Western Digital Says Last Year’s Earnings Fell 21%, Sales Rise

Hampered by a computer industry slump and heavy losses in a new product line, Western Digital Corp. said Monday that its earnings fell 21% last year as the company narrowly missed the $1-billion sales mark.

The Irvine-based computer company earned $34.3 million for its fiscal year ended June 30, compared to earnings of $43.4 million in 1988. Sales rose 22%, to $992.1 million for the year, up from $768.3 million in 1988.

Analysts said Western Digital’s results were in line with expectations.

“Western Digital has been warning us that this (fourth) quarter would be disappointing,” said Benny Lorenzo, an analyst with Volpe & Covington, a San Francisco investment firm. “Some analysts are frustrated with Western Digital, but they’ve done quite a bit to improve” the company’s financial condition.

‘I’m Not Disappointed’

Western Digital Chairman Roger W. Johnson said the company had predicted higher earnings at the beginning of the fiscal year, “but overall, I’m not disappointed with where we ended up for the fourth quarter and year.”

Western Digital, the county’s largest high-technology company, is a manufacturer of data storage devices and varied other components for the personal computer industry.

Johnson said the company was hurt by sluggish sales of personal computers last year, which he partly attributed to a severe industrywide shortage of key computer memory chips in 1988 and early 1989.

He also said the company’s results were dampened by “several significant internal product and technology transitions.”

The company’s heaviest losses resulted from sluggish growth in its “motherboard” business. Motherboards are memory boards on which chips are mounted for use inside personal computers.

Sluggish growth “cost us a lot of money during the year,” said Johnson, attributing the losses to confusion in the industry over several competing computer design standards.

Johnson said the market for another new product, an “integrated” computer disk drive for personal computers, also did not develop as quickly as expected.

Other Products Profitable

The losses from the motherboard and integrated-disk-drive products adversely affected the company’s data storage, computer graphics and communications products, all of which were “very profitable,” he said.

Johnson said he looks for improved results for the current year: “We should have good solid improvement in revenues for the rest of this year, and profits should grow faster than revenues.”

Fourth-quarter earnings fell to $4.3 million, down 70% from $14.7 million in the year-ago period. Sales were down 12%, to $243.5 million from the year-earlier quarter, and were essentially unchanged from the third quarter.

WESTERN DIGITAL PERFORMANCE

(Year ended June 30)

(in millions)

Revenue Net Income 1989 $992 $34.3 1988 768 43.4 1987 481 45.8 1986 300 21.5 1985 189 (4.1 loss)