Western Digital Makes Progress, but Still in Red

Western Digital Corp., inching toward recovery after a bloody industry pricing war, reported a third-quarter loss that beat analysts’ initial predictions and marked an improvement over its year-earlier results.

The Irvine manufacturer, the world’s third-largest maker of computer disk drives, posted a net loss of $70.7 million, or 53 cents a share, the lion’s share from a one-time $62.8 million restructuring charge. In last year’s fiscal third quarter, the company lost $114.3 million, or $1.27 a share.

Despite the improvement, the latest figures extended the troubled company’s streak of losing quarters to 10. Its total loss since mid-1997 exceeds $1 billion.

The most hopeful sign: The company’s quarterly operating loss, once projected to be as large as $50 million, ended up at $22.6 million, or 17 cents a share. That figure was much improved over the loss from operations of $61.3 million, or 68 cents a share, for the year-earlier period.

Chief Executive Matt Massengill credited the improvement to “the stable pricing environment and better-than-anticipated demand in what is typically one of the industry’s softer periods.”

In trading before the earnings announcement, Western Digital shares rose 94 cents to $7.75 each. The stock has advanced by 85% this year, bouncing back a bit from a low of $2.75 a share last November. Still, it is far off the high of more than $51 it reached in August 1997.

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 several other rivals also are doing better this quarter, analysts said. Industry leader Seagate Technology Inc., however, reported reduced sales and profits earlier this month.

Western Digital’s results also reflect cost-cutting moves made in the last six months.

In January, the company announced it would stop making disk drives used in high-end computers and would fire most of the 420 workers. The Minnesota division that made the products had steep operating losses, and orders had dropped.

Two months earlier, the company axed 56% of its Singapore work force and consolidated its manufacturing operations in Malaysia.

Bloomberg News contributed to this report.

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Western Digital Results

Western Digital’s third-quarter loss was narrower than forecasted by analysts:

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3rd qtr. 2000 3rd qtr. 1999 9 months 2000 9 months 1999 Revenue $517 $668 $1,484 $2,058 Net income (loss) (71.0) (114.3) (192.0) (391.0) Per share (loss) (0.53) (1.27) (1.64) (4.39)

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(Figures in millions except per share data)

Note: Figures include restructuring and acquisition-related charges and a $14.7 million gain on the sale of investment securities.

Source: Western Digital