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, 12:35 PM
- Micron (MU -3.6%), Nvidia (NVDA -3.4%), Seagate (STX -3.7%), and Western Digital (WDC -3.4%) have joined Intel and HP among the ranks of PC-exposed names off sharply in response to Microsoft's results and guidance. The Nasdaq is down 1.5%.
- The 13% Y/Y drops reported by Microsoft for Windows OEM Pro and non-Pro license revenue are getting a lot of attention, as is the fact Microsoft partly blamed the former on slowing business PC demand (also reported by IDC).
- Microsoft also stated non-Pro revenue was hurt by a mix shift towards cheaper PCs (typically feature cheaper processors, integrated GPUs, less DRAM, and smaller hard drives) for which Windows license fees are lower.
- Seagate and Western both tumbled yesterday due to the former's soft calendar Q1 guidance. Western reports after the close.
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)
Nov. 6, 2014, 1:37 PM
- Hitachi is selling 5.4M Western Digital (NASDAQ:WDC) shares through a public offering, and giving underwriters a 815K-share overallotment option.
- The offering covers over 2% of WDC's outstanding shares; Hitachi obtained them through WDC's purchase of the company's hard drive unit.
- Assuming the overallotment option isn't used, Hitachi will have a 7.1M-share (3%) stake in WDC once the offering is complete.
Oct. 28, 2014, 5:24 PM
- Western Digital (NASDAQ:WDC) guides on its FQ1 CC (webcast) for FQ2 revenue of $3.75B-$3.85B and EPS of $2.00-$2.10, below a consensus of $3.9B and $2.20.
- The oulook is overshadowing Western's FQ4 beat. Seagate (NASDAQ:STX), which moved higher yesterday following its FQ1 beat and slightly above-consensus FQ2 guidance, is following Western lower.
- FQ1 results, PR
May. 27, 2014, 2:10 PM
- A "material ramp" in high-margin enterprise drive shipments in 2H14 could provide $0.30/share in upside to Seagate (STX +2.6%) EPS estimates, writes RBC's Amit Dayanani.
- Daryanani thinks enterprise drives carry a 40%+ gross margin, well above a company-wide FQ3 GM of 28.5%. He believes Seagate can deliver $7+ in FY16 (ends June '16) EPS, aided by cost controls, buybacks, and a 30% GM.
- Seagate's enterprise drive sales rose 200K Y/Y in FQ3 to 7.7M. They've been pressured by weak enterprise server/storage demand, but have also received a lift from strong demand from Web/cloud clients. The latter customer base often prefers higher-density/lower-margin enterprise drives.
- Western Digital (WDC +2.6%) is once more heading in the same direction as Seagate, as is assembly supplier Hutchison (HTCH +2.9%).
May. 8, 2014, 12:40 PM
- "The 3D NAND industry cycle will be longer than historical patterns and SanDisk (SNDK +3.7%) has a longer-term mix shift toward higher value enterprise SSDs and 2D NAND cost advantages," writes Raymond James while upgrading the NAND flash giant to Strong Buy.
- Nomura has upped SanDisk to Neutral and hiked its 2014/2015 estimates. The firm is still worried about the NAND pricing/margin gap that exists between SanDisk and rivals, it thinks "the risks of an earnings miss in 2H14 have declined" amid seasonal improvements and slowing industry supply growth.
- In its investor day slides (.pdf), SanDisk forecasts annual NAND flash industry bit growth will be in a modest 30%-40% range going forward. The company also noted its client SSD sales tripled in 2013 to $922M - SanDisk claims to be the market's #2 vendor. Enterprise sales almost doubled in 2013 to $267M; SanDisk is aiming for over $1B in 2016 enterprise sales.
- Of interest to Seagate (STX +1%) and Western Digital (WDC +1.7%) investors: SanDisk predicts the SSD attach rate for business notebooks will grow to 39% in 2017 from 16% in 2013, and that the rate for consumer notebooks will grow to 21% from 10%. The hard drive industry is already expected to see limited growth due to SSD pressure.
- Both SanDisk and NAND rival Micron (MU +3.3%) have made fresh 52-week highs. Micron rallied last week following a report the company is set to hike DRAM prices.
- Yesterday: SanDisk hiking dividend to $0.30/share
May. 1, 2014, 10:06 AM
- Like Seagate (STX -4%), Western Digital (WDC -6.1%) missed FQ3 revenue estimates while beating EPS forecasts. Also like Seagate, it offered light FQ4 guidance on its CC (transcript): Revenue of $3.5B-$3.6B and EPS of $1.65-$1.75 vs. a consensus of $3.72B and $1.89.
- While Seagate estimates March quarter industry hard drive shipments totaled 138M, Western pegs them at 137M. More importantly, the company expects shipments to fall to 130M in the June quarter.
