Western Digital’s 9th Loss Not as Bad as Predicted

Struggling Western Digital Corp. recorded its ninth straight quarter of red ink Tuesday with a $66-million operating loss, which was good news mainly in that it beat analysts’ gloomier projections.

Company executives acknowledged that they still face huge challenges in returning to profitability after accumulating more than $1 billion in operating losses since mid-1997.

But analysts said the modestly improved results show that the Irvine disk-drive maker, the industry’s third largest, may yet emerge from its tailspin.

“They’re getting closer to health,” said Dane Lewis, a senior analyst at Robertson Stephens.

Western Digital’s operating loss, amounting to 54 cents a share, excludes restructuring charges and an extraordinary gain. Analysts had expected an operating loss of more than $100 million, or about 98 cents a share, for the company’s fiscal second quarter that ended Dec. 31.

The company lost $82.3 million, or 93 cents a share, on operations in the previous year’s second quarter.

Western Digital’s net loss for its latest quarter, however, was much smaller: $15.2 million, or 13 cents a share. The net loss includes a restructuring charge of $25.5 million and one-time gain of $76.3 million.

Quarterly revenue fell 24% to $560.2 million from $738.6 million a year earlier.

Cost-cutting, stronger demand and more stable pricing improved the results, Chief Executive Matthew Massengill said.

Manufacturing capacity also bounced back after the company completed a massive recall of about 870,000 faulty hard drives. The company shipped 5.3 million drives in the quarter, compared to 3.4 million in the previous one. Massengill said he expects volume to be flat or up slightly for the first three months this year.

Last week, the company said it would stop making hard drives for high-end computers and would shut down the Minnesota plant that makes them. The division had operating losses of $20 million and orders had dropped by 100,000 in the second quarter, company executives said Tuesday.

Western Digital said it expects to see the first sales later this year from two subsidiaries that make data-storage products for companies moving onto the Internet.