Feeds

Western Digital edges ahead of Seagate

Seagoing computers counteract rare-earth headwinds

Designing a Defense for Mobile Applications

Western Digital, encountering the same adverse headwinds as Seagate, has emerged ahead.

In its fourth quarter (Q4) of fiscal 2011, WD reported revenues of $2.4bn, marginally above Q4 2010's $2.38bn. Net income fell from Q4 2010's $265m to $158m, hindered by $35m of costs associated with the Hitachi GST acquisition.

For the full year WD revenues were $9.53bn, compared to $9.85 in 2010, and net income was $726m, down almost half on 2010's $1.38bn.

This Q4 and full year 2011 pattern of results paralleled Seagate's, although WD's quarterly net income fell less (41 per cent) than Seagate's (69 per cent). WD's annual income decreased 48 per cent year-on-year, while Seagate's went down by 68 per cent.

WD faced the same rare earth metal price rises as Seagate, and the same economic environment, but it did not, so to speak, shoot itself in the foot with new product manufacturing ramp issues.

New technology

It has introduced a 1TB, 2.5-inch Scorpio Blue drive with 500GB/platter technology and more products using this technology will come soon.

Turning to the future, CEO John Coyne was asked about the timing of energy-assisted recording technologies such as HAMR, and said: "I think that's a difficult technology. We ... the industry is demonstrating the technology and has been for several years.

"But typically, in this kind of technology area, when you see the announcements of the new technology performing at the current level of the mature technology, you can add three years to volume availability of that new technology. And we have not yet reached the point of equivalence to the current technology in the lab demos that are demonstrating the new technology. So it's at least three years out for mass volume deployment."

That means 2014 with, perhaps, a 2013 introduction.

The sea and stronger demand

One unexpected benefit of the Japanese earthquake was that WD saw stronger demand than it had anticipated because of increased adoption of sea freight in the PC supply chain, which countered traditionally lower seasonal demand in the quarter.

COO Tim Leyden amplified this sea freight point. There was a "margin focus across the PC market where lower financing and inventory-carrying costs encouraged increased use of ocean freight, leading to pull-ins of built schedules versus historical seasonal patterns," he said. "And fear of supply disruption from the Japan aftermath led to pull-forwards by OEM customers to create inventory buffer on the basis that it is better to be looking at it than looking for it."

WD is seeing stronger demand next year. Coyne said: "We believe that 2012 could be a stronger period for the industry and for WD for several reasons: an acceleration of the commercial PC refresh as part of an overall macro reinvestment cycle; the potential for better consumer confidence translating into stronger discretionary spending; [and] the planned launch of redesigned, feature-rich PCs enabled by Windows 8."

He also mentioned "the massive amounts of content being generated on the client and in the cloud."

Rare earth problem

Concerning the rare earth problem, the earnings call transcript has Coyne saying: "We've worked with our supply chain to moderate some of the influence of the raw material increases. We have not fully counterveiled those pressures, and so we've gone to our customers and we've sought their help in reflecting, in our pricing, the cost increase which we could not offset in other areas."

He sees alternative sources of supply, such as Australia, opening up because increased rare earth metal prices makes previously non-viable mines profitable once again.

Opportunity and outlook

The Hitachi GST acquisition is on track for a fourth quarter, 2011 close, with the various regulatory approvals needed having either been gained or being on track.

Coyne sees an opportunity in the home, where consumers are storing more data but not backing it up. He said: "Our research into that market tells us that we still haven't effectively publicised or proselytised the backup story. There's still way, way too many people out there totally exposed in terms of backup... if we can do an effective marketing job of convincing people that not only do they need that incremental storage, but they need to back it all up, then we have an even brighter future out there to go turn that opportunity into financial performance."

The outlook, according to CFO Wolfgang Nickl, is for the next September quarter to deliver revenues "in the range from $2.425bn to $2.525bn; [and] earnings per share of between $0.90 and $1 ... which excludes [HGST] acquisition-related expenses."

WD is managing its business better than Seagate. It won't get an immediate boost from integrating Hitachi GST, as the benefits from that acquisition will take a number of years to flow through. One issue that might conceivably exist is that Hitachi GST's SSD is being developed by Intel, which, of course, sells its own SSDs.

WD also could decide it needs more control over its SSD technology and look to build the technology itself rather than relying on Intel. ®

The Power of One eBook: Top reasons to choose HP BladeSystem

More from The Register

next story
Apple fanbois SCREAM as update BRICKS their Macbook Airs
Ragegasm spills over as firmware upgrade kills machines
Attack of the clones: Oracle's latest Red Hat Linux lookalike arrives
Oracle's Linux boss says Larry's Linux isn't just for Oracle apps anymore
THUD! WD plonks down SIX TERABYTE 'consumer NAS' fatboy
Now that's a LOT of porn or pirated movies. Or, you know, other consumer stuff
EU's top data cops to meet Google, Microsoft et al over 'right to be forgotten'
Plan to hammer out 'coherent' guidelines. Good luck chaps!
US judge: YES, cops or feds so can slurp an ENTIRE Gmail account
Crooks don't have folders labelled 'drug records', opines NY beak
Manic malware Mayhem spreads through Linux, FreeBSD web servers
And how Google could cripple infection rate in a second
FLAPE – the next BIG THING in storage
Find cold data with flash, transmit it from tape
prev story

Whitepapers

Designing a Defense for Mobile Applications
Learn about the various considerations for defending mobile applications - from the application architecture itself to the myriad testing technologies.
How modern custom applications can spur business growth
Learn how to create, deploy and manage custom applications without consuming or expanding the need for scarce, expensive IT resources.
Reducing security risks from open source software
Follow a few strategies and your organization can gain the full benefits of open source and the cloud without compromising the security of your applications.
Boost IT visibility and business value
How building a great service catalog relieves pressure points and demonstrates the value of IT service management.
Consolidation: the foundation for IT and business transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.