Western Digital Expects Another Quarterly Loss
In a sign that Western Digital Corp.’s financial recovery may take longer than expected, the computer products manufacturer has told Wall Street analysts that it expects to report another loss for the current quarter.
After talking with company officials over the last week, several analysts revised their fourth-quarter earnings estimates to project losses of $5 million to $7 million for the three months ending June 30.
Until recently, most analysts who follow the Irvine-based technology company had been predicting break-even results or a small loss for the current quarter.
In February, Western Digital Chairman Roger W. Johnson said the company could return to profitability by the fourth quarter, barring a deepening recession.
“It looked like they were making rapid progress in a recovery and now it just looks like they’re making OK progress,” said Steve DeLuca, analyst at Cruttenden & Co., an investment banking firm in Newport Beach. “For the long term, it still looks good. But some investors may be getting frustrated and that has affected the stock price.”
Western Digital stock closed unchanged Tuesday at $4.625 a share. It has traded above $14 a share during the past year.
Western Digital has struggled during the past year, losing $107 million on revenue of $733 million for the nine-month period ended March 30. The company lost $10.8 million for the third quarter ended March 30.
Besides the recession, which has hurt personal computer sales, the company has been adversely affected by a big drop-off in demand for its older products. The company has been counting on sales of newer products to pick up the slack.
Western Digital also undertook a costly reorganization that emphasized high-margin sales of chips and disk drives to computer manufacturers, instead of the less-profitable business of selling add-on computer boards to retailers.
The company is attributing the disappointing performance to falling prices for an older generation of 3.5-inch disk drives with 40 megabytes of memory, said Robert J. Blair, a company spokesman.
Those drives are used mainly in older personal computers, whose sales have fallen off as manufacturers unveil new models incorporating the latest technology offering more bang for the buck.
Blair said demand remains strong for the company’s newer disk drive products, especially those used in the briefcase-size machines known as notebook computers.
Blair said demand for the company’s older disk drives has fallen since the company introduced a new line of drives powered by smaller, more efficient internal motors known as voice coil motors. Blair said the company plans to phase out sales of the older drives by the end of 1991.
