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| Comment!
Nov. 14, 2013, 8:02 AM
Nov. 4, 2013, 1:37 PM
- Western Digital's (WDC +2.6%) HGST unit (i.e. Hitachi's former hard drive business) has begun shipping its first helium-filled drive. Making good on past promises, WDC's drives offers an unmatched 6TB of storage - existing hard drives top out at 4TB - and is also said to be lighter and much more power-efficient (both with regards to idle and operational power draw) than existing 4TB offerings.
- WDC says it worked with H-P, Netflix, Huawei, research lab CERN, and "some of the world's largest social media and search companies" (could be a reference to Facebook and Google, who are often tight-lipped about the products going into their data centers) to qualify the drives.
- Web/cloud service providers are natural customers for WDC's helium drives, given their voracious storage appetites and obsession with maximizing compute/storage densities while minimizing power consumption. WDC goes as far as to argue its helium drives can facilitate liquid data center cooling (viewed as more efficient than air-based cooling) in a way traditional drives can't.
- WDC's helium drives could give it a leg up on Seagate (STX -0.3%), which has historically derived a larger portion of its sales from the higher-margin enterprise/data center segment. Seagate, which has questioned the viability of helium drives in the past, is aiming to launch 5TB hard drives in early 2014 with the help of a technology called shingled magnetic recording (SMR). WDC plans to have its helium drives support SMR down the line.
Nov. 1, 2013, 11:31 AM
- Hitachi (HTHIY) is selling 10.87M of the 25M Western Digital (WDC -0.7%) shares it received as part of its compensation for the latter's purchase of the former's hard drive unit. (PR)
- The shares are being sold through a secondary offering that has been priced at $67 (3% below WDC's current trading price), and features a 1.63M-share underwriter option.
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
Oct. 24, 2013, 7:14 PM
- Previously down over 3% in AH trading, Western Digital (WDC) has pared its losses after guiding on its FQ1 CC (prepared remarks) for FQ2 revenue of $3.775B-$3.875B and EPS of $1.95-$2.10, below a consensus of $3.88B and $2.18.
- Investors had already been expecting a tough quarter on account of PC and (in light of EMC's numbers) storage industry weakness. Seagate (STX) is now up 1.4% AH.
- WDC estimates hard drive industry shipments totaled 139M in FQ1, up M Q/Q and flat Y/Y. Shipments are expected to be flat Q/Q in FQ2.
- FQ1 enterprise SSD sales totaled $106M (~3% of revenue). The sTec and Virident deals should boost WDC's flash memory-related sales. WDC's hard drive ASP fell $2 Q/Q to $58.
- FQ1 gross margin was 29.8%, +70 bps Q/Q. It's expected to be flat Q/Q in FQ2. $150M was spent on buybacks.
Oct. 24, 2013, 4:17 PM
Oct. 9, 2013, 4:35 PM
- While the number isn't pretty, it's notably better than the 11.4% drop IDC estimated for Q2, as well as the firm's respective Q3 and full-year forecasts of -9.5% and -9.7%. Easier comps helped out a bit (shipments fell 8.6% Y/Y a year ago), as did "channel intake of Windows 8.1-based systems" in September. (PR)
- As was the case in Q2, U.S. and enterprise were areas of strength. U.S. shipments only fell 0.2%, and enterprise volumes saw a "slight uptick." But tablet cannibalization led Asia-Pac (exc. Japan) shipments to fall 8.8%. EMEA declined in-line with expectations, while Japan outperformed.
- The mix shift is a positive for H-P (HPQ - 27% U.S. share vs. 17.1% global share), Intel (INTC - higher ASPs), and Microsoft (MSFT - higher ASPs and less piracy). It hurts Lenovo (LNVGY.PK), but the Chinese firm was still the market's top vendor, and saw its global share rise 160 bps Y/Y to 17.3%.
- H-P was #2; its share rose 130 bps. #3 Dell, which has gotten more aggressive with its pricing, saw its share rise 90 bps to 11.7%.
- Apple's (AAPL) U.S. PC share, which has been rising in recent years, fell 140 bps to 11.6%; the enterprise mix shift and pending MacBook Pro/Mac OS X refreshes likely played roles.
