Western Digital Recovers From 1st-Quarter Loss
Western Digital Corp. rebounded from a first-quarter loss, with earnings of $8.6 million for the second quarter ended Dec. 31, though the profits were down from the $12.7 million recorded for the corresponding period a year ago.
The Irvine-based personal computer components company reported revenue of $264.9 million, the second-highest quarterly figure in the firm’s history, contrasted with $258.4 million in the second quarter last year.
The earnings figure included a one-time gain of $1.1 million from the purchase of debentures and $1.1 million in tax benefits from the first-quarter loss.
The recovery from the first-quarter loss of $2.7 million exceeded analysts’ expectations and was largely attributed to the success of the company’s 3.5-inch intelligent disk drives. The company said its communications products operations also did well, but problems remained in the imaging sector, which makes computer graphics products.
Roger W. Johnson, chairman and chief executive, said he was “pleased with the direction, not pleased with the absolute level” of the company’s earnings. He also noted “very nice improvements” in the balance sheet, as inventories and receivables declined even as revenues climbed.
Karen Payne, an analyst with Wheat First Butcher & Singer in Philadelphia, said earnings were “a bit better than everybody expected,” and lauded the “impressive” performance of the disk drive products. She added, however, that there are “still some problems to work through.”
“The real problem is that they have five different product lines and they’ve never been able to get them all firing at the same time,” Payne said. She also said that increased competition in the disk drive area might hurt profit margins over the next year.
Mark Matheson of Cruttenden & Co., a Newport Beach investment firm, said the quarter “could have been a blockbuster” were it not for the problems with the imaging business. Western Digital acknowledged that its microcomputer products unit--including the imaging, communications and systems logic products--was unprofitable, largely as a result of poor sales and low margins in the imaging business.
Johnson said he hoped the microcomputer products division would be profitable by year’s end.
A company spokesman said the company expected to sustain the strong performance in disk drives, with substantial increases in orders for the next several quarters. Johnson also said the firm was succeeding in its effort to get customers--primarily personal computer manufacturers--to buy groups of products from Western Digital.
