Western Digital (WDC)

Q2 2012 Earnings Call

January 23, 2012 5:00 pm ET


Wolfgang U. Nickl - Chief Financial Officer and Senior Vice President

Timothy M. Leyden - Chief Operating Officer

John F. Coyne - Chief Executive Officer, President, Executive Director and Chairman of Executive Committee

Bob Blair -


Benjamin A. Reitzes - Barclays Capital, Research Division

Richard Kugele - Needham & Company, LLC, Research Division

Unknown Analyst

Mark A Moskowitz - JP Morgan Chase & Co, Research Division

Katy Huberty - Morgan Stanley, Research Division

Mark S. Miller - Noble Financial Group, Inc., Research Division

Sherri Scribner - Deutsche Bank AG, Research Division

Scott D. Craig - BofA Merrill Lynch, Research Division

Jayson Noland - Robert W. Baird & Co. Incorporated, Research Division

Nehal Sushil Chokshi - Technology Insights Research LLC

Aaron C. Rakers - Stifel, Nicolaus & Co., Inc., Research Division

Steven B. Fox - Cross Research LLC



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Previous Statements by WDC
» Western Digital's CEO Discusses Q1 2012 Results - Earnings Call Transcript
» Western Digital's CEO Discusses Q4 2011 Results - Earnings Call Transcript
» Western Digital's CEO Discusses Q3 2011 Results - Earnings Call Transcript

Good afternoon, and thank you for standing by. Welcome to Western Digital Second Quarter Financial Results for Fiscal Year 2012. [Operator Instructions] As a reminder, this call is being recorded. Now I will turn the meeting over to Mr. Bob Blair. You may begin.

Bob Blair

Thank you. I want to mention that we will be making forward-looking statements on our comments and a response to your questions concerning the impact of the Thailand flooding, including its impact on the industry demand in the next several quarters and the industry's ability to meet that demand, charges and expenses in the March quarter related to the Thailand flooding, flood mitigation measures in Thailand, our insurance coverage, demand for storage in the long-term, a return to pre-flood capacity levels by WD in the industry on our supply chain, our internal slider production in Thailand and Malaysia, industry inventory, diversification of our supply chain and its impact on cost and pricing, our investments and development, the expected completion of the timing of our planned acquisition of Hitachi Global Storage Technologies, the timing and outcome of our motion to vacate the award entered against us in our arbitration with Seagate, our capital expenditure plans and our financial results expectations for the March quarter, including unit shipments, revenue, gross margin, expenses, tax rate, share count and earnings per share.

These forward-looking statements are based on management's current expectations and are subject to risks and uncertainties that could cause actual results to differ materially, including those listed in our 10-K filed with the SEC on October 28, 2011.

We undertake no obligation to update our forward-looking statements to reflect new information or events. And you should not assume later in the quarter that the comments we make today are still valid.

In addition, references will be made during this call to non-GAAP financial measures. Reconciliations of the differences between the historical non-GAAP measures we provide during this call to the comparable GAAP financial measures are included in the investor information summary posted in the Investor Relations section of our website.

The forward-looking guidance we provide during this call, excludes charges and expenses related to the Thailand flooding and our planned acquisition of HGST. Because these charges and expenses are not known to us at this time, we are unable to provide guidance or a reconciliation to the most directly comparable GAAP financial measures. The impact of these excluded items may cause the estimated non-GAAP financial measures to differ materially from the comparable GAAP financial measures.

I would also like to mention that due to daily changes in the industry supply picture and continuing evaluation of our Thailand flood losses and litigation exposures, our financial results for December quarter are preliminary until we file our Form 10-Q for the quarter with the Securities and Exchange Commission.

In addition, we expect additional flood recovery expenses -- related expenses to be incurred in the March quarter, and it is possible that our fixed asset -- impairment estimates for the December quarter may have to be adjusted as the recovered assets are put into production.

Also as a reminder, until our acquisition of HGST closes, WD and HGST remain independent companies, but we will not be taking any questions about HGST's business or financial performance.

[Operator Instructions] I also want to note that copies of remarks from today's call will be available on the Investors section of WD's website immediately following the conclusion of this call.

I would now turn the call over to President and CEO, John Coyne.

John F. Coyne

Thank you, Bob. Good afternoon, and thank you for joining us on today's call. With me are COO, Tim Leyden; and CFO, Wolfgang Nickl. After my introductory remarks, Tim will provide an update on our operations and Wolfgang will review our Q2 financial performance and current outlook.

I'm pleased to report that we've made substantial progress in our mission to restore our manufacturing capacity in the aftermath of the historic flooding in Thailand. This is reflected in our Q2 financial performance announced earlier today, the continued ramp of our Thai HDD production capacity and in the fact that we have now recommenced slider manufacturing, which had been suspended since October 10.

While much work remains to be done over the next several quarters to reach our pre-flood manufacturing capabilities, the progress, thus far, is ahead of our original expectations and is attributable to the dedicated and effective actions of our employees, contractors and Thai government agencies, the efforts of our supply partners and the support of our customers. I want to thank all of those involved in this huge and extraordinary effort.

We believe industry shipments in the December quarter were about 119 million units, which included approximately 11 million units of pre-flood inventory. Today, one quarter after the floods hit and despite the industry's heroic recovery efforts, supply remains significantly constrained. We believe this condition will persist throughout calendar 2012 with gradual improvement during the year, with industry production in the June quarter approaching pre-flood quarterly build levels.

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