Predictions Too Dire, Western Says

Bolstered by strong sales and improved profit margins, computer disk drive maker Western Digital Corp. said Wednesday that its anticipated loss for the latest quarter will be less than analysts have predicted.

The Irvine manufacturer said that it expects to post $27 million to $34 million of red ink, or 20 cents to 25 cents a share, for its fiscal third quarter, which ended March 31. Analysts had estimated a loss of $50 million, or 42 cents a share.

Though the company will not report official results until April 27, investors responded to Wednesday’s advance peek by sending Western Digital shares up $1.25 a share, or 19%, to $7.69 in New York Stock Exchange trading.

“Pricing has been more stable and Western Digital’s restructuring has been beneficial,” said Dane Lewis, an analyst at Robertson Stephens & Co. Lewis has raised his rating on the stock to “buy” from “market perform.” He projected the price of the stock to reach $10 a share in the coming year.

Even so, the lower loss still would extend the troubled company’s streak of losing quarters to 10. Its total loss since mid-1997 exceeds $1 billion. And though the stock price has risen about 54% this year, it is still down 17% from a year ago.

Western Digital and other hard disk makers are emerging from a disastrous period of price cuts that depressed profits even as demand for data storage products grew. Maxtor Corp., Quantum Corp. and other rivals also are doing well this quarter, even though it is usually a slow period, Lewis said.

Western Digital’s projected results also reflect the impact of several cost-cutting moves.

In January, the company said it would stop making disk drives used in high-end computers and would fire most of the 420 workers in the Minnesota plant that produced them. The division had operating losses of $20 million and orders had dropped in the second quarter.

Two months earlier, the company lopped 56% off its Singapore work force and moved its manufacturing operations to Malaysia. The consolidation not only saved money but boosted productivity, analysts said.

The company attributed about one-third of its forecasted loss to two new digital content management initiatives, its Connex and its SageTree units.

Connex began selling network-storage devices to small and medium-sized businesses last month. SageTree, which is not scheduled to begin selling products until late this year, designs data tools to help manufacturers manage quality and quality-related business decisions.