Rebounding Western Digital to Issue 5 Million New Shares : Recovery: The offering--prompted by a boost in its stock price--will be used to reduce debt.
Encouraged by its rising stock price and a recovery in its core computer components businesses, Western Digital Corp. said Thursday that it plans to issue 5 million additional shares of stock to pay off debt.
Chairman Roger W. Johnson announced at the company’s annual meeting that Western Digital will file a registration statement with the Securities and Exchange Commission in a few days. The offering, which would raise about $40 million at current stock prices, is planned for January.
Western Digital’s stock hit a 52-week high of $8 a share on Tuesday, up from $2 a share on Dec. 16. In Thursday’s trading on the New York Stock Exchange, the stock closed at $7.50 a share, down 50 cents.
Johnson said the company is seizing the opportunity to issue stock because of the recent boost in share price, which he thinks has risen because of two consecutive profitable quarters. He attributed the improved financial performance primarily to a slowdown in price cuts in the disk drive industry to about 8% per quarter, contrasted with a rate of 15% per quarter during 1991. Last year’s price declines caused losses for most major producers of the devices, which store data on PCs. Johnson cautioned, however, that pricing trends could change.
Johnson also credited the company’s recovery to cost controls, productivity increases and well-received products during the past six months. “We’ve been through a difficult two years, and we’ve come through,” he said.
The offering would be used to reduce the company’s estimated $195 million in total bank debt. Johnson said he expects to renegotiate repayment terms on the rest of the debt before current banking agreements expire in July.
The upbeat message prompted a generally positive response from shareholders at the meeting, in stark contrast to angry comments a year ago about the company’s poor performance.
One shareholder wondered aloud if Johnson might leave the company if offered a post in the Clinton Administration, a hot rumor in political circles.
Johnson said he has no immediate plans to leave. “I’ll cross that bridge when I come to it,” he said.
