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. 22, 2014, 4:17 PM
Jan. 22, 2014, 12:10 AM
Jan. 21, 2014, 5:35 PM
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.
Jan. 9, 2014, 5:58 PM
- IDC and Gartner respectively estimate PC shipments fell 5.6% and 6.9% Y/Y in Q4. Those numbers represent improvements from estimated Q3 declines of 7.6% and 8.6%. For the full year, both firms think shipments dropped 10% (to 315M and 316M, respectively).
- Gartner thinks U.S. PC sales (outperformed in Q3) have bottomed, but nonetheless estimates they fell 7.5%, and states "consumer spending during the holidays did not come back to PCs as tablets were one of the hottest holiday items."
- IDC thinks U.S. shipments only fell 1.6%, thanks to healthy enterprise demand. EMEA and much of Asia-Pac remained weak, but Japan delivered positive growth. The U.S. and Japan have higher ASPs and lower piracy rates than many emerging markets.
- Lenovo (LNVGY) added to its market lead in Q4: IDC assigns the company an 18.6% share (+250 bps Y/Y). #2 H-P, which performed well in its October quarter, is given a 16.8% share (-50 bps); both IDC and Gartner think H-P's U.S. sales were weak. #3 Dell, which has been cutting prices to gain share, is given a 12.2% share (+130 bps).
- H-P and Lenovo have each rolled out a slew of new Windows and Android notebooks, tablets, and convertibles at CES. Lenovo's pricing has arguably been more aggressive than H-P's.
- Other PC industry names: MSFT, INTC, AMD, NVDA, MU, STX, WDC.
Dec. 23, 2013, 6:48 PM
- With Xyratex's storage subsystem business both a supplier and a rival to the storage OEMs who account for a large chunk of Seagate's (STX) enterprise hard drive sales, analysts note Seagate's pending acquisition of Xyratex brings both cross-selling opportunities and channel conflict risks.
- BMO suspects Seagate hopes to use Xyratex (presumably via its ClusterStor line) to directly supply Web/cloud providers, but also notes Seagate "will now compete against a set of customers." The Register's Chris Mellor: "Western Digital (WDC) and Toshiba ... should pick up some extra [hard drive] business from OEMs displeased by Seagate competing with its own channel."
- Piper, however, likes how Xyratex's hard drive equipment unit could lower Seagate's hard drive testing times and capex. It also observes Xyratex claims IBM, H-P, NetApp, and Dell as clients, even if it competes with them to an extent.
- Wells Fargo likes the deal, but also thinks Seagate may still need to make some flash storage acquisitions. Western Digital has been more aggressive here, snapping up server flash module vendor Virident and module/SSD supplier sTec.
- Deutsche, meanwhile, expects Teradyne's (TER) hard drive test equipment sales to get a boost as Western Digital and Toshiba stop buying test equipment from Xyratex.
Dec. 23, 2013, 9:25 AM
- Seagate (STX) is acquiring hard drive equipment/storage subsystem maker Xyratex (XRTX) for $13.25/share, or $294M if excluding $80M in cash on hand. The price represents a 27% premium to Xyratex's Friday close. (PR)
- By acquiring Xyratex, which has counted Seagate, Western Digital (WDC), and Toshiba among its clients (the latter two might now now turn to other suppliers), Seagate is vertically integrating in an effort to gain a manufacturing edge. The purchase comes shortly after Western beat Seagate to the punch in shipping helium drives (they're lighter, denser, and more power-efficient than conventional drives), a technology long promoted by Xyratex.
- The deal also increases Seagate's enterprise storage exposure. As SA Pro contributor Kingsley Park Capital has noted, Xyratex, historically focused on relatively low-end solutions, recently launched ClusterStor, a solution aimed at the growing, higher-margin HPC storage market.
- Seagate expects the purchase to contribute $500M-$600M to FY15 (ends June '15) revenue, and to be neutral to FY15 EPS. The deal is expected to close by mid-2014. Activist investor Baker Street Capital, which has a large stake in Xyratex, backs the deal.
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. 13, 2013, 9:14 AM
- Citi's Joo Yoo has upgraded Seagate (STX -0.3%) and Western Digital (WDC +1.3%) to Buy, while respectively raising his PTs to $62 and $100.
- Echoing recent Intel upgrades, Yoo expects Seagate and Western improving/stabilizing PC demand. He also sees the hard drive giants to getting a boost from sales to cloud infrastructure services firms; Western is targeting these companies (and others) with its new helium drives.
- Yoo downgraded Seagate and Western to Sell in Oct. '12, and upgraded them to Neutral in July. Shares have had a pretty good run over the last 14 months.
- STX +1.6% premarket.
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.
Dec. 3, 2013, 12:49 PM
- After forecasting in August global PC shipments would fall 9.7% Y/Y in 2013, IDC now estimates they'll drop 10.1% to 314.2M. Consumer shipments are expected to drop 15%, and commercial shipments (tend to have higher ASPs) 5%.
- Interestingly, emerging markets (shipments -11% to 182.1M) are expected to see a slightly larger drop than "mature markets" (-8% to 132M). There have been signs of stabilizing demand in the U.S. and certain other developed markets.
- IDC's forecast cut comes even though the firm thinks shipment declines moderated to a 7.6% Y/Y clip in Q3, after dropping 11.4% in Q2. In addition, H-P (HPQ +0.8%) just reported a mere 2% Y/Y PC sales drop for its Oct. quarter, and Intel (INTC -1%) stated the PC market is "beginning to show signs of stabilization," albeit while providing disappointing 2014 guidance.
- IDC expects shipments to drop another 3.8% in 2014 before "turning slightly positive in the longer term." It foresees 2017 shipments (naturally hard to predict) of 305.1M - barely above 2008 levels.
- For reference, IDC has predicted smartphone shipments will rise 39% this year to 1.01B (over 3x PC shipments), and tablet shipments will rise 58% to 227M (72% of PC shipments).
- Affected companies: MSFT, STX, WDC, MU, AMD, NVDA, LNVGY
Nov. 29, 2013, 1:04 PM
- DRAMeXchange forecasts the NAND flash memory market will follow up on a solid 2013 by growing 13% in 2014 to $28B.
- Though smartphone/tablet-related NAND sales are expected to grow, SSD demand is seen as the main growth driver: SSDs are expected to account for 25% of NAND chip shipments in 2014, up from a mere 13% in 2013.
- While the price gap between SSDs and hard drives (on a $/GB basis) remains considerable, SSD sales to both the PC and server/storage markets have been ramping quickly, thanks to the technology's space, power, reliability, and read performance advantages. That's proving to be a headwind for Seagate (STX) and Western Digital (WDC -1.5%), in spite of their efforts to grow their SSD/flash storage positions.
- In spite of recent price declines, the NAND industry's supply/demand is seen remaining favorable, with bit demand growth (37.6%) slightly outpacing supply growth (36.3%). Supply is expected to rise 40.3% in 2013.
- DRAMeXchange's 2014 bit supply estimate is lower than the well-received 40% forecast provided by Micron (MU -0.3%) in August. SanDisk (SNDK +0.4%) has also been predicting NAND's supply/demand balance will remain healthy.
Nov. 25, 2013, 11:44 AM
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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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