- Goldman notes hyperscale data center owners (Google, Facebook, Amazon, etc.) are getting more efficient with their storage usage, and that this is affecting both Western and Seagate. Seagate is also dealing with inventory issues at enterprise storage OEMs; Western isn't reporting anything similar.
- With SSDs continuing to encroach on hard drives, Western's enterprise SSD sales grew to $134M (+46% Y/Y, still less than 4% of sales) in FQ3, and are expected to outgrow the broader market going forward. Non-PC applications made up 53% of total revenue.
- Western's ASP fell $2 Q/Q to $58 due to.a mix shift towards console hard drive sales. In spite of the ASP drop, gross margin was 30.1%, flat Q/Q and up 90 bps Y/Y, and above guidance of 29.5%. A 29.5% GM is forecast for FQ4.
- $244M was spent on buybacks, up from $150M in FQ2. Free cash flow was $536M vs. $539M a year ago.
- Hard drive controller supplier Marvell (MRVL -1%) is off moderately.
Apr. 14, 2014, 1:37 PM
- Citing improving margins and a favorable hard drive supply/demand balance, Argus has upgraded Seagate (STX +3%) to Buy. Archrival Western Digital (WDC +2.2%) is also rallying.
- Seagate had a 28% GM in its December quarter (flat Q/Q and +100 bps Y/Y), and guided for margins to be roughly flat Q/Q in the March quarter. Western had a 30.1% GM (+30 bps Q/Q and +140 bps Y/Y), and guided for March quarter GM to be near the midpoint of a 27%-32% target range.
- Both companies have seen a margin boost from hard drive industry consolidation. Seagate reports on April 29, and Western on April 30.
Jan. 27, 2014, 6:07 PM
- In addition to missing FQ2 estimates, Seagate (STX) has guided on its CC for FQ3 revenue of "at least" $3.4B; that compares unfavorably with a consensus of $3.46B.
- Seagate estimates the total addressable market (TAM) for hard drives stood at 142M (same as Western Digital) in the December quarter, up by 2M Q/Q and 6M Y/Y. The company estimates its share was 40%, flat Q/Q but down from 43% a year ago.
- FQ2 gross margin was 28%, flat Q/Q and up 100 bps Y/Y. $1.5B was spent on buybacks, thanks to the Samsung deal.
- Enterprise shipments (higher-margin) +7% to 7.8M, desktops -12% to 19.2M, notebooks -2% to 16.9M, consumer electronics +20% to 6.7M, branded drives (also higher-margin) +3% to 6.2M.
- Western Digital (WDC) is ticking lower in sympathy with Seagate. The shoe was on the other foot last week.
- Seagate's earnings slides
Jan. 22, 2014, 6:22 PM
- Though it beat FQ2 (Dec. quarter) estimates, Western Digital (WDC) has guided on its CC for FQ3 revenue of $3.65B-$3.75B and EPS of $1.80-$1.90, mostly below a consensus of $3.73B and $1.95. The company blames a seasonally weaker hard drive market and lower factory utilization.
- Western is down 2% AH. Archrival Seagate (STX), which reports on Monday, is down 2.1%, as is hard drive/SSD controller supplier Marvell (MRVL).
- Western estimates the total addressable market (TAM) for hard drives was 142M in FQ2; that's slightly above guidance for TAM to be roughly flat with an FQ1 level of 139M. Gaming was an area of strength, no doubt thanks to the Xbox One/PS4 launches.
- FQ2 gross margin was 30.1%, +30 bps Q/Q and +140 bps Y/Y, and slightly better than guidance. FQ3 gross margin is expected to be near the midpoint of Western's 27%-32% model range (implies 29.5%).
- $150M was spent on buybacks, and 54% of revenue came from non-PC applications. ASP rose by $2 Q/Q to $60, thanks to a stronger mix of branded drive and distributor sales.
- FQ2 results, PR, prepared remarks, datasheet
Jan. 21, 2014, 9:57 AM
- 3D Systems (DDD -3%) has been cut to Neutral by Credit Suisse.
- Seagate (STX +2.1%) has been upgraded to Overweight by Morgan Stanley, and rival Western Digital (WDC +0.5%) has been upgraded to Outperform by BMO. Wesern reports tomorrow, and Seagate on Jan. 27.
- SolarCity (SCTY -3.3%) has been cut to Neutral by JPMorgan. Deutsche started shares at Buy last week.
- SanDisk (SNDK -2.3%) has been cut to Neutral by BofA/Merrill. Q4 results arrive tomorrow.
- NetApp (NTAP +2.2%) has been upgraded to Buy by Lake Street Capital.
- InvenSense (INVN -2.8%) has been cut to Hold by Needham.
- FireEye (FEYE -3.7%) has been cut to Neutral by JPMorgan following a huge run-up in the wake of the Mandiant deal and the company's guidance hike.
- Altera (ALTR +2.8%) has been upgraded to Overweight by JPMorgan ahead of Wednesday's Q4 report.
