Thu, Oct. 29, 1:15 PM
- Western Digital's (WDC +1.7%) FQ1 results were roughly in-line with the outlook provided in its Oct. 21 pre-announcement (provided while announcing the SanDisk deal). The company guided on its earnings call (transcript) for FQ2 revenue of $3.3B-$3.4B and EPS of $1.50-$1.60, below a consensus of $3.45B and $1.75.
- Western is nonetheless trading higher. Archrival Seagate (STX -2.9%), which issued an FQ1 warning on Oct. 15 (enterprise share loss to Western is believed to be the culprit) and reports on Friday morning, is selling off.
- Western's gross margin fell 90 bps Q/Q and 120 bps Y/Y in FQ1 to 28.9%; it's expected to rise "slightly" in FQ2. $60M was spent on buybacks; Western has said it will suspend its buyback (while keeping its dividend) on account of the SanDisk deal.
- Hard drive shipments totaled 51.7M - 15.8M notebook, 11.7M desktop, 11.5M consumer, 5.6M branded, 7.2M enterprise - up from 48.5M in FQ4 and down from 64.7M a year ago. 66% of revenue came from non-PC markets, up from 55% a year ago (the SanDisk deal will further increase that number). Enterprise SSD revenue was $233M vs. $244M in FQ4 and $156M a year ago.
- On the earnings call (transcript), Western noted demand for high-capacity enterprise hard drives (beloved by Internet giants) was "somewhat softer than anticipated" due to the "absorption of previously deployed storage assets." Regardless, it still expects a 35% enterprise capacity CAGR through 2020.
- The company echoes others in declaring it sees "some signs of stabilization" in PC demand. Ahead of the SanDisk deal (will boost Western's SSD share and lower its flash costs), Western also reports seeing "a very competitive market" in enterprise SSDs.
- Western's FQ1 results, PR, datasheet (.pdf)
Wed, Oct. 28, 4:17 PM
Tue, Oct. 27, 5:35 PM
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Wed, Oct. 21, 9:32 AM
- Along with announcing a $19B deal to acquire SanDisk (SNDK +4.1%), Western Digital (WDC -2%) says it expects to report FQ1 revenue of $3.4B and EPS of $1.56 vs. a consensus of $3.28B and $1.56. Gross margin fell 90 bps Q/Q to 28.9%. With Seagate (STX -0.5%) having warned last week, the revenue outlook appears to confirm analyst suspicions Western gained enterprise hard drive share.
- Of Western's proposed $86.50/share payout to SanDisk, $85.10/share is in cash. The cash portion of the $86.50/share payout drops to $67.50/share if a planned investment in Western by Tsinghua Unigroup subsidiary Unisplendour (for a 15% stake) hasn't closed or is terminated.
- To help finance the deal, Western plans to obtain a whopping $18.4B worth of new debt facilities. It expects to continue paying its dividend, but will suspend its buyback program.
- Cost synergies are expected to reach a $500M/year run rate within 18 months; the deal is expected to be accretive to EPS within 12 months of closing (not surprising given it's mostly in cash). SanDisk's NAND flash manufacturing JV with Toshiba will be maintained.
- By acquiring SanDisk's NAND chip, controller, and SSD IP, and by gaining the ability to source NAND at cost, Western effectively neutralizes the cannibalization threat posed by SSDs/flash storage to its hard drive ops. For now, Seagate continues to rely on 3rd-party flash manufacturers; an alliance with Micron was formed in February.
- SanDisk is trading roughly 10% below Western's offer price.
Thu, Oct. 15, 7:08 PM
- "Based on the Pre-announcement and implied 117.5M [total addressable market], we believe Seagate (NASDAQ:STX) lost share on the Enterprise side of the business to Western Digital (NASDAQ:WDC)," writes RBC's Amit Daryanani after taking in Seagate's FQ1 warning, which was blamed on weak nearline enterprise hard drive sales. "ASPs declined materially where Enterprise units (40% gross margins) are in the $100+/unit range while PC/gaming units are in the $55-$65/unit range."
- Likewise, Brean's Ananda Baruah thinks both slightly higher-than-expected industry shipments and Seagate's enterprise issues "suggest a net-positive impact" for Western through at least calendar Q4. However, he argues Seagate's issues are temporary. "We maintain conviction that STX’s normalized EPS remains at least $5.00 (a key level for us). Bottom line is that STX has issued a significant response to the softer PC environment by reducing its Opex $s 20% from the Mar ’15 Q and Mar Q ’16 ... Our $65 [target] (30% appreciation) is 12x our estimated FY17 EPS of $5.30 and 13x our CY16 EPS of $5.00."
