Updated from 5:08 PM EDTSAN FRANCISCO -- Hard-disk drive maker Western Digital ( WDC) posted lower first-quarter net income because of charges related to its acquisition of a component maker and non-recurring tax charges. After the market's closed, the company said net income fell to $69 million, or 31 cents a share, from $103 million, or 46 cents a share. Excluding the Komag acquisition and tax charges, the company earned 81 cents a share, handily beating analysts' consensus estimate of 57 cents, according to Thompson Financial. Revenue surged nearly 40% to $1.77 billion, also topping analysts' average estimate. Growth in sales outpaced a 29% increase in hard drive shipments to 29.4 million units, underscoring the company's earlier statement that it sees a greater proportion of sales coming from higher-priced models. The company also said that this is the first quarter in which sales of non-desktop drives accounted for more than half of its total hard drive revenue. This largely reflects strong demand for drives used in notebook personal computers, mobile devices and enterprise storage appliances. "We continue to reap the benefits of our investments and deployment of leading technologies over the last several years, enabling us to address customer demand for mainstream and higher capacity hard drives in consumer and commercial applications," said Chief Executive John Coyne in a statement.
The company's gross margin improved 1.1 percentage points to 18.3% from the same quarter a year ago thanks to better pricing, cost controls and a shift in sales toward higher-priced drives. This level of profitability falls within the company's long-term target range of 15% to 20%. Average hard drive selling prices were approximately $59 per unit, an increase of $3 from the same quarter last year and $4 from the previous quarter. Coyne said the factors affecting pricing and demand should remain in tact in the foreseeable future. Inventories of 3.5-inch and 2.5-inch drives are 11% lower compared to this time last year, he said. Coyne also noted that large Japanese competitors, namely Hitachi (HIT), appear to be focusing on improving profitability, rather than churning out drives to gain market share, which undercuts prices industry-wide. Western Digital expects its average selling price to remain at their current level in the seasonally weak December quarter. The company forecasted second-quarter earnings of 73 cents to 77 cents a share, excluding one-time items, on revenue of $1.875 billion and $1.925 billion. These estimates exceed analysts' consensus earnings forecast of 57 cents a share on revenue of $1.77 billion. In late trading, shares had recently surged 79 cents, over 3%, to $26.81.