- Tibco (TIBX -2.4%) has been cut to Neutral by Wedbush. Shares rallied last week on a report suggesting Dan Loeb is set to make an activist push.
- NetSuite (N +1.1%) has been upgraded to Buy by Maxim.
- Violin Memory (VMEM -3.7%) has been cut to Underweight by Barclays.
- Motorola Solutions (MSI +1.8%) has been upgraded to Buy by Citi.
- LG Display (LPL +3.2%) has been upgraded to Buy by BofA/Merrill.
Jan. 14, 2014, 1:54 PM
- Seagate (STX +3.1%) and Western Digital (WDC +3.3%) are both up sharply after leading hard drive suspension assembly supplier Hutchinson (HTCH +13%) reported preliminary Dec. quarter sales that soundly beat consensus estimates, and did so on the back of 13% Q/Q and 12% Y/Y assembly shipment growth.
- Storage hardware vendor Quantum's guidance hike might be helping the hard drive kingpins as well.
- Noble Financial observes Hutchinson's Q/Q shipment growth (attributed to strong demand for 2.5" notebook drives) is "welcome news" given Seagate/Western had guided for roughly flat industry hard drive shipments for the Dec. quarter.
- The firm is reiterating a Buy on Hutchinson, but also thinks the company needs to ship 130M assemblies/quarter (up from a Dec. quarter level of 115.7M) to break even.
- Western reports on Jan. 22, and Seagate on Jan. 27.
Dec. 20, 2013, 11:44 AM
- Brean's Ananda Baruah has raised his Seagate (STX +4.1%) PT to $70 from $55, and his Western Digital (WDC +0.9%) PT to $125 from $85, while reiterating Buys for both names. The PT hikes come shortly after the hard drive giants respectively received upgrades to Overweight and Buy from JPMorgan and Citi.
- With industry consolidation keeping pricing healthy, Baruah thinks Seagate/Western can deliver 100-200 bps of gross margin improvement over the next few years, and perhaps 400-500 of improvement within 5-7 years.
- That, in turn, leads him to forecast Seagate and Western willrespectively deliver $7+ and $8.64 in calendar 2015 EPS. He add cost savings obtained from integrating Hitachi's hard drive unit could boost Western's EPS by another ~$1.70. For reference, Seagate's current FY15 (ends June '15) EPS consensus is at $5.96, and Western's is at $8.59.
- Seagate has made new 52-week highs, and Western is close to its 52-week high of $84.70.
Dec. 4, 2013, 1:49 PM
- Citing the impact of faster-than-expected cloud computing adoption, Morgan Stanley's Katy Huberty has downgraded Accenture (ACN -1.9%) and NetApp (NTAP -0.9%) to Equal Weight. Meanwhile, citing more favorable risk/reward, Huberty has upgraded Western Digital (WDC +2.8%) to Overweight and Brocade (BRCD +0.5%) to Equal Weight.
- Concerns about the impact of cloud services on sales of IT outsourcing services such as Accenture's, and enterprise storage hardware such as NetApp's, have been around for some time. Recent numbers (I, II) provided by the companies, and by peers such as IBM and EMC, haven't done much to soothe those fears. Synergy Research recently estimated sales of cloud infrastructure (IaaS) and app platform (PaaS) services rose 46% Y/Y in Q3.
- Accenture now trades at 15x estimated FY14 (ends Aug. '14) EPS exc. net cash, and NetApp trades at just 10x estimated FY14 (ends April '14) EPS exc. net cash.
- Western Digital, whose hard drive sales have been pressured by PC weakness and SSD adoption, recently began shipping its first helium drives (they're lighter, denser, and more power-efficient than traditional drives), in part to better meet the needs of Web/cloud companies.
Oct. 28, 2013, 5:59 PM
- Seagtate (STX) guides on its FQ1 CC for FQ2 revenue of $3.5B-$3.6B, below a $3.64B consensus. The hard drive giant sees its gross margin staying flat Q/Q after rising 55 bps in FQ1 to 28.5%.
- Shares are lower due to the guidance and Seagate's FQ1 miss. Western Digital (WDC), which fell last week after beating FQ1 estimates and issuing below-consensus FQ2 guidance, is down only slightly for now.
- Seagate's hard drive ASP was $62 in FQ1, down from $63 in FQ4 and the year-ago period. WDC, whose enterprise exposure is a little lower than Seagate's, had a hard drive ASP of $58 during the Sep. quarter.
- Seagate estimates industry hard drive shipments totaled 140M in the Sep. quarter (WDC had estimated 139M), and that it had a 40% share. That's unchanged Q/Q, but down from 42% a year ago. Average capacity/drive was 875GB, up from 863GB in FQ4 and 733GB a year earlier.
- FQ1 results, slides
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Western Digital Corp is a developer, manufacturer & provider of data storage solutions that enable consumers, businesses, governments & other organizations to create, manage, experience & preserve digital content. Its product include; HDDs and SSDs.
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