Neff on HGST - Hitachi HDD operating loss widened, but gained share from STX in enterprise. After a brief episode of profitability (in December 2005), Hitachi's HDD operation (Hitachi Global Storage Technology) resumed its operating losses, which appears to have widened from March 2006, although it seems that HGST has benefited from STX/MXO merger in terms of units -- gaining share in 2Q06 (compared to our forecast for STX which reports on 8/8).
Despite gaining share in enterprise and desktop drives, Hitachi reported 2Q06 revenues of $1.068 billion (down 4% sequentially but up 3% y/y) and an operating loss of $112 million, increased from a loss of $46 million during the prior quarter. It appears that HGST is aggressively going after share fallout from the STX/MXO merger.
On the other hand, losses in the drive industry usually tends to lead to more disciplined pricing -- but that factor seems to be missing currently as Hitachi/HGST goes for market share.
Point of clarification: there is always confusion in news reports about Hitachi's HDD results when Hitachi Ltd. reports its results, because Hitachi Ltd. includes the Hitachi Global Storage Technology (HGST, the HDD operation) results for the previous quarter (i.e., this release for HIT's June results includes HGST's results for March quarter), but the footnotes break out the results for HGST's June quarter (which will be consolidated into Hitachi Ltd.'s September results).
HGST gained share in enterprise and desktop from STX sequentially. While STX has yet to report its June-quarter results, it appears that HGST has gained share in enterprise and desktop drives, benefiting from the STX/MXO merger. Hitachi’s enterprise unit shipments of 1.0 million were up 11% sequentially (or up 43% y/y), while we estimate that combined STX/MXO’s shipments to decline by 2% sequentially (or down 8% y/y).
HGST losing share in notebooks but seeing sold growth in 0.8-inch market. On the other hand, Hitachi lost share in notebook HDD market, with shipments declining by 8% compared to our expectation of STX’s notebook HDD shipments increased by 30% sequentially and WDC’s notebook units increasing by 16% sequentially. Meanwhile, Hitachi saw solid increase in its 1.0-inch drive shipments with units increasing by 29% sequentially (but down 82% y/y) to 450,000 units (see table below for details).
Stock impact: negative for STX/MXO and WDC (aggressive pricing by HGST); positive for KOMG (share gain by Hitachi could help offset the decline in STX/MXO). |
