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Storage Stocks Set to Report Earnings on Jul 28: WDC & DTLK

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Yesterday, some of the bellwethers in the Technology sector like Apple (AAPL - Free Report) and Twitter came up with quarterly results. Apple’s third-quarter fiscal 2016 earnings as well as revenues managed to surpass the respective Zacks Consensus Estimate in spite of soft comps in China. Twitter’s second-quarter 2016 results, on the other hand, were a mixed bag, wherein its bottom line fared better than the Zacks Consensus Estimate but the top line missed the same.

With the Q2 earnings cycle picking up pace, several tech companies are slated to report quarterly numbers over the next couple of days. In addition to major semiconductor stocks like Xilinx and NXP Semiconductors, this week, investors are expected to focus on the performance of two storage solution providing companies – Western Digital (WDC - Free Report) and Datalink Corp. . Both the companies are slated to report earnings on Jul 28.

Western Digital will report fourth-quarter fiscal 2016 results. For the quarter, the company has an Earnings ESP of 0.00% and a Zacks Rank #3 (Hold). Last quarter, it posted a negative earnings surprise of 3.20%. Notably, in the preceding four quarters, the stock has surpassed the Zacks Consensus Estimate twice and missed the same on the remaining two occasions, resulting in an average positive earnings surprise of 1.04%.

WESTERN DIGITAL Price and EPS Surprise

WESTERN DIGITAL Price and EPS Surprise | WESTERN DIGITAL Quote

Western Digital is the largest manufacturer of hard-disk drives (HDD) in the U.S., with a rough 44% share of the market. Understandably, the company derives the bulk of its revenues from PCs, which are still the primary users of HDD.

However, over the past few years, cannibalization of PCs by mobile devices has been hurting Western Digital’s top and bottom line. Data storage used to be a hot commodity back when PCs and laptops ruled the roost in the enterprise and personal digital communication space. But with the rise in popularity of handheld devices, HDDs, flash memory, solid-state and data center solutions businesses have lost their stature within a significantly short period of time.

To deal with the aforementioned situation, the company is focusing on the enterprise side, where it has the scope to acquire higher-margin businesses. Synergies from acquisitions and product innovations are other growth catalysts. We believe that this will boost fourth-quarter margins and reduce Western Digital’s dependence on the PC market. (Read more: Western Digital's Q4 Earnings: Stock to Surprise?)

Datalink will report second-quarter 2016 results. The company offers services and solutions that help data centers become more efficient, manageable and responsive to changing business requirements.

Datalink has an Earnings ESP of 0.00% and a Zacks Rank #3. Last quarter, the company posted a negative earnings surprise of 66.67%. In fact, in the four preceding quarters, it has missed the Zacks Consensus Estimate thrice, surpassing it only once, resulting in an average negative earnings surprise of 42.66%.

DATALINK CORP Price and EPS Surprise

DATALINK CORP Price and EPS Surprise | DATALINK CORP Quote

Exponential growth in the amount of data, complexity of data formats and the need to scale resources at regular intervals have compelled several companies to turn to cloud computing vendors. Cloud solutions require lower storage costs, provide easier and faster access, and offer stronger security and recovery modes. Reducing the need to purchase and maintain hardware has propelled cloud-based solutions to a top priority.

We believe that growing demand for data centers will help Datalink grow over the long run.

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