On Feb 28, 2014, we issued an updated research report on
). Despite reporting better-than-expected second-quarter results,
the company expects a sequential decline in revenues due to lower
total addressable market (TAM) impacted by seasonality. Moreover,
the company's earnings estimates are expected to be affected due
to the sTec and Virident acquisitions.
Nonetheless, Western Digital shipped 63.1 million hard drives
at an average selling price (ASP) of $61.0. Reported shipment was
up from 62.6 million sequentially and 59.2 million in the
year-ago quarter. Moreover, Western Digital's shift toward non-PC
applications continued as 34% of the quarter's revenues came from
the segment during the last reported quarter.
We believe the secular growth of digital data and growing
exposure to the small and medium business space are the long-term
positives. The company is launching storage devices to attract
Moreover, the company is expected to get good mileage from its
cloud-based business. Cloud-based storage has become the order of
the day as it enables the access of content through different
gadgets such as smartphone, tablets and personal computers.
To cater to this pent up demand, the company expanded its My
Cloud solutions with My Cloud EX4 - a broader portfolio of
network attached storage hard drives. My Cloud EX4 will help the
company meet growing business needs with improved flexibility and
Moreover, strategic acquisitions to expand its offerings in
the SSD segment is expected to place Western Digital in a better
position compared to its peers such as
). However, continued investments in product innovation could
result in flattish margins in the near term.
Also, Western Digital witnessed lower estimate revisions for
the March quarter over the last 60 days. During the period,
Western Digital's earnings estimate dropped from $1.91 to
Currently, Western Digital has a Zacks Rank #3 (Hold).
Investors can consider a better-ranked stock like
) which sports a Zacks Rank #1 (Strong Buy).
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