Western Digital had a roaringly successful first fiscal 2010 quarter with revenues 15 per cent up year-on-year.
It recorded sales of $2.2bn, compared to $2.1bn a year ago, and net income of £288m, up from last year's $211m, and beating Wall St estimates. Drive shipments totalled 44.1 million, a 12 per cent year-on-year increase, and a record for WD.
Part of the reason was WD gaining drive sales as Toshiba acquired Fujitsu's drive business.
Last year in its equivalent quarter Seagate shipped 48.23 million drives, 8.83 million more than WD. In this first fiscal 2010 quarter Seagate shipped 46.3 million drives, almost two million fewer than a year ago and only 2.9 million more than WD. It seems WD is catching up as the unit ship gap between Seagate and WD has declined by 75 per cent over the period.
Could WD overtake Seagate in drive shipment terms? Seagate is a recovering company and getting on top of its game so the short-term next quarter or two prospect of WD overtaking Seagate is receding but the longer term possibility is still there.
WD president and CEO John Coyne talked of the raised demand for drives in the earnings call transcript, saying: "For the second consecutive quarter, demand for hard drives was stronger than we expected as the positive industry conditions that first materialized in the June quarter continued throughout the September quarter.
"The demand strength is primarily consumer driven, and we believe it is underpinned by the growing social media phenomenon. This is creating strong demand in mobile and desktop PCs, near-line enterprise and external storage markets.
"The inventory situation in the drive business is extremely lean. It’s at the lowest levels that we’ve seen in over three years.
CFO Tim Leyden said: "Throughout the September quarter, hard drive industry demand exceeded supply... Demand for our HDD products in the September quarter was stronger sequentially than we would have expected."
One result of this was a stable pricing environment. Gross margin was 23.3 per cent, compared to 20.1 per cent in the year-ago quarter and 19.2 per cent in the preceding quarter. WD has also been running its factories very efficiently.
Coyne said: "In the last six months, we have been running our capacity close to 98, 99 per cent utilisation. That’s very good for the short-term margin and absorption benefit. However, it inhibits our ability to provide one of the critical values that we provide to customers which is availability and responsiveness. So our target is to run at about a 90 per cent utilisation."
Leyden said the outlook is positive. "As we enter the December quarter, demand remains strong... seasonal indicators seem to be lining up very well for a positive holiday season."
WD expects its second 2010 quarter revenues to be $2.25bn to $2.35bn, with gross margin staying constant. It estimates that the total addressable drive market in the quarter will be 152 million to 160 million drives. With its current 29 per cent share, that equates to 44 million to 46 million drive shipments.
It all looks very healthy, and WD has still not entered the enterprise drive space where it may hope to expand sales volume further. Leyden mentioned the coming enterprise products, saying: "We’ve indicated that we are going to be entering the traditional enterprise market during the course of the year."
If that means 2009 and not fiscal 2010 then we could see a WD enterprise drive by year-end. ®