Western Digital Climbs Out of Its Slump With Brisk Sales
Western Digital Corp., helped by brisk sales of its new line of computer disk drives, said Friday that earnings for its latest quarter doubled to $8.8 million from the same period a year ago as the company continued its recovery from a 1989 slump.
The Irvine computer company’s earnings for the third quarter ended March 31 compares to earnings of $4.4 million in the year-earlier quarter. Revenue rose 18% to $286.8 million from $243.2 million a year ago.
Western Digital supplies a wide range of components used by every major personal computer manufacturer except Apple Computer, which makes most of its own components.
Western Digital Chairman Roger Johnson said the record quarterly sales reflected growth in each of the company’s five major product categories. Sales of the company’s line of 3.5-inch “intelligent” disk drives--widely used to store data in personal computers--soared 187% to $111.1 million for the quarter.
Raj Rajaratnam, analyst with Needham & Co. in New York, said Western Digital’s earnings exceeded his expectations by 20%. Western Digital stock rose 50 cents to $12.875 in trading Friday on the American Stock Exchange.
In early 1989, the firm stumbled and reported severe drops in earnings, forcing layoffs of about 950 employees. But it has rebounded in the past several quarters and worldwide employment has climbed back to 7,300 people, just 200 less than before the layoffs.
The company said 48% of its top 25 customers bought four out of its five product lines during the quarter, up from a previous high point of 40%.
“That means their one-stop shopping strategy of supplying all computer components for manufacturers is beginning to work,” Rajaratnam said.
Before the third quarter, the highest level of penetration among the top customers was 40%. Rajaratnam said the company’s imaging businesses rebounded from a slowdown last year, and inventories were reduced 21% to $48.5 million as a result of manufacturing efficiencies.
In an interview Friday, Johnson said Western Digital has been acquiring companies and aligning its products so that it can offer a complete package of personal computer components to its customers.
Now that it manufactures everything from disk drives to storage controllers, Western Digital is designing computer components concurrently--engineers who design logic chip sets also work with engineers who design disk drives--in the hopes that the final products, when assembled, will work faster and more efficiently.
Johnson said the first “chip set” products, which combine different processing functions into smaller chips without a sacrifice in performance, were designed under the new program and being sampled by manufacturers now and should enter volume production in the second half of 1990.
He said revenue from these products should keep company revenue growing strongly whether or not the personal computer industry hits a downturn.
“Each (product line) has had its own set of problems,” he said. “But we think we’ve got them cooking pretty well together.”
WESTERN DIGITAL PERFORMANCE
Revenues: In millions of dollars: 1990: 3rd Quarter: $286.7
Net Income: In millions of dollars: 1990: 3rd Quarter: $8.8
