Western Digital Corp.
) reported fourth-quarter fiscal 2014 non-GAAP earnings per share
(excluding amortization of intangibles, restructuring charges and
other one-time items) of $1.85, which beat the Zacks Consensus
Estimate of $1.74.
Despite being down 5.9% from the year-ago quarter, reported
earnings surpassed management's guidance range of $1.65 to $1.75
Shares of Western Digital went down 2.6% in after-hours trading on
Wednesday as the year-over-year comparisons of both earnings and
revenues were unfavorable.
Western Digital reported revenues of $3.65 billion for the fourth
quarter, which decreased 2.1% from the year-ago quarter but came
ahead of the Zacks Consensus Estimate of $3.59 billion. Reported
revenues also came ahead of management's guided range of $3.5-$3.6
Revenues declined on a year-over-year basis primarily due to a drop
in hard disk drive (HDD) average selling price coupled with
seasonally lower demand for notebook and desktop PC units and soft
demand from the enterprise segment.
During the quarter, Western Digital shipped 63.1 million hard
drives at an average selling price (ASP) of $56. ASP for the
quarter was down from $60.0 in the year-ago quarter and $58.0
reported in the previous quarter. However, reported shipment was up
from 59.9 million in the year-ago quarter and 60.4 million HDDs
shipped in the previous quarter.
Western Digital's market share in the total addressable market
(TAM) increased from 43.8% in the previous quarter to 45.7%. Market
share also expanded from 44.9% reported in the year-ago quarter.
Western Digital's contribution from its non-PC segment (branded
consumer electronics and enterprise HDD and SSD businesses)
remained consistent at 53% of total revenue on a quarterly basis.
Moreover, the company reported $113.0 million in revenue
contribution from the Enterprise Solid State Drive (SSD) segment,
which increased from $104.0 million in the year-ago quarter,
primarily due to higher adoption of its product range.
Western Digital's top 10 customers contributed 45% to revenues
compared with 48% in the year-ago quarter and 44% in the previous
Western Digital's non-GAAP gross margin expanded 43 basis points
(bps) to 29.5% aided by strong demand in gaming and notebook PCs
and efficient operations.
Lower operating expenses (down 46.7% year over year) positively
impacted Western Digital's operating results. Income from
operations came in at $352.0 million, which increased from an
operating loss of $221.0 million reported in the year-ago period.
Non-GAAP net income came in at $445.0 million or $1.85 per share
compared with $477.0 million or $1.96 per share in the year-ago
Cash and cash equivalents were $4.80 billion compared with $4.57
billion in the previous quarter. During the quarter, Western
Digital generated $713.0 million in cash from operations compared
with $697.0 million in the previous quarter. The company generated
free cash flow of $552.0 million.
The company repurchased stocks worth $272.0 million and paid
dividends of $70.0 million during the quarter.
For the first quarter of fiscal 2015, revenues are expected in the
range of $3.8 to $3.9 billion. The Zacks Consensus Estimate is
pegged at $3.82 billion.
Gross margin is expected to be approximately 29.5%. Total operating
expenses are expected to be approximately $625.0 million.
Management expects non-GAAP earnings per share to be between $1.95
and $2.05 for the September quarter. The Zacks Consensus Estimate
is pegged at $2.06 per share.
Western Digital reported better-than-expected fourth-quarter fiscal
2014 results. However, year-over-year comparisons were unfavorable
primarily due to a fall in hard disk drive (HDD) average selling
price and soft demand from the enterprise segment. The company
provided a tepid revenue and earnings guidance citing seasonal
Nonetheless, shift toward non-PC applications, secular growth of
digital data and growing exposure to the small and medium business
space are long-term positives. Additionally, modest growth in TAM
and higher demand for storage are expected to lead to a positive
earnings surprise in the upcoming quarter.
We remain encouraged by the company's launch of a string of storage
devices under the mobile and cloud segment. Continued investment in
product innovation could result in flattish margins in the near
Moreover, strategic acquisitions to expand its offerings in the SSD
segment are expected to place Western Digital in a better position
compared to its peers such as Seagate Technology (
) and SanDisk Corp. (
Western Digital currently holds a Zacks Rank #2 (Buy). Investors
can also consider NVIDIA Corporation (
) which sports a Zacks Rank #1 (Strong Buy) and is worth buying.
Want the latest recommendations from Zacks Investment Research?
Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report
WESTERN DIGITAL (WDC): Free Stock Analysis
SEAGATE TECH (STX): Free Stock Analysis Report
SANDISK CORP (SNDK): Free Stock Analysis Report
NVIDIA CORP (NVDA): Free Stock Analysis Report
To read this article on Zacks.com click here.