Financial

posted on 25 July 2008 06:37

Western Digital's sales and revenues surged but Q4 net income was flat, the year ago quarter's net income being boosted by a tax credit.

In its Q4 fy08 WD revenues were $2.0 billion, up 46 percent on Q4 fy07. Net income was essentially flat at $213 million ($0.94/share), slightly up on Q4 fy07's $212 million ($0.94/share). The Q4 fy07 number was inflated by a $126 million tax credit. The Q4 fy08 number was deflated by a $15 million tax charge.

WD shipped 35.2 million hard drives in the quarter, compared to 24.9 million in Q4 fy07.

Full year fy08 revenues were $8.1 billion, 48 percent up on fy07's $5.5 billion. Net income was $867 million ($3.84/share), up 54 percent on fy07's $564 million ($2.50/share). The company shipped 38 percent more drives in fy08, 133.3 million compared to 96.5 million in fy07.

It is succeeding in its diversification away from its dominating PC drive sector with increased sales across the enterprise, mobile, external attach and consumer device (PVR, etc) sectors. The desktop proportion of revenues in fy08 was 44 percent against 57 percent in fy 07. The quarterly comparison was more marked; 37 percent in Q4 fy08 versus 54 percent in fy07.

Mobile drives were a highlight with 11.7 million 2.5-inch units shipped, up 208 percent on fy07 and 15 percent compared to Q3 fy08. This was helped by Seagate's momentary lapse of reason, so to speak, when it de-emphasised its mobile drive focus a year or so ago. That stuation has changed and Seagate is in full catch-up mode.

WD shipped 4.1 million consumer drives in the quarter; this was 32 percent more than the previous quarter and 50 percent more than in Q4 fy07.

WD did not highlight its enterprise drive shipments but its recent enterprise drive VelociRaptor announcement implies it should have some success in that sector with its fast 2.5-inch SATA drives. However industry leader Seagate already has an equivalent speed (10,000rpm) 2.5-inch SAS drive and we shouldn't expect WD to make the headway in the enterprise drive market in fy 2009 that it has in the mobile market in fy 2008, Seagate not having taken its eye off that particular ball.

Analysts were pleasantly suprised by the company's overshoot of their expectations for the quarter.

WD's president and CEO, John Coyne, said: "Fiscal 2008 was an outstanding year for WD, capped off with the strong fourth-quarter financial performance. Our outstanding financial performance demonstrates the efficiency and effectiveness of the business model that we have built and refined over the last several years, underpinned by our industry-leading cost structure. Customer satisfaction with WD's broad product line, high quality and reliability, service excellence and overall value proposition continues to drive our profitable growth."

The outlook was for Q1 fy09 revenues of $2.05B - $2.15 billion ($0.81 - $0.89/share). Analysts had been expecting higher per share earnings - $0.99 on $2.04 billion revenue according to Reuters - and the company's shares fell around 10 percent in value. The company said in a conference call that a competitor with a large desktop drive inventory to shift (Seagate) had caused depressed pricing in Q4 and this was exected to influence the Q1 fy09 quarter.

The average selling price for WD's hard drives in Q4 fy08 was $56. It was $59 in Q3 fy08 and $55 in Q4 fy07.

^{[Chris Mellor.]}