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)
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.
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.
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, 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.
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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