
This is a Press Release edited by on 2012.07.26

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 (in US$ million) 4Q11 4Q12 FY11  FY12
 Revenues 2,403 4,754 9,526  12,478
 Growth    98%    31%
 Net income (loss) 158  745 726 1,612

Western Digital Corp. reported revenue of $12.5 billion and net income of $1.6 billion, or $6.58 per share for fiscal year 2012, compared to fiscal 2011 revenue of $9.5 billion and net income of $726 million, or $3.09 per share.

On a non-GAAP basis, fiscal 2012 net income was $2.1 billion or $8.61 per share, compared to fiscal 2011 net income of $770 million or $3.28 per share. Both the GAAP and non-GAAP fiscal 2012 results include results from the company's newly acquired HGST subsidiary from the acquisition date of March 8 through the end of fiscal 2012.

For its fourth fiscal quarter ended June 29, 2012, the company reported revenue of $4.8 billion, hard-drive shipments of 71.0 million and net income of $745 million, or $2.87 per share.

On a non-GAAP basis, net income was $872 million, or $3.35 per share. In the year-ago quarter, the company reported revenue of $2.4 billion, net income of $158 million, or $0.67 per share, and shipped 53.8 million hard drives. Non-GAAP net income in the year-ago quarter was $193 million, or $0.81 per share.

The company generated $1.1 billion in cash from operations during the June quarter, ending with total cash and cash equivalents of $3.2 billion. During the quarter, the company repaid $558 million of debt and spent $604 million to buy back over 16 million shares of common stock.

"Fiscal 2012 was one of the most challenging and exciting years in our 42-year history," said John Coyne, CEO. "While responding to two major natural disasters and completing the largest acquisition in the history of the industry, we achieved year-over-year revenue growth of 31% and more than doubled earnings per share.

"In the June quarter, demand was in line with our forecast as industry shipments reached 157 million units, bringing total HDD shipments for the year to 599 million units. Our WD and HGST subsidiaries both performed ahead of plan in Q4, delivering great products with consistent execution, resulting in strong revenue growth, gross margin and cash flows."

Our Comments

Thai flood is not far to be totally forgotten at WD, shipping a record of 71 million HDDs for the quarter.

For the previous quarter (3Q12) where HGST was not totally included in the period - only 3.5 weeks -, the company only sold 44 million HDDs.

Compared to its last three-month period, revenue grew sequentially 58% and units shipped 61%.

But at the same time, the prices of HDDs are not decreasing and we are not coming back at the level recorded before the flood. Quarterly they increase from $62 to $65 per unit sold for WD but you have to consider that HGST is producing a lot of more expansive enterprise units. For Seagate, it's supposed to be around $68 for its June quarter. Before the flood, we were in the $44-$48 range for WD, $55 for Seagate.

This latter recently revealed its preliminary results for the same quarter ended June 2012 and WD is beating its competitor in term of global revenue and units shipped (see below).

Following the Thai flood, WD lost its ≠1 ranking for a while, as last quarter Seagate recorded 47% more revenues and 37% more HDDs shipped than its competitor.

Now the company is well positioned to keep this first place for several quarters. Seagate was dominating this business for several years but is no more the leader of the disk drive industry.

     Figures for the quarter ended June 2012
   Seagate*  WD % in favor
of WD

Revenue in $ billion       4.5  4.8       7%
HDD shipped in million        66   71       8%
EB shipped
       45   48       7%
 * Preliminary results

Abstracts of the earnings call transcript:

John Coyne, chairman and CEO:
"In formulating our outlook for fiscal 2013, (…) our planning assumption for unit growth and hard-drive demand is a 5%.
" (…) due to the regulatory requirements to operate WD and HGST as separate subsidiaries for at least 2 years, we do not expect any significant OpEx synergies in that timeframe."

Steve Milligan, president:
"We shipped a total of 71 million units or 48 million TB of storage into the market in the June quarter. The segment mix of the consolidated results for the two subsidiaries demonstrates a very healthy balance. In total, WD shipped 7.9 million HDDs into the enterprise market; 54 million HDDs into the client space, including notebook and desktop; 4.2 million HDDs into the consumer electronics segment, including DVR, gaming and automotive applications; and 5 million HDDs for branded products. We also shipped one million non-HDD units including solid state drives, media players and routers.
"On the operations front, WD began production in its new slider fabrication facility in Malaysia, and both subsidiaries improved efficiencies and reduced cost from flood-induced levels.
"To address demand for thin and light devices, HGST continued to leverage its first-mover advantage with its 2.5-inch, 7mm drives. More than 46 million of these particular drives have shipped since product inception."

Wolfgang Nickl, CFO:
"We shipped a total of 71 million HDDs into the market at an average selling price of $65. Both unit volume and average selling price exceeded the expectations that were implied in our guidance.
"OEM sales represented 69% of revenue, distribution channel sales were 21% and retail sales were 10%.
"I will now provide our guidance for the September quarter: We expect TAM to be flat with the prior quarter; revenue to be in the range of $4.2 billion to $4.3 billion; gross margin to be 30%, excluding the amortization of intangibles and a 50 basis point dilutive impact of sales of drive to Toshiba.
"We're about 82 million, 2.5-inch drive; 65 million, 3.5-inch drives; ATA that were about 17 - they were about 9 million performance enterprise drives and then there were a few 1.8-inch that were shipped."