Outlook Boosts Western Digital
Updated from March 30
Buoyed by a stronger-than-expected outlook for the third quarter, shares of
Western Digital
(WDC) - Get Report
rallied strongly on Thursday.
The hard drive maker said after the bell Wednesday that it now expects to earn 29 cents to 31 cents a share on revenue of $900 million to $915 million. Western Digital had previously said it was anticipating earnings of 16 cents to 19 cents a share on revenue of $885 million to $915 million.
A consensus survey of analysts by Thomson First Call had expected the company to earn 18 cents a share on revenue of $901 million.
In recent trading, Western Digital had gained $1.43 a share, or 12.8%, to $12.60, a 52-week high.
Western Digital was helped by improved pricing in the distribution channel and in OEM sales, a welcome but relatively routine event. But the shift to newer markets could herald a period of resurgence for the company and some of its competitors.
"What is important to note here is that desktop demand was not cited, but rather a well-balanced supply level and growth in the new areas of consumer and high-capacity (multi-platter) drives. This provides further evidence of the gradual decoupling of the hard-drive industry from being solely tied to the health of the PC world," said Needham analyst Richard Kugele.
Consumer devices like Apple's iPod, game consoles like
Microsoft's
(MSFT) - Get Report
Xbox and even cell phones are becoming an
important market for hard drive makers. Western Digital sells standard-sized drives for use in digital video recorders, and by the end of the June quarter it will move onto
Seagate's
(STX) - Get Report
turf, selling much smaller drives for use in handheld devices.
Western Digital also boosted its expectations for third-quarter gross margin to about 18% from about 14.5%.
As to the fourth quarter, the company indicated that it's premature to provide a quantitative business outlook coming off of the "exceptional" third-quarter performance. It's too early to indicate anything other than normal seasonal trends, which typically result in lower unit volumes, revenue and gross margins, the company said.