Oct. 27, 2014, 2:25 PM
- Seagate (STX +1.3%) guided on its FQ1 CC (transcript) for FQ2 revenue of $3.7B, slightly above a $3.68B consensus. The company expects a hard drive addressable market (TAM) of 145M units. The market totaled 148M units in FQ1, above initial guidance of 142M-146M.
- Gross margin is expected to rise slightly Q/Q, in spite of the margin pressured caused by the Xyratex and Avago deals. FQ1 GM was 28.1%, down 40 bps Q/Q and Y/Y. The acquisitions led opex to rise 20% Y/Y to $595M.
- $183M was spent to buy back 3M shares. Over the last 8 quarters, Seagate's share count has fallen by 59M to 327M.
- With the help of strong demand from Web/cloud giants, enterprise drive shipments (higher-margin overall) rose 9% Y/Y to 8.8M. Desktop drives -11% to 18.7M; notebooks +17% to 20.2M; consumer electronics -3% to 6M; branded drives (also higher-margin) +12% to 5.1M.
- Seagate pegs its FQ1 hard drive share at 40%, up from 38% in FQ4 and even with a year ago.
- Western Digital (WDC +1.4%) is getting a lift from Seagate's numbers; it reports tomorrow afternoon.
- FQ1 results, PR, earnings slides (.pdf)
Oct. 8, 2014, 5:09 PM
- IDC estimates global PC shipments were down 1.7% Y/Y in Q3 to 78.5M, better than an expected 4.1%. The decline is even with Q2's rate, and better than Q1's 4.4% and Q4 2013's 5.6%. Gartner estimates shipments fell only 0.5%.
- Developed markets continue faring better than emerging markets still getting hit by tablet cannibalization. IDC thinks U.S. shipments rose 4.3%, a bit slower than Q2's 6.9% growth. EMEA grew, while Asia-Pac (exc. Japan) declined. Japanese growth remained "deeply negative."
- The corporate migration from Windows XP to Windows 7 (following MSFT's ending of XP support) is still providing a lift, as is a soft tablet market. However, IDC cautions demand for "large commercial refreshes" remains low.
- Notably, Apple (NASDAQ:AAPL) finally managed to crack IDC's list of the top-5 global vendors: With the help of a strong U.S. market and Mac price cuts, Apple's unit share rose an estimated 60 bps to 6.3%. Revenue share is likely above 10%, given Apple's calendar Q2 Mac ASP was $1,255. U.S. unit share was at 13%.
- The four companies ahead of Apple all grew their shares as well, gaining ground against vendors with less scale: Lenovo (OTCPK:LNVGY) was at 20% (+230 bps), H-P (NYSE:HPQ) at 18.8% (+130 bps), Dell at 13.3% (+140 bps), and Acer (OTC:ACEIY) at 8.4% (+100 bps).
- Intel's (NASDAQ:INTC) Oct. 14 Q3 report should provide additional color on PC demand going into the holiday season.
- Related tickers: AMD, NVDA, MU, STX, WDC, HTCH
Oct. 8, 2014, 1:20 PM
- The Minnesota Supreme Court has upheld a $630.4M arbitration award levied against Western Digital (WDC +0.7%) over the theft of trade secrets by a former Seagate (STX +0.6%) employee. An appeals court ruled in Seagate's favor last year.
- Since the S.C. verdict can't be appealed, Western expects to pay the amount in full to Seagate, as well as interested accrued since Jan. 2012 (the date of the original award ruling). Western had "recorded an accrual of $758 million" for the dispute as of June 27.
- Western had $5.1B in cash and short-term investments as of June 27, and $2.4B in debt. Seagate had $2.7B in cash and short-term investments as of the same date, and $3.9B in debt. The award will be paid using offshore cash.
- Seagate reports on Oct. 27, and Western on Oct. 28.
Aug. 26, 2014, 2:35 PM
- Nine months after Western Digital (WDC +0.1%) became the first company to launch a 6TB hard drive, Seagate (STX -0.3%) has become the first to launch an 8TB drive.
- Like Western's offering, Seagate's drive is aimed at the high-capacity enterprise storage segment, which has been growing rapidly (and taking share from high-margin performance-optimized drives) thanks to strong demand from Web/cloud giants. The company promises "the best Watts/GB for enterprise bulk data storage in the industry."
- Unlike Western, Seagate (tight-lipped about technical details for now) isn't making use of helium to achieve high densities and low power draw. The company's shingled magnetic recording (SMR) tech might be leveraged. Seagate has promised SMR will enable 20TB drives by 2020.
Aug. 25, 2014, 4:49 PM
Aug. 5, 2014, 10:41 AM
Jul. 30, 2014, 4:19 PM
Jul. 16, 2014, 9:56 AM
- Citing strong traction with cloud clients using hyperscale data center architectures (Google, Facebook, Amazon, etc.), Baird has upgraded Western Digital (WDC +2.7%) to Outperform, and hiked its PT by $25 to $120. Seagate (STX +1.6%) is following Western higher.
