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)
Tue, Apr. 14, 9:37 AM
- Believing PC weakness is priced in and valuations are low, BofA/Merrill has upgraded Seagate (STX +0.8%) to Neutral and Western Digital (WDC +1.1%) to Buy ahead of the companies' calendar Q1 reports (set for April 17 and 28, respectively).
- BofA thinks pricing is holding up well in spite of PC-driven unit weakness, and that a mix shift towards higher-margin enterprise drives (fueled by Web/cloud demand) is propping up both ASPs and gross margins.
- Nonetheless, the firm is respectively cutting its Q1 and Q2 hard drive market shipment (NYSE:TAM) forecasts by 4M and 3M to 126M and 129M - Seagate/Western's Q1 forecast is at 135M - and its 2015 TAM forecast by 9M to 525M. Estimates for both firms have been moderately cut.
- Regarding Western, BofA argues the company's strong SSD presence (made possible by a string of acquisitions) "ensures that the cannibalization of performance drives [by SSDs] is not a significant net negative."
- The upgrades come a day after Brean reiterated Buy ratings on Seagate/Western (while cutting estimates), and Jefferies added Western to its Franchise Pick list; like BofA, Jefferies cited the demand/ASP boost provided by high-capacity cloud drives, and argued PC issues are priced in.
Thu, Apr. 9, 6:03 PM
- As Intel's (NASDAQ:INTC) March 12 warning led many to expect, PC sales were weak in Q1: IDC estimates shipments fell 6.7% Y/Y to 68.5M, a much sharper drop than Q4's 2.4% and Q3/Q2's 1.7%. Gartner estimates shipments fell 5.2% to 71.7M. With IDC also reporting of price pressure, revenue declines might be larger.
- IDC: [T]he Q1 market faced multiple headwinds – including inventory build-up of Windows Bing based notebooks, commercial slow down following the [Windows] XP refresh and constrained demand in many regions due to currency fluctuations and unfavorable economic indicators." Gartner thinks sales of "mobile PCs" (notebooks, convertibles, and Windows tablets) rose, while desktop sales fell sharply. "PC replacements will be driven by thin and light notebooks with tablet functionality."
- Both Gartner and IDC report U.S. PC shipments fell only ~1% Y/Y. On the other hand, IDC thinks Japan (another high-ASP market) saw shipments fall 44%; strong Q1 2014 spending prior to a tax hike made for tough comps.
- Market leaders Lenovo (OTCPK:LNVGY) and HP (NYSE:HPQ) continued taking share from firms with less scale: IDC estimates Lenovo's share rose to 19.6% from 17.6% a year ago (3.4% unit growth), and HP's to 19% from 17.1% (3.3% unit growth).
- #3 Dell's share rose to 13.5% from 13.4%; #4 Asus (OTC:ASUUY) was flat at 7.1%, and #5 Acer (OTC:ASIYF) rose to 7% from 6.3%. Everyone else collectively fell to 33.9% from 38.4%.
- Unlike in Q4 and Q3 (seasonally stronger quarters for the company), Apple (NASDAQ:AAPL) wasn't in the global top-5. IDC estimates the company's US. unit share rose to 10.9% from 10.6%, good for fourth place (revenue share is higher).
- Other PC industry names: MSFT, AMD, NVDA, MU, STX, WDC, HTCH
Mon, Apr. 6, 12:43 PM
- Following the 20%+ plunge seen in response to the company's Q1/2015 warning, SanDisk (NASDAQ:SNDK) is trading 40% below its replacement value (as measured in terms of fabs, royalty revenue, and cash), estimates Bernstein's Mark Newman. That, in turn, leads him to call the NAND flash giant a compelling buyout target.
- Newman adds there's "growing unrest" among SanDisk investors over its current valuation, and considers the company an "obvious" target for activists. His list of potential suitors includes NAND rivals Micron and SK Hynix, and hard drive giants Seagate and Western Digital.
- Of note: Antitrust regulators would closely vet a Micron or Hynix acquisition, given the potential pricing impact of further NAND consolidation. And Seagate recently formed a NAND alliance with Micron.
- Susquehanna also argues today SanDisk makes for a good buyout target, but focuses specifically on Western Digital (WDC +0.1%). The firm argues an acquisition of SanDisk by Western, which has already made a string of flash-related purchases (all enterprise-related) to protect its flank as SSDs continue encroaching on hard drives, would be accretive for Western in year 2 even at a 35% premium.
Fri, Mar. 13, 3:21 AM
- In the latest sign of weakening demand for personal computers, International Data Corp. predicts global shipments of PCs will decline 4.9% this year to 293.1M units, a bigger drop than its previous guidance for a 3.3% decrease.
- According to market research firm, the PC market declined 0.8% to $201B last year and is expected to drop an additional 6.9% in 2015, with smaller declines in coming years, reducing the market to $175B by 2019.
- Previously: Intel -4.1% on Q1 warning; other PC industry names also fall (Mar. 12 2015)
- Related stocks: OTC:ASIYF, AMD, HPQ, INTC, OTCPK:LNVGY, MSFT, MU, NVDA, SNE, STX, OTCPK:TOSYY, WDC
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.
Wed, Mar. 11, 12:22 PM| Comment!