- Seagate fell 13.3% in regular trading to new two-year lows. Western fell 2.5%.
Thu, Oct. 15, 9:17 AM
- Seagate (NASDAQ:STX) now expects to report FQ1 revenue of $2.9B vs. prior guidance of $2.9B-$3.1B and a $3.03B consensus. Unit shipments are expected to total 47M - up from FQ4's 45.3M but down from 59.5M a year ago - with Seagate maintaining a 40% share (implies a total market of 117.5M).
- Gross margin (non-GAAP) is now expected to be at 24%, below prior guidance of 27% and down from 27.2% in FQ4 and 28.1% a year ago. Seagate blames lower-than-expected demand for 4TB and 6TB nearline hard drives. An 8TB product was recently announced.
- FQ1 op. cash flow is expected to total $800M. 20M shares were repurchased.
- CEO Steve Luczo: "While Seagate had strong operating cash flows and made significant progress in cost containment in the September quarter, we are disappointed we did not execute a product portfolio that fully addressed the demand in the nearline market. Looking ahead, we are confident that our nearline product portfolio will be fully competitive by our fiscal third quarter."
- Full FQ1 results arrive on the morning of Oct. 30. Western Digital (NASDAQ:WDC), recently rumored to have held buyout talks with SanDisk, is following Seagate lower. Seagate also issued an FQ4 warning in July.
Wed, Jul. 29, 6:39 PM
- Western Digital (NASDAQ:WDC) has guided on its FQ4 call for FQ1 revenue of $3.2B-$3.3B and EPS of $1.50-$1.60, below a consensus of $3.5B and $1.76. However, a light outlook was expected following Seagate's warning and a deluge of soft PC data.
- Western has risen to $83.11 AH. Seagate (NASDAQ:STX) has risen to $50.74 ahead of Friday morning's FQ4 report.
- Western's FQ4 results, PR
Wed, Jul. 29, 4:16 PM
Tue, Apr. 28, 6:33 PM
- In addition to missing FQ3 estimates, Western Digital (NASDAQ:WDC) has guided on its CC for FQ4 revenue of $3.3B-$3.4B and EPS of $1.50-$1.60, below a consensus of $3.64B and $1.92. Not surprisingly, much of the blame is placed on weak PC sales.
- FQ3 gross margin (non-GAAP) was 30.1%, down 40 bps Q/Q and flat Y/Y. Western has set a broad FQ4 GM guidance range of 27%-32%. Operating expenses fell 2% Y/Y to $591M, and $240M was spent on buybacks.
- Desktop hard drive shipments fell by 3.1M Y/Y to 13.5M, and notebook drives by 3M to 18.8M. Enterprise drives (high-margin, lifted by Web/cloud demand) rose by 400K to 7.5M; branded drives (also high-margin) fell by 100K to 6.1M; consumer electronics drives rose fractionally to 8.6M.
- Western estimates the total addressable market (TAM) for hard drives fell to 125M from FQ2's 140.8M and the year-ago period's 138.1M. 60% of revenue came from non-PC products, up from 53% a year ago. Enterprise SSD revenue rose to $224M from FQ2's $187M and the year-ago period's $134M.
- Shares have fallen to $94.50 AH. Seagate provided light guidance 11 days ago.
- FQ3 results, PR, datasheet (.pdf)
Tue, Apr. 28, 4:17 PM
Fri, Apr. 17, 11:00 AM
- In addition to missing FQ3 revenue estimates (while beating on EPS), Seagate (NASDAQ:STX) has guided on its CC (webcast) for FQ4 revenue of $3.2B-$3.3B, below a $3.42B consensus. However, a light outlook was expected given the PC industry's recent woes. Demand is expected to pick up in 2H15 thanks to higher PC/console sales and continued enterprise/cloud strength.
- $706M was spent on buybacks in FQ3, helping EPS beat estimates in spite of a revenue miss. Also: Gross margin was 28.9%, +70 bps Q/Q and +40 bps Y/Y, and above guidance of 28.5%. While revenue fell 2% Y/Y, operating expenses rose 18% to $555M, thanks to both higher R&D and marketing/admin spend.
- Boosting margins: Shipments of enterprise drives (higher-margin) rose 18% to 9.1M thanks to a server upgrade cycle and Web/cloud demand. PC drive shipments fell 14% to 31.1M, with plunging desktop volumes offsetting slight notebook growth. Consumer drives -11% to 4.8M; branded drives -14% to 5.1M. Hard drive ASP rose $1 Q/Q and Y/Y to $62.
