Western Digital Corp.
) posted fourth-quarter 2013 adjusted earnings per share of
$1.96, comprehensively beating the Zacks Consensus Estimate of
Revenues during the quarter decreased 21.6% year over year to
$3.73 billion and were above the company's guidance range of
$3.55 billion - $3.65 billion. The company's revenues declined
primarily as a result of modest price declines and a seasonal
change in business mix.
The company shipped a total of 59.9 million hard drives,
having an average selling price (ASP) of $60 per unit. The
company exceeded their revenue guidance primarily on the back of
better-than-expected business mix and lower-than-expected price
Gross margin for the quarter was 28.2% up from 31.0% in the
year-ago quarter. Although GAAP gross margin declined, non-GAAP
gross margin was approximately 60 basis points (bps) better than
the company's guidance, reflecting better-than-expected business
mix and capacity utilization and lower-than-anticipated price
Operating margin for the quarter was 12.3%, down from 16.9%
reported in the year-ago quarter. Total operating expenses
increased 17.8% due to higher product development cost and other
Net income for the quarter was $416.0 million or $1.71 per
share, up from $745.0 million or $2.87 per share in the year-ago
quarter. Excluding amortization of intangibles related to the
acquisition of HGST, employee termination benefits and other
charges, non-GAAP/adjusted basis net income was $477 million or
$1.96 per share, compared with $872 million or $3.35 per
Balance Sheet & Cash Flow
The company generated $684.0 million cash from operations in
the third quarter, down from $727.0 million in the year-ago
quarter. Cash and cash equivalents were $4.31 billion, up from
$4.06 billion in the previous quarter.
The company repurchased 4.4 million shares for $235.0 million
during the June quarter.
For the first quarter, revenues are expected in the range of
$3.7 billion to $3.8 billion, attributable to price declines and
a seasonal change in business mix. Gross margin is expected to be
flat, excluding R&D and SG&A spending of approximately
$550 million and the amortization of HGST intangibles. The tax
rate is expected to be within 7 to 10%, while the share count is
expected to be 242 million. As a result of this, non-GAAP
earnings per share of between $1.95 and $2.05 are expected for
the September quarter.
The company's fourth-quarter earnings were mixed. Revenues
decreased substantially, in spite of improvement in demand, a
decent price environment and good shipping. The secular growth of
digital data and growing exposure to the small and medium
business space are long-term positives. The company is rolling
out new storage devices to attract more customers. However,
increased innovation has resulted in higher R&D expenses,
which may lead to flat margins.
SanDisk Corp. and Western Digital are coming up with
innovative product to grab additional market share, whereas new
acquisitions such as Velobit continues to make WDC's position
Western Digital Corp. carries a Zacks Rank #3 (Hold).
Investors can also look at other stocks that are performing
well such as
Aspen Tech Inc.
). All these companies carry a Zacks Rank #1 (Strong Buy).
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SANDISK CORP (SNDK): Free Stock Analysis
WESTERN DIGITAL (WDC): Free Stock Analysis
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