Western Digital Tallies 1st Profit in 7 Quarters : Earnings: Strong rebound in sale of computer disk drives credited for Irvine company’s comeback. It earned $4.1 million, or 13 cents a share.
As expected, Western Digital Corp. on Tuesday reported its first profit in seven quarters, thanks to a strong rebound in its sales of computer disk drives.
The company said it earned $4.1 million, or 13 cents a share, for its fourth fiscal quarter, which ended June 30. That contrasted with a loss of $26.5 million, or 91 cents a share, for the same period a year earlier.
But the fourth-quarter comeback did little to salvage the year for Western Digital. The company reported a loss of $72.8 million, or 64 cents a share, contrasted with a loss of $134.2 million, or $2.49 a share, for the previous 12 months. And Western Digital must also contend with a load of $163.4 million in current debt.
Revenue for the fourth quarter rose 16% to $293.5 million from $253.3 million a year earlier. For the fiscal year, however, revenue was down 5% to $938.3 million from $986.2 million.
The decline in revenue put Western Digital behind AST Research Inc. in Irvine as Orange County’s biggest computer company. AST on Monday reported annual revenue of $944.1 million.
Being No. 2 doesn’t bother Chairman Roger W. Johnson, who noted that AST is a customer of Western Digital. “We should be really proud to have two Fortune 500 computer companies here,” he said.
Johnson said the fourth quarter showed that Western Digital has strengthened its overall financial position. He said he expects the company to be profitable in the coming quarter and fiscal year.
He credited sales growth to increasing demand for disk drives, which store data on personal computers; stable pricing, and better management of the company’s assets--tighter inventory control, for example. He said the company stands poised to launch new products that will keep up with new waves of technology.
“I would say that we’ve turned the financial performance around,” he said. “ . . . But now we have to worry about tomorrow.”
Analysts said Western Digital’s fourth-quarter earnings exceeded their expectations. They expressed mixed opinions, however, about whether the company’s turnaround is complete.
“I think they’re out of the woods,” said John McManus, analyst with investment bank Needham & Co. in New York. “What could hurt them is a sluggish economy. But we expected continued profit growth.”
In contrast, analyst Ian Gilson at L.H. Friend, Weinress & Frankson, an investment bank in Irvine, said Western Digital still faces some fundamental problems. The company, he said, is the weakest major player in the disk drive industry, which has a history of volatility because of frequent price wars.
“They’re still between a rock and a hard place,” he said. “The more they grow, the more working capital they’ll need. But they still have to repay their debt.”
Johnson argued that the company has room to breathe, but he added that reducing debt is the company’s top priority in the coming year. It had $33.8 million in cash on June 30, compared with $36 million a year earlier.
During that time, the company managed to reduce its cash requirements by more than $200 million by restructuring its capital expenditures, accounts receivable and inventory.
Western Digital
Western Digital finished a fiscal quarter in the black for the first time in nearly two years, with a $4.1 million profit on revenue of $293.5 million for its fourth fiscal quarter. That contrasted with a loss of $26.5 million on revenue of $253.3 million for the same period a year earlier. The company attributes its recent success to stable prices, better asset management and an increased demand for its disk drives.
Figures are in thousands except data per share.
4th Qtr 4th Qtr 12 Months 12 Months 1992 1991 1992 1991 Revenue $293,538 $253,298 $938,332 $986,201 Net income (loss) 4,068 (26,540) (72,860) (134,171) Per share (loss) 0.13 (0.91) (2.49) (4.59)
Source: Western Digital Corp.
