Earnings Preview: Western Digital

Western Digital (WDC) is expected to report Q1 earnings Thursday Oct. 23 after market close, with a conference call scheduled for 5:00 pm ET.

Guidance

The consensus estimate is 82c for EPS and $2.08B for revenue, according to First Call.

Commentary from management on the mid-quarter update was: "Thus far in the September quarter overall demand is consistent with seasonal patterns established over the last several years." "Regionally, demand in Asia Pacific, the Middle East and Latin America is offsetting some industry demand softness in the U.S. and Western Europe." "Consumer desktop demand is at the low end of expectations while notebook, commercial desktop, DVR and Enterprise SATA drive demand is tracking to expectations."

Analyst Views

Thomas Weisel is cautious on WDC shares ahead of the company's Q1 results. Weisel's checks and analysis suggest Q1 results and Q2 guidance will disappoint, adding fuel to the growing fear that margins may decline. Following checks, Weisel believes the industry and WDC saw at least an 11% QoQ increase in total HDD shipments during Q1, consistent with the midpoint of WDC's forecast. However, on aggressive pricing through the quarter (notebooks and desktops), Weisel believes blended ASPs for WDC declined 7% QoQ, greater than its prior estimate of 5% QoQ. As such, Weisel had reduced its September quarter revenue estimate from to $2.06B and EPS to 70c.

Guidance provided on July 24, 2008 was for revenue of between $2.05B and $2.15B and EPS of between 81c and 89c. Weisel believes actual investor expectations for revenue to be $2.05B and EPS to 70c. Weisel had also recently cut its December quarter estimates due to continued pricing pressure, to $2.21B and 93c, below consensus of $2.15B and 92c. Relative to what Weisel believes are excessively negative investor expectations for EPS in FY09, well below First Call, it seew prospects for positive EPS surprises in FY09 and thus remain bullish on the 6 to 12 month outlook for WDC shares.

Comments

[User 284710:]

Thomas Weisel had it so completely wrong. What an idiot.

2008 Oct 23 05:38 PM

[Mr. Specialist:]

Where are all my analysts that I proved you incorrect. Your numbers do not match Western Digital's performance. As I told you before that your estimates for this quarter were too negative and I may suggest cautious. Analysts have performed very poorly for the last 17 quarters on estimates from Western Digital. Your opinion is meaningless when WD outperforms your track record quarter after quarter after quarter and so on...As I repeat again, what information does analysts use when they are proven wrong time after time. If you do not have correct information about WD, then I suggest to keep your comments to yourself. In todays maket pre-drepression global market, WD will continue to do very well despite this pre-dreprssion global market!

2008 Oct 24 06:36 AM