Western Digital Corp.
) is scheduled to announce its first quarter 2013 results after
the close of trading on October 22, 2012. In the run up to the
earnings release, we witness some revisions in analysts'
Fourth Quarter Overview
The company reported fourth quarter 2012 earnings per share
(EPS) of $3.35, comprehensively beating the Zacks Consensus
Estimate of $2.46.
Revenues during the quarter increased 97.8% year over year to
$4.75 billion. Hard drive shipments were 157 million units during
the quarter, thus bringing the total shipments for the year to
599 million units, aided by higher demand.
Gross margin in the reported quarter was 30.9% versus 19.5% in
the year-ago quarter. Gross margin exceeded the company's
estimate on the back of lower-than-expected price declines and
Considering the ongoing muted PC demand, the company was
compelled to cut its sales and total available market (TAM)
forecast for fiscal first quarter.
Currently, the company expects revenues to be in the range of
$3.9 billion to $4.0 billion, which is substantially down from
the previous revenue estimate of $4.2 billion to $4.3
Agreement of Analysts
Analysts are positive about the expected production ramp up,
market share gains and an improved mix from the addition of
products from Hitachi's Global Storage Technology business.
Moreover, analysts are quite optimistic about the strategy
adopted by the company and is focused on three main areas
-- public/private clouds (around 44% market share), mobile client
(around 47% market share) and personal cloud (around 45% market
Moreover, the company will be introducing more high capacity
offerings for the cloud, which includes the new 7 platter helium
drive as well as the SAS enterprise SSDs along with the
Moreover, Western Digital is also coming up with a host of
hardware and software solutions, which are particularly designed
to make storage easier and more readily available. The analysts
are optimistic about these products and believe that they will
find many takers. On the other hand, the downward movement in PC
demand may affect the business of the company negatively.
Therefore, out of the 19 estimates for the first quarter, 3
moved downward and none went up over the last thirty days. Out of
the 20 estimates for fiscal 2013, 2 estimates moved down and one
estimate moved up over the last thirty days. Again for fiscal
2014, 2 analysts made upward revision in last 30 days, while only
1 analyst made a downward revision.
Magnitude of Estimate Revisions
Over the past 90 days, the Zacks Consensus Estimates for the
first quarter 2013 plunged 8 cents and for the last 30 days it
moved down by 6 cents to $2.31. Again, for fiscal 2013, estimates
over the last 90 days moved up by 85 cents, while over the last
30 days it moved down by 12 cents to $8.91. For fiscal 2014,
estimates over the last 90 days moved up by $1.79, while the same
over the last 30 days moved up by 1 cent.
We believe that the weakness in PC demand will have a
significant impact on the overall market for hard disks. The
company has also forecasted quarterly shipment to drop to 140
million units from 157 million guided previously. We expect
improved mix from the addition of Hitachi's Global Storage
Technology business to have a positive impact on the gross
Though we are concerned about some oversupply in the short
run, but we believe that Western Digital's growth prospects
remain intact. The company's decision to buy back additional
shares worth $1.5 billion and launch new drives will act as
The company's international business and the overall demand
for its products are gradually improving, owing to which, revenue
is expected to improve going forward. Moreover a tough
) may also have an impact on the demand of the company.
Currently, Western Digital has a Zacks #3 Rank, implying a
short-term Hold rating.
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