Western Digital Posts Banner Quarter

(Updated to include trader commentary on Western Digital's share-price decline)

LAKE FOREST, Calif. (TheStreet) -- Disk-drive maker Western Digital(WDC Quote) had a banner fiscal first quarter, posting stiff growth and easily exceeding Wall Street expectations -- but the report perhaps gave investors a reason to take some profits off the table Friday.

In afternoon trading, shares of the company stumbled 4.3%, or $1.61, to $35.50, on heavier than average volume. A chart of the stock covering the last six months resembles foothills rising to an alpine range. Western Digital shares have gained some 180% from their lows in March.

Further, a recent sell-on-the-news pattern has developed in U.S. equities markets this earnings season, and that same kind of pressure may have afflicted Western Digital shares Friday, along with the broader market selloff, said Mike Bellafiore, a trader and partner with SMB Capital in New York.

Still, as far as Western Digital itself goes, investors have long understood that the explosion in downloading and online social media has been spurring consumer demand for computer gadgets, including drives, even in the midst of the recession. Western Digital provided further evidence of that Friday.

Net income for its fiscal first quarter rose 36% to $288 million, or $1.25 a share, topping analysts' estimates of $1.09 a share. A year ago, earnings came to $211 million.

On the top line, revenue reached a record $2.2 billion, up about 5% from a year ago and even with analysts' targets.

Western Digital said it shipped about 44 million units in the quarter, some 12% more than it did in the same period of 2008. The company suggested that it, and the drive industry as a whole, have been prudent about the supply side of the equation. "Hard drive inventories remain at historically low levels, reflecting industry discipline in managing supply and demand," said the company's chief, John Coyne, in a prepared statement.

There was perhaps one worrisome note in the otherwise bullish report, however, said SMB Capital's Bellafiore. To wit, investors and traders might have been a touch concerned about Western Digital's planned increase in its 2010 capital expenditures to $650 million from an earlier target of $600 million.