- Also possibly helping: Intel beat Q2 estimates and issued strong Q3/full-year guidance. The chip giant reported 6% Y/Y sales growth for its PC CPU reporting segment, and 19% growth for its server CPU segment.
- Gartner has forecast cloud demand will help drive a 25.1% CAGR for shipments for high-capacity business-critical drives from 2013-2018. On the other hand, soft enterprise storage sales and SSD cannibalization are expected to produce a -4.9% CAGR for performance-optimized business drives; Seagate has a stronger position here than Western.
- Western is hoping its helium drives will help it maintain its Web/cloud momentum. Seagate reports tomorrow, and Western on July 30.
Jul. 9, 2014, 5:29 PM
- Global PC shipments fell only 1.7% Y/Y in Q2 to 74.4M, says IDC. That's much better than the firm's forecast for a 7.1% drop, and smaller than the 4.4% and 5.6% declines respectively seen in Q1 and Q4. Gartner is even more positive, estimating shipments rose 0.1%, thus ending a long string of declines.
- Unsurprisingly (especially given INTC's Q2 guidance hike), IDC thinks business PC upgrades stemming from Microsoft's (MSFT) ending of Win. XP support helped out. But it also says consumer demand was better than expected, with sales of low-end PCs (inc. Chromebooks) improving amid slowing tablet growth.
- Sales in the U.S. and EMEA (two high-ASP regions) rose, while Asia-Pac (exc. Japan) still fell by nearly double digits. IDC now thinks full-year industry growth "could get closer to flat, rather than the May projection of -6%."
- IDC's Q1 share data points to industry leaders gaining at the expense of smaller players: Lenovo (LNVGY) 19.6% share, +270 bps Y/Y. H-P (HPQ) 18.3%, +190 bps. Dell 14%, +180 bps. Acer (ACEIY) 8.2%, -10 bps. Asus (ASUTY) 6.2%, +30 bps. Everyone else 33.6%, -690 bps.
- HPQ +0.6% AH. Other names with strong PC exposure: AMD, NVDA, MU, STX, WDC, HTCH.
Jul. 8, 2014, 11:28 AM
- Following checks with Japanese hard drive component suppliers Nidec and TDK, and research firm TSR, CLSA reports Seagate (STX -0.9%) is cutting its Sep. quarter forecast for industry hard drive shipments to ~133M from a prior 140M-145M.
- In April, Seagate guided for June quarter industry shipments to be "down a few points" from a March quarter level of 138M, but to also reach 140M-145M in each of the next 2 quarters. The market has been pressured by SSD cannibalization and weak enterprise storage sales, but has also benefited from stabilizing PC sales and healthy demand from Internet giants.
- Seagate and Western Digital (WDC -1.5%) are only down moderately on a rough day for tech. Seagate reports on July 17, and Western on July 30.
- Other names with strong industry exposure: MRVL, HTCH
Jun. 12, 2014, 6:13 PM
- Seagate (STX) +0.8% AH and Western Digital (WDC) +0.9% after Intel hiked its Q2 and full-year guidance, while citing stronger-than-expected corporate PC demand.
- Several other names with strong PC industry exposure are also up. Seagate's PC hard drive shipments fell by 400K Y/Y in the March quarter to 36.2M. Western's shipments fell by 1.5M to 38.4M.
Jun. 6, 2014, 6:40 PM
- Thanks to a 25% drop in high-end storage spend, external disk storage and total disk storage sales respectively fell 5.2% and 6.9% Y/Y in Q1, says IDC. Those figures contrast with Q4 growth rates of 2.4% and 1.3%.
- Market leader EMC, which depends heavily on its high-end Symmetrix line, saw its external share fall 110 bps Y/Y to 29.1%, and its total share fall 50 bps to 22.4%. EMC previously reported its high-end sales fell 22% in Q1; strong flash/scale-out storage sales partly offset the drop.
- NetApp's (NTAP) low high-end exposure allowed its shares to grow 30 bps and 50 bps to 15.1% and 11.7%, in spite of a 2.8% revenue drop. H-P's (HPQ) external share rose 40 bps to 8.8% (3PAR strength), but its total share fell 20 bps to 15.1% (server weakness).
- Things still look bleak for IBM, which reported a 23% Y/Y Q1 system storage revenue drop: Its external share fell 200 bps to 8.8%, and its total share 180 bps to 10.1%.
- The total disk share of non-top-5 vendors rose 370 bps to 28.8%. Chalk that up to both surging demand for cloud storage (getting cheaper by the quarter) running on commodity hardware, and solid momentum for flash/hybrid storage upstarts such as Nimble (NMBL), Pure Storage, and Nutanix.
- Hard drive/assembly suppliers: STX, WDC, HTCH
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 15, 2014, 9:48 AM
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.
WDC vs. ETF Alternatives
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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