Western Digital Shows Record Annual Profits
Riding high on demand for its data-storage products, Western Digital Corp. reported record annual profit and sales Wednesday and saw its stock close at an all-time high of $41 a share.
Western Digital stock actually rose to $44.50 a share at one point during a frenzied day of trading on the New York Stock Exchange before settling back to the record closing price, a gain of 34 cents for the day.
The shares moved on the strength of the company’s financial news and analysts’ predictions that its fiscal 1998 will be an equally good year.
The disk-drive maker reported fiscal 1997 profit of $267.6 million, or $2.85 a share, more than 2 1/2 times the $96.9 million, or $1 per share, posted a year earlier.
Revenue for the 12 months ended June 28 rose 46% to $4.18 billion from $2.87 billion.
“By any standard, fiscal 1997 was the finest in the 27-year history of Western Digital,” said a beaming Chuck Haggerty, the company’s chairman, president and chief executive.
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A month ago, Western Digital’s stock price was riding a roller coaster, soaring as a 2-for-1 split pumped up investor confidence and then crashing as a dismal earnings report from rival Seagate Technology Inc. caused skittish investors to abandon the storage-products market.
At the time, Haggerty said he was confident that the company was headed for one of its best years ever and that he was confident with analysts expectations that Western Digital would earn in the vicinity of 90 cents a share in its fourth quarter.
In fact, the company reported a fiscal 1997 fourth-quarter profit of $87.9 million, or 95 cents a share, up from $32.7 million or 36 cents a share a year earlier.
Sales for the final period rose 32% to $1.08 billion from $821 million. Haggerty said Western Digital shipped about 6.2 million disk drives in the fourth quarter, a third more than in the last three months of its fiscal 1996.
Disk-drive shipments for the year rose 51% to a record 23.1 million units from 15.3 million in fiscal 1996.
Most of the sales and profit came from Western Digital’s products for desktop computers. The company has just begun new lines of disk drives for computer networks and for laptop and notebook computers that are expected to add to earnings in coming years.
Analysts are projecting earnings of about $4.30 a share for the company’s fiscal 1998.
That number is tempered, however, by a stock buyback plan that so far has seen Western Digital retire 22% of its shares since it began in 1995. When there are fewer shares on the open market, earnings per share increase even when the total profit doesn’t.
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Haggerty said Wednesday that Western Digital purchased 1.2 million of its shares in the fourth quarter for approximately $35 million--an average price of $28.85.
The company has repurchased 22.2 million shares for a total of $278 million since the buyback began. That’s an average cost of $12.53 a share, less than a third of Wednesday’s record closing price.
Trading in the shares was delayed for a brief time when the market opened Wednesday because there were far more orders for purchasing Western Digital stock than there were shares being offered for sale.
Once trading did open, nearly 5.7 million shares of Western Digital changed hands, almost 80% more volume than the past six months’ daily average of 3.2 million shares.