- Other affected industry names: AMD, NVDA, MU, STX, WDC.
- Update: Gartner thinks shipments fell 8.6% Y/Y.
Sep. 30, 2013, 10:04 PM
- "We believe back to school PC demand has been virtually absent," says Sterne Agee's Vijay Rakesh in a critical note on Intel (INTC). Moreover, Sterne thinks high inventories and weak demand are pointing to the absence of a holiday season sales boost (normally 5%-7%) as well.
- Rakesh now sees PC sales falling 10.7% Y/Y in Q4, worse than a prior forecast for a 9.6% drop. He also questions the ability of smartphone/tablet CPU sales to offset declining PC CPU sales for Intel, given notebook processors typically sell for several times as much as their mobile counterparts. Oddly enough (given Nokia's limited smartphone share), Rakesh also suggests the Microsoft-Nokia deal is a negative for the chip giant.
- In August, IDC lowered its 2013 PC shipment growth forecast to -9.7% from a prior -7.8%. The firm estimates PC shipments fell 11.4% Y/Y in Q2 (Gartner is at 10.9%), and has predicted tablet shipments (aided by seasonality) will exceed PC shipments in Q4.
- Other PC industry names in the crosshairs: MSFT, HPQ, AMD, NVDA, MU, STX, WDC, LNVGY.PK.
Sep. 25, 2013, 5:40 PM
- Seagate (STX +5%) gradually moved higher over the course of the day after Longbow's Joe Wittine decided to put the company on his firm's Best Ideas list at the expense of archrival Western Digital (WDC +1.2%).
- WDC nonetheless saw moderate gains, perhaps in part because much of Wittine's commentary can be viewed as positive for the hard drive industry at-large.
- Wittine reiterates his belief the hard drive industry bottomed in 1H, and points out non-PC drive sales are eclipsing (slumping) PC drive sales thanks to strong enterprise/branded drive growth. He also sees Seagate and WDC's near-duopoly status allowing the companies to maintain a gross margin in the 27%-32% range, and let future capacity additions lag demand.
- He expects Seagate to continue producing $1.9B/year in free cash flow, and praises its valuation of 7.6x estimated FY14 (ends June '14) EPS.
- In spite of the PC industry's woes, both Seagate and WDC have done well this year.
- Earlier: Western Digital CFO leaving for ASML
Sep. 25, 2013, 4:53 PM
- Wolfgang Nickl, Western Digital's (WDC) CFO since Aug. 2010, is resigning, effective Nov. 17, to become the CFO of Dutch chip equipment giant ASML. '
- WDC points out the job change allows Nickl to rejoin his family in Europe. The hard drive maker says it has begun a search for a replacement. (PR)
- ASML says Nickl will start his new job on Dec. 1. The company has been without a full-time CFO since Peter Wennink was appointed CEO earlier this year. Wennink, who took over as CEO from chairman Eric Meurice, has been serving has as both CEO and CFO since July 1.
Sep. 19, 2013, 11:25 PM
Sep. 9, 2013, 10:26 AM
- Virident, like Fusion-io (FIO +11.3%), offers PCI-Express-based server flash memory modules meant for performance-intensive applications. And beaten-down Fusion-io has been the subject of plenty of M&A speculation over the last two years.
- Virident asserts its FlashMAX II PCI-Express modules offer 2x the performance of rival solutions.The company also provides FlashMAX Connect, an innovative software solution for allowing FlashMAX II modules to be clustered, to mirror/replicate content, and to act as caches for 3rd-party storage.
- Western Digital (WDC -0.5%) should be able to greatly expand Virident's distribution. The purchase comes less than 3 months after WDC announced it's buying enterprise SSD vendor sTec for $207M.
- In addition to Fusion-io, Virident competes against EMC, which offers its XtremSF flash modules and other flash storage products, and private flash storage system vendors such as Nimble Storage and Violin Memory.
- Interestingly, Western Digital archrival Seagate (STX -0.8%) recently invested $40M in Virident and struck a reseller deal with the company. Though Seagate is probably getting a good return on its investment, it can't be happy to see Virident fall into WDC's arms. Will it counter by making a play for Fusion-io?
- Previous: Western Digital buying Virident for $685M
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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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