Western Digital Stock Is Tumbling After Beating Earnings Estimates. Heres Why. -- Barrons.com
5:40 PM ET 10/30/19 | Dow Jones
By Eric J. Savitz
Western Digital (WDC) stock is trading sharply lower late Wednesday after the company provided disappointing December-quarter earnings guidance and announced the planned retirement of CEO Steve Milligan, who has held the top job at the disk-drive maker since January 2013.
For the fiscal first quarter ended October 4, the company posted revenue of $4.0 billion, down 19.6% from a year ago, a drop that reflects sharp price declines in flash memory, but above the Street consensus at $3.93 billion. Non-GAAP profits were 34 cents a share, above the Street at 30 cents.
"Fiscal year 2020 is off to a good start. The continued success of our capacity enterprise drives for the data center was the primary driver of the upside we experienced in the fiscal first quarter," Milligan said in a statement. "The overall demand environment remains solid. We continue to believe the flash industry has passed a cyclical trough, with improving trends across our flash product portfolio. With a broad and growing product portfolio, Western Digital remains well positioned to benefit from the long-term drivers of the growth and value of data."
For the fiscal second quarter ending January 3, the company sees revenue of $4.1 billion to $4.3 billion, just below the Street consensus at $4.22 billion at the midpoint. Western Digital sees non-GAAP profits for the quarter of 45-65 cents a share, well below the Street consensus at 75 cents.
In a separate announcement, the company said that Milligan intends to retire, but will stay on until the company chooses a successor, and will remain a board member and an advisor to the company until September 2020. The company said its board has hired the search firm Heidrick & Struggles to assist in the search for a new CEO.
"Western Digital has significantly evolved since I first joined in 2002, and it has been an honor to lead this talented team through critical and transformative periods -- not only for our company, but for the entire industry," Milligan said in a statement. "We are currently at an inflection point in the semiconductor cycle and, as we prepare for a cyclical upturn, now is the right time to begin the transition to Western Digital's next phase of leadership."
In late trading, Western Digital stock was down 11% to $55.30.
Write to Eric J. Savitz at eric.savitz@barrons.com
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October 30, 2019 17:40 ET (21:40 GMT)
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