There is a lot of stuff going on in the Disk Drive sectors (as always).
The Seagate Maxtor merger was a recent big event, that event is apparently discounted by the DD analyst community. Just months ago, the DD analyst community was screaming price cutting was in check because there was 1 less DD supplier. In the same breath the DD analyst community was screaming OEMs would award more business to WDC because the OEMs did not want to become too dependent on a single supplier of DDs or the combined Seagate Maxtor.
Within a year this reasoning and logic is kaput. I do not think so.
The new competition is the flash memory. The new IPOD uses flash memory to store an enormous amount of songs. The IPOD is the transistor radio generation of kids, the sound does not have to be excellent just good enough to groove on through the headphones. Keep your eye here for its impact on the DD companies. Also, look at the foreign DD suppliers like Samsung, Fujitsu -- they may get it right.
Prices of DDs are coming down, that is true, but the bytes stored per dollar have been falling for 25 years. Keep you eye on number of drives sold and inventory turnover. These 2 stats will bear out WDC is 1) selling a lot of drives, 2) is inventory is dynamic. When the inventory turnover begins to fall--then get worried.
Before you get too carried away with the DD analyst community re-read the last quarterly statement.
"LAKE FOREST, Calif. - Jan. 26, 2006 - Western Digital Corp. (NYSE: WDC) today reported revenue of $1.1 billion on shipments of approximately 18.1 million units, and net income of $104.3 million, or $.47 per share for its second fiscal quarter ended Dec. 30, 2005, including $4.2 million of expenses for stock options. Excluding stock option expenses, net income on a non-GAAP basis was $108.4 million, or $.49 per share. Gross margin for the December quarter was 20.4 percent. During the December quarter, the company also recorded a $7.0 million charge to expense related to the write-off of capitalized software, which is included in both the GAAP and non-GAAP results.
These results represented strong year-over-year performance, including 12 percent unit growth, 17 percent growth in revenue versus $955 million in the year-ago period and 86 percent growth in net income over the $56.0 million reported last year. A year ago, the company reported earnings of $.26 per share in the fiscal second quarter, shipped 16.2 million units, and posted gross margin of 15.7 percent..."
Here is the link.
wdc.com{7E27241E-CD1A-4177-B82A-4A85C467440D} |
