Western Digital Turns Things Around in Big Way : Earnings: The Irvine-based computer firm reports fiscal-year earnings of $73.1 million after three years of losses.

In a stunning reversal after three years of losses, Western Digital Corp. reported record annual earnings and revenue Tuesday on the strength of continued heavy demand for its high-capacity disk drives.

For the fiscal year ended June 30, the Irvine-based computer products company posted a profit of $73.1 million, or $1.77 a share. That compared to a loss of $25.1 million, or 79 cents a share, for the previous year. Annual revenue was $1.5 billion, a 26% increase from $1.2 billion.

“I think we surprised analysts,” said Chuck Haggerty, Western Digital’s chairman. “Higher-capacity hard drives are driving the market, and we are seeing that increase at a much faster rate than anticipated.”

Computer users are replacing their hard drives to get more storage capacity. The average hard drive made by Western Digital during the latest year had a capacity of 330 megabytes, compared to 200 megabytes for the previous 12 months, the company said.

Haggerty also pointed to gains in the company’s computer chip business, which became profitable for the first time in three years.

Analysts said Western Digital has benefited from blossoming demand for advanced CD-ROM and high-capacity hard disk drives and also capitalized on its advantages through cost-cutting and shrewd management.

“They have done a very good job,” said John M. Garaghty, analyst for the brokerage First Boston Corp. in New York. “The first thing was, they concentrated their product line in the high end of the disk drive business. They had excellent financial management, and to some degree they were helped by the market. . . . They were smart enough to take advantage of it.”

Haggerty, who became chairman when Roger Johnson left for Washington last year to head the General Accounting Office, continued to reduce the company’s work force from 7,700 two years ago to 6,400 now. “We had to cut five layers out of the total management structure,” he said.

At the same time, the company has standardized parts in many of its products to achieve sharp productivity gains. It also sold off a semiconductor plant that was a drag on earnings.

“Clearly, the turnaround is phenomenal,” said Roxanne Googin, Los Angeles-based analyst for the brokerage Gruntal & Co. “Chuck understands cost controls. There was a lot of focus on that for the first time. Even under Roger Johnson, the drive business had improved all the while the company was losing money.”

For its fourth fiscal quarter, Western Digital had earnings of $37.3 million, or 79 cents a share, compared to a loss of $37.8 million, or $1.07 a share, for the same period a year earlier. Three-month revenue was $462.2 million, a 62% increase from $285.2 million for the comparable period a year earlier.

In Tuesday’s trading on the New York Stock Exchange, Western Digital closed at $14.50 a share, down 87 cents. The financial results were released after the market closed.

Western Digital’s 4th Quarter

For its fourth fiscal quarter, Western Digital reported revenue of $462.2 million, a 62% increase over the same period a year earlier. Earnings rose to $37.3 million, compared to a loss of $37.8 million a year earlier. Dollar amounts in millions, except data per share:

4th qtr 4th qtr 12 months 12 months 1993 1994 1993 1994 Revenue $285.2 $462.2 $1,225.2 $1,539.7 Net income (loss) (37.8) 37.3 (25.1) 73.1 Per share (loss) (1.07) 0.75 (.79) 1.70

Source: Western Digital; Researched by JANICE L. JONES / Los Angeles Times