Sat, Mar. 7, 3:26 PM
- With Intel's (NASDAQ:INTC) Grantley Xeon CPU launch and Web data center investments offsetting weak high-end server demand, IDC estimates global server revenue rose 1.9% Y/Y in Q4 to $14.5B, and Gartner estimates it rose 2.2% to $14B; those figures compares with Q3 growth estimates of 4.8% and 1.7%, respectively.
- Likewise, IDC estimates global enterprise storage revenue rose 7.2% Y/Y in Q4, aided by Web investments and healthy demand for mid-range systems featuring integrated flash. Q3 growth was pegged at 5.1%.
- IBM had a rough time its both the server and storage markets: IDC believes its storage share fell to 9% (tied for #3) from 12.7% a year earlier, and Gartner estimates its server revenue fell 14% if one excludes Big Blue's x86 server unit, which was just sold to Lenovo. After accounting for the x86 sale, IDC estimates IBM's server share was at 13.7% (#3) vs. 26.8% a year ago.
- HP (NYSE:HPQ) fared a little better: IDC has its server share falling fractionally to 26.8% (still #1 overall), and its storage share falling to 13.8% (#2) from 14.1%. The company's x86 server unit has been gaining ground against IBM's former business, but its high-end server sales remain weak.
- Cisco's (NASDAQ:CSCO) UCS server line (recently refreshed) continues to gain ground: Its share rose to 5.3% (#5) from 4.5%, with full-year revenue pegged at $2.9B. With the help of aggressive pricing and x86 growth, Dell's server share rose to 16.7% (#2) from 15.2%, while its storage share slipped to 9% (tied for #3) from 9.2%. Lenovo (OTCPK:LNVGY) claimed a 7.6% server share (#4) thanks to the IBM deal, kicking Oracle (NYSE:ORCL) out of the top-5 along the way.
- EMC, whose high-end storage sales have been pressured (mid-range/flash demand has been better), saw its storage share drop to 22.2% (still #1) from 23.1%. NetApp (NASDAQ:NTAP), which posted an FQ3 miss and light guidance last month amid tough mid-range competition from EMC and others, saw its share drop to 7.2% (#5) from 8%.
- Not surprisingly, the white-label hardware beloved by Google, Facebook, Amazon, etc. continued to take share. IDC estimates such hardware, referred to as ODM Direct, claimed server and storage shares of 8.2% and 12.8% vs. 6.4% and 9.9% a year ago.
- Sales of x86 servers, the lion's share of which run on Intel CPUs, rose 7.1% to $11.5B. Sales of non-x86 servers fell 14% to $3B, thanks to declining demand for both mainframes and UNIX servers running proprietary RISC CPUs. "Early-stage revenue" was seen for ARM (NASDAQ:ARMH) servers, largely via HP's Moonshot line.
- Other companies with strong server and/or storage exposure: STX, WDC, SMCI, MLNX, AVGO, QLGC, RHT
Tue, Mar. 3, 12:39 PM
- BofA/Merrill's Wamsi Mohan has reinstated coverage on Seagate (STX -5.4%) with an Underperform rating and $50 target, and on Western Digital (WDC -3.3%) with a Neutral rating and $117 target.
- Mohan is worried Q1 and Q2 hard drive demand (i.e. TAM) is tracking below expectations. With regards to Seagate, he's also worried about its relatively high PC exposure (especially for business PCs), SSD cannibalization risk in both the client and (high-margin) performance hard drive segments, and potential conflicts with OEM customers from Seagate's systems business (stems from the Xyratex acquisition).
- Though worried about Western's exposure to the same TAM issues as Seagate, Mohan is relatively positive on the company due to its "solid" SSD position (partly the result of acquisitions) and strength in the growing high-capacity enterprise drive segment (boosted by demand from Internet giants).
- Top hard drive/SSD controller supplier Marvell (MRVL -2.1%) is following Seagate/Western lower, as is hard drive assembly supplier Hutchison (HTCH -1.7%). The Nasdaq is down 0.9%.
- Marvell's decline comes as the company reveals a Release 10 4G modem at the Mobile World Congress (competes with chips from Qualcomm, Intel, and others), as well as a partnership with Google to support the Web giant's Ara modular phone project.
- Earlier: Western Digital buys object storage software firm
Tue, Mar. 3, 11:12 AM
- Western Digital's (WDC -2.5%) HGST unit (formerly Hitachi's hard drive division) is acquiring Amplidata, a provider of software for managing object storage deployments within data centers. Terms are undisclosed.
- Amplidata argues its software, which is sold to enterprises, service providers, and OEMs, offers unmatched data reliability and durability, and can scale infinitely as more nodes are added. Demand for object storage solutions has been outpacing broader storage growth, as enterprises increasingly rely on them to handle unstructured data (documents, e-mails, videos, etc.).
- HGST already relies on Amplidata's software to help power its Active Archive storage systems, and says the deal "supports the company's strategy to expand into higher value data storage platforms and systems." It follows HGST's December acquisition of flash storage array vendor Skyera.
- Of note: Though having a sizable Silicon Valley presence, Amplidata is incorporated in Belgium. Thus, Western is likely using offshore cash to pay for the acquisition.
Tue, Feb. 3, 11:15 PM| Comment!
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
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, 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)
WDC vs. ETF Alternatives
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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