- Western Digital (NASDAQ:WDC) is following Seagate higher ahead of its April 28 FQ3 report. The gains come in in spite of a 1.5% drop for the Nasdaq. BofA's upgrades are looking good for now.
- Seagate's FQ3 results, PR, earnings slides (.pdf)
Thu, Mar. 12, 9:17 AM
- Intel (NASDAQ:INTC) now expects Q1 revenue of $12.5B-$13.1B, below prior guidance of $13.2B-$14.2B and a $13.7B consensus. Gross margin guidance remains at 60% (+/- 2%), with lower volumes offset by higher ASPs.
- "All other expectations" have been withdrawn - that presumably includes full-year guidance for mid-single digit revenue growth. Guidance will be updated during Intel's April 14 Q1 report.
- The chip giant blames the warning on "weaker than expected demand for business desktop PCs and lower than expected inventory levels across the PC supply chain." In particular, it thinks "lower than expected Windows XP* refresh in small and medium business and increasingly challenging macroeconomic and currency conditions, particularly in Europe," are taking a toll on sales. Server CPU division sales are "meeting expectations."
- Other PC-exposed names are following Intel lower: Microsoft (NASDAQ:MSFT) -2.4% premarket, AMD -2.8%, Nvidia (NASDAQ:NVDA) -2.5%, HP (NYSE:HPQ) -2.3%, Seagate (NASDAQ:STX) -2.5%, Western Digital (NASDAQ:WDC) -2.7%, Micron (NASDAQ:MU) -3.6%.
- Update (11:35AM ET): While Intel is still down over 4%, Micron and Seagate have turned positive, and HP is close to breakeven. Microsoft, Nvidia, and Western Digital have pared their losses, but remain lower.
Tue, Jan. 27, 8:14 PM
- Western Digital (NASDAQ:WDC) guided on its FQ2 CC for FQ3 revenue of $3.6B-$3.7B and EPS of $1.90-$2.00, mostly below a consensus of $3.73 and $1.99. With shares having already plunged over the last two days due to Seagate's outlook and Microsoft's numbers, investors are giving the hard drive giant a pass.
- FQ2 gross margin was 30.5%, up from 30.1% in FQ1 and the year-ago period, and above guidance for GM to be flat Q/Q. Western is also guiding for GM to be roughly flat Q/Q in FQ3.
- Notably, Western puts the total addressable market for hard drives in calendar Q4 at 140.8M units, less than the 144M-145M estimated by Seagate. That implies an FQ2 share of 43.4%, down from 44% in FQ1 and 44.4% a year ago. Average shipped drive capacity rose to 1.09TB from 1.00TB in FQ1 and 874GB a year ago. ASP was at $60.
- $309M was spent on buybacks, boosting EPS. R&D spend rose 2% to $426M, and SG&A spend 27% to $164M.
- FQ2 results, PR, prepared remarks, factsheet (.pdf)
Tue, Jan. 27, 4:17 PM
Mon, Jan. 26, 5:35 PM
Mon, Jan. 26, 10:00 AM
- In addition to slightly missing FQ2 revenue estimates (while posting in-line EPS), Seagate (NASDAQ:STX) has guided on its CC for FQ3 revenue of "at least $3.45 billion," unfavorable to a $3.59B consensus.
- FQ2 gross margin was 28.2%, +10 bps Q/Q but -40 bps Y/Y, and below (per Needham) a consensus of 28.6%. Seagate forecasts an FQ3 GM of 28.5%.
- Seagate estimates the addressable market (TAM) for hard drives was 144M-145M in FQ2, down from 147M in FQ1 and up from 142M a year earlier. The company pegs its share at 40%. Hard drive ASP fell by $1 Y/Y to $61.
- Two weak spots in FQ2: Consumer electronics hard drive shipments fell 9% to 6.1M, and branded drive shipments (high-margin) fell 3% to 6M. PC drive shipments rose 4% Y/Y to 36.6M, with notebook growth offsetting a desktop decline, and enterprise shipments (high-margin) rose 17% to 9.1M.
- $18M was spent on buybacks. Not counting a $620M gain recorded for an arbitration award, opex rose 6% Y/Y.
- Archrival Western Digital (WDC -7.2%) and hard drive assembly supplier Hutchison (HTCH -4.5%) are following Seagate lower. Western reports tomorrow afternoon, and Hutchison on Wednesday morning.
- Seagate's FQ2 results, PR, earnings slides (.pdf)
Western Digital Corp is a developer, manufacturer and provider of data storage solutions that enable consumers, businesses, governments & other organizations to create, manage, experience & preserve digital content. Its products include HDDs and SSDs.
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