Western Digital Jumps Back in First Quarter
Bouncing back from its worst performance in three years and defying the computer industry’s persistent sales woes, Western Digital Inc. said Thursday that its first-quarter profit hit $3 million, up from $2.8 million a year earlier, on record sales of $63 million--a 34% gain from $38.2 million a year ago.
The results for the period ended Sept. 30 come on the heels of a $13.4-million loss in the fourth quarter of 1985 and a full-year loss of $4.6 million, the Irvine computer-parts maker’s first since 1982. Furthermore, the profits and record sales come as many computer-parts suppliers are awash in red ink and battling to hold on until their customers’ fortunes improve.
However, the renewed profits are entirely in line with what president and chief executive Roger Johnson predicted last month when the company announced its 1985 losses and blamed them on a variety of one-time problems caused by the simultaneous receipt of several high-volume orders that required a costly, around-the-clock manufacturing schedule.
‘Too Much Success’
“The company had too much success . . . far beyond its ability to cope,” observed a Laidlaw Ansbacher analyst who follows the company in New York.
In an interview Thursday, Johnson said Western Digital has solved the production problems that caused the earlier losses and has returned to a more orderly growth strategy. But Johnson refused to rule out the possibility of a disciplinary shake-up in the responsible departments.
“The good news was that we shipped the orders and met our customers’ needs. But it cost us a bloody lot,” Johnson said. “What was inexcusable was the surprise nature of the problem. We didn’t know just how much we were spending to get the job done.”
Johnson pointed out that the production “inefficiencies” carried over into the first quarter of the 1986 fiscal year and eroded profit margins. But he said he expected profit margins to return to the company’s historical range for the remainder of the year, giving the company a potential profit of $4.2 million in the current quarter if sales remain at the $60-million level.
Johnson attributed Western Digital’s overall strong performance in recent years to its position as a supplier to such computer industry giants as IBM, Hewlett-Packard Co., AT&T; and Digital Equipment Corp. Despite the industry’s general slowdown, Johnson said his customers are doing well and need supplies for their products.
Shift in Products
Another reason for Western Digital’s growth from sales of $20 million in 1980 to $177 million last year, Johnson said, is an all-important shift in product mix--away from individual electronic components and toward pre-assembled boards using Western Digital’s components. Not only do the boards command much higher prices, but because they use company-made parts, profits are increased.
Johnson said the company also plans to increase its line of power and memory add-on products for the IBM personal computer. These products, part of the so-called computer “aftermarket” because they are marketed after the computer is sold, put the company into one of the better performing segments of the electronics industry these days. Western Digital is expected to unveil its newest addition to this product line at the industry’s trade show next month.
