Western Digital Corp.
) reported first-quarter 2014 non-GAAP earnings per share of
$2.12, which beat the Zacks Consensus Estimate of $2.04. However,
earnings were down from $2.36 per share reported in the year-ago
Although revenue of $3.8 billion was down 5.7% on a
year-over-year basis, it topped the Zacks Consensus Estimate of
$3.78 billion and was at the higher end of management's guidance
range of $3.7 billion-$3.8 billion. The company's revenues
declined primarily as a result of modest price declines and a
seasonal change in business mix.
During the quarter, Western Digital shipped 62.6 million hard
drives at an average selling price (ASP) of $58. Although the
reported shipment was up from 59.9 million sequentially, it was
up marginally from the year-ago quarter shipment of 62.5 million.
However, ASP for the quarter was down from $60 in the previous
quarter and $62 in the year-ago quarter.
Western Digital's market share in the total addressable market
increased from 44.9% in the previous quarter to 45.1%. Moreover,
market share expanded from 44.9% reported in the year-ago
Nonetheless, Western Digital's shift toward non-PC
applications continued as 53% of the quarter's revenues came from
the segment. Moreover, the company reported $106 million in
revenue contribution from the Enterprise Solid State Drive (SSD)
segment which increased from $104 million in the previous quarter
and $70 million contributed in the year-ago quarter.
Although Western Digital's non-GAAP gross margin declined 67
basis points (bps) it exceeded management's guidance by 70 bps
primarily due to lower-than-expected price declines and
better-than-expected cost optimization. The year-over-year
decline was due to lower revenue base and lower ASPs.
Operating margin for the quarter remained relatively flat at
16.5% due to lower operating expenses. Western Digital's non-GAAP
net income came in at $514 million or $2.12 per share compared
with $594 million or $2.36 per share reported in the year-ago
Balance Sheet & Cash Flow
Cash and cash equivalents were $4.87 billion, up from $4.31
billion in the previous quarter. During the quarter, the company
generated $680 million in cash from operations compared to $684
million in the previous quarter.
The company repurchased 2.3 million shares for $150 million
and paid dividends of $59 million during the quarter.
For the second quarter, revenues are expected in the range of
$3.775 billion to $3.875 billion. Gross margin is expected to be
flat. Management expects non-GAAP earnings per share to be
between $1.95 and $2.10 for the December quarter. The Zacks
Consensus Estimate is pegged at $2.16.
Although Western Digital's first-quarter top- and bottom lines
surpassed the Zacks Consensus estimate, year-over-year
comparisons were dismal. Despite improvement in shipments,
results were impacted by lower ASPs.
Nonetheless, the secular growth of digital data and growing
exposure to the small and medium business space are long-term
positives. The company is launching storage devices to attract
more customers. Continued investments to innovate products could
result in flattish margins in the near term.
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
Western Digital Corp. carries a Zacks Rank #1 (Strong
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