HDD sales fell Western Digital increased sales by 10 but
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HDD sales fell: Western Digital increased sales by 10%, but could not avoid losses

For Western Digital Corporation, the difficult situation in the flash memory market caused certain problems in the dynamics of financial performance in the second fiscal quarter ended in December. Steady revenue growth of 10% to $3 billion couldn’t prevent an operating loss of $91 million for the quarter that beat analysts’ expectations.

    Image source: Western Digital

Image source: Western Digital

Year-over-year, Western Digital’s quarterly revenue fell 2%, but the size of its operating losses narrowed slightly compared to $119 million a year ago. Profit margin also improved sequentially, rising to 15.5% from 4.1% quarter-on-quarter, but it was 17.4% a year ago, so market conditions deteriorated. According to management, the company’s business suffered from low utilization of production lines last quarter. Profile losses amounted to $156 million.

For the current quarter, Western Digital expects revenue of $3.2 billion to $3.4 billion, a profit margin of between 21.5 percent and 23.5 percent and earnings per share of $0.2 or a loss of $0.1 per share. It must be said that the company’s sales in the last quarter were below analysts’ expectations; the share price fell 4% after the market closed. In the cloud segment, WD’s revenue rose 23% sequentially to $1.1 billion but fell 13% year-over-year. In the customer segment, revenue fell to the same $1.1 billion sequentially but increased 3% year-over-year. Finally, consumer electronics segment revenue grew 6% both sequentially (up 15% to $0.8 billion) and year-over-year.

Revenue from flash memory sales fell just 0.5% year-over-year to $1.665 billion, profit margin in this segment remained at 7.9% and the average selling price increased 10% quarter-on-quarter, although it just went down in the last four quarters. At the same time, the total capacity of solid-state drives sold in the fourth quarter fell 2% sequentially, despite growing by double-digit percentages in the previous six months.

Hard drive shipments increased sequentially by 14% in terms of capacity, but in quantitative terms growth was only observed in the cloud segment from 5.5 to 5.9 million units, while in the customer the number of hard drives shipped increased from 4.0 dropped to 2. 7 million units, in the consumer electronics segment it fell from 3.4 to 2.2 million units. The average selling price of a hard drive increased from $99 to $122, and taking into account the reduction in total shipment volume from 12.9 to 10.8 million units, this confirms the general trend – manufacturers are focusing on providing more expensive and capacious hard drives for server use. Incidentally, revenue from the sale of WD hard drives fell by 5.7% to $1.367 billion over the course of the year. The profit margin increased from 20.7 to 24.8%, which also confirms the above thesis.

Over the past six months, WD has shipped approximately 1 million drives with UltraSMR recording technology in each of the two quarters. They are actively used not only by large American clients, but also by their Chinese competitors, including video hosting sites. In the next calendar year, according to the company’s forecasts, the main demand in the nearline segment will be hard drives with SMR recording technology.

About the author

Dylan Harris

Dylan Harris is fascinated by tests and reviews of computer hardware.

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