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Western Digital Surpasses
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Western Digital (WDC - Analyst Report) reported third quarter 2010 EPS of $1.71, exceeding the Zacks Consensus Estimate of $1.55.
Revenue
Third quarter 2010 revenue of $2.6 billion was up 64.5% from the prior year and almost flat sequentially. The substantial increase may be attributed to strong demand from existing customers during the quarter ended March 31. This has, in turn, enabled the company to generate unit shipment growth in the recently concluded quarter.
Revenue by sales channel was as follows: 49% from OEM, 33% from distribution and 18% from retail, compared to 48%, 30% and 22%, respectively, in the year-ago quarter and identical figures in the previous quarter.
Average hard drive selling prices came in at $51.0 per unit, increasing $1.0 from the year ago period and declining $1.0 from the second quarter of 2010. Strength in emerging markets, coupled with growth in the commercial segment translated into better-than-expected growth in the desktop segment.
This apart, the company shipped 19.8 million mobile drives during the third quarter, compared to 10.1 million in the year-ago quarter and 21.2 million in during the second quarter of 2010. The company declined the mobile shipment volume, in-line with the decline in demand due to seasonality. This apart, during the third quarter, the company shipped 4.6 million drives into the DVR market, versus 3.5 million in the year-ago quarter and 4.1 million in the second quarter of 2010.
Operating Results
The company’s third quarter gross margin was 25.2% up from 15.9% in the year-ago quarter and 26.2% in the previous quarter. Stability in pricing, better segmental performance and tight cost control measures once again enabled the company to roll out a better gross margin.
Total R&D and SG&A spending increased to $224.0 million, or 8.5% of revenue, versus $174.0 million, or 10.9% of revenue in the year-ago quarter, and $214.0 million, or 8.2% of revenue in the previous quarter.
The company’s R&D investment is focused on enhancing its product portfolio, keeping pace with customer needs and making technological developments, which are expected to help it move ahead of competition. Operating income for the quarter was $441.0 million, or 16.7% of revenue, versus $61.0 million, or 3.9% of revenue in the year-ago quarter and $473.0 million, or 18.0% of revenue in the previous quarter.
Net Income for the recently concluded quarter was $400.0 million, or $1.71 per share, compared to $50.0 million, or $0.22 per share in the year-ago quarter, and $429.0 million, or $1.85 per share in the previous quarter.
Cash Position
The company generated $588.0 million of cash from operations, up from $557.0 million in the previous quarter. Cash and cash equivalents for the quarter was $2.8 billion, up from $2.4 billion reported in the year-ago quarter. Capital expenditures were $177.0 million, while depreciation and amortization totaled $128.0 million. This apart, the company made debt repayment installment of $19.0 million, bringing the debt balance to $425 million.
Guidance
For the fourth quarter of 2010, the company expects revenue in the range of $2.475 billion to $2.575, total R&D and SG&A of approximately $230 million and earnings per share of $1.40 to $1.50.
Revenue
Third quarter 2010 revenue of $2.6 billion was up 64.5% from the prior year and almost flat sequentially. The substantial increase may be attributed to strong demand from existing customers during the quarter ended March 31. This has, in turn, enabled the company to generate unit shipment growth in the recently concluded quarter.
Revenue by sales channel was as follows: 49% from OEM, 33% from distribution and 18% from retail, compared to 48%, 30% and 22%, respectively, in the year-ago quarter and identical figures in the previous quarter.
Average hard drive selling prices came in at $51.0 per unit, increasing $1.0 from the year ago period and declining $1.0 from the second quarter of 2010. Strength in emerging markets, coupled with growth in the commercial segment translated into better-than-expected growth in the desktop segment.
This apart, the company shipped 19.8 million mobile drives during the third quarter, compared to 10.1 million in the year-ago quarter and 21.2 million in during the second quarter of 2010. The company declined the mobile shipment volume, in-line with the decline in demand due to seasonality. This apart, during the third quarter, the company shipped 4.6 million drives into the DVR market, versus 3.5 million in the year-ago quarter and 4.1 million in the second quarter of 2010.
Operating Results
The company’s third quarter gross margin was 25.2% up from 15.9% in the year-ago quarter and 26.2% in the previous quarter. Stability in pricing, better segmental performance and tight cost control measures once again enabled the company to roll out a better gross margin.
Total R&D and SG&A spending increased to $224.0 million, or 8.5% of revenue, versus $174.0 million, or 10.9% of revenue in the year-ago quarter, and $214.0 million, or 8.2% of revenue in the previous quarter.
The company’s R&D investment is focused on enhancing its product portfolio, keeping pace with customer needs and making technological developments, which are expected to help it move ahead of competition. Operating income for the quarter was $441.0 million, or 16.7% of revenue, versus $61.0 million, or 3.9% of revenue in the year-ago quarter and $473.0 million, or 18.0% of revenue in the previous quarter.
Net Income for the recently concluded quarter was $400.0 million, or $1.71 per share, compared to $50.0 million, or $0.22 per share in the year-ago quarter, and $429.0 million, or $1.85 per share in the previous quarter.
Cash Position
The company generated $588.0 million of cash from operations, up from $557.0 million in the previous quarter. Cash and cash equivalents for the quarter was $2.8 billion, up from $2.4 billion reported in the year-ago quarter. Capital expenditures were $177.0 million, while depreciation and amortization totaled $128.0 million. This apart, the company made debt repayment installment of $19.0 million, bringing the debt balance to $425 million.
Guidance
For the fourth quarter of 2010, the company expects revenue in the range of $2.475 billion to $2.575, total R&D and SG&A of approximately $230 million and earnings per share of $1.40 to $1.50.
Read the full analyst report on WDC
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