WDC conference call:
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[Overall: Though this quarter really hurt because of continued aggressive pricing and time to qualify 2.1 and issues involved with non-qualification of the last TF products, they are making rapid progress towards MR, are enjoying very good yields in MR, see continued enterprise business growth, have shored up their balance sheet and industrywide for the first time in a long time see "some signs of improvement" in the overall DD industry. Management is "cautiously optimistic" going forward and Haggerty mentioned that they were in the "latter stages" of the cycle recovery.]
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(1) Opening Comments
- Being stung by "Prolonged industry cycle" and "product transition" issues
- Aggressive pricing continues GM down to 4.4%
- Industry Conditions: "Oversupply" now - expects "lessen"ing over the next few quarters, sees "some signs of improvement" in both enterprise and desktop, but sees increased competition in enterprise area. "Cautious optimism" overall tempered because of "aggressive pricing". Getting mixed reports re: PC/Server demand but recent reports about PC growth have been encouraging, likewise with inventory levels in the industry.
- "Substantial improvement" made in 3 key areas: Asset Management, MR technology, enterprise area.
- Asset Management: "modest" channel inventory reduction, healthy "finished goods" reduction of 36 million, 460 mil. convertible debt (= 19.3 mil of shares if and when converted) + credit line usage (?) (53mil) = LTD of 513 mil, used proceeds to shore up cash position to 578 mil. cash. Current ratio now 1.93 and (Cash + A/c Rec'bl)/(Current Liab.) = 1.52 (healthy numbers).
- MR technology: 40% of units shipped, expect to be 80% MR by June (?) q, expect no TF to be shipped in desktops > June q. Getting "excellent yields", "peak efficiency", "highest yields" (missed words).
- Enterprise Area: 5th sequential quarter of higher units/revenue/operating profits, Headcount at Rochester increasing 40% YOY, MR yields "very very storng", 9.1 Gig, yields "exceed TF" even though this is at early ramp.
- Does NOT plan to be the price leader
- Opearationally: By Sept. sees 95% of shipments being new products (introduced in last year) based on MR, 2.1 G/p shipping to all "blue chip" customers but 1 and that is expected to qual soon, shipping qual of 2.8 G/p to 4 OEMs, expects to be "very competitive" at all aereal densities going forward, admitted on 2.1 "qual. time somewhat longer because this was first high volume MR product", enterprise 9.1 G shipping to 9 OEMs and qualified at 7 more.
- Sees need to concentrate on 4 operational areas going forward: Working down Inventories, Desktop production efficiencies, Enterprise business growth, MR technology. Presumably WDC's success or failure here dictates how well they'll be doing going forward.
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more later...
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Shane. |
