Western Digital Earnings Preview

Bear Stearns analysts Andy Neff, Bill Hand and Ted Chung sent a note to clients Tuesday morning previewing Western Digital's (WDC) F2Q08 earnings Wednesday after the bell (find the conference call transcript here, later on Wednesday night). Key excerpts:

Wednesday 1/23 @ 5:00pm ET: WDC 2Q08 EPS after market close – expect 2Q08 results in line or better than pre-announcement, with positive outlook.

Despite having pre-announced better 2Q08 results on 12/5, we still see potential for WDC to report upside to 1Q08 results given seasonally strong demand and favorable pricing, and provide a positive outlook for 2Q08.

With positive structural changes in the HDD industry (e.g., component-level consolidation, HGST focused on profitability, Samsung focused on technology), the key for WDC is whether these changes will lead to continued benign competitive environment during the seasonally weak CY1H08.

• Post-option EPS of $1.05 vs. $0.57 a year ago (guidance is for $1.02-$1.06; First Call consensus is at $1.04)
• Revenues of $2.07bn, up 45% year/year (guidance is for $2.025-$2.075bn; First Call consensus is at $2.05bn)
• On 1/14, we lowered our estimates across our entire coverage within the IT Hardware sector to reflect our assessment of macro concerns -- all of our estimates cuts were going forward, i.e. not for the December quarter