Western Digital Warns That Fourth Quarter
Results Will Fall Below Wall Street Estimates
PR Newswire - June 09, 1998 16:31
WDC %CPR %ERP V%PRN P%PRN
IRVINE, Calif., June 9 /PRNewswire/ -- Western Digital Corporation (NYSE:
WDC) today announced that due to greater than anticipated industry
pricing pressures and reduced unit volumes in its desktop hard drive
business, its performance for the fourth fiscal quarter ending June 27, 1998
will fall substantially short of current Wall Street analyst forecasts. The
current range of analyst estimates is a loss of $.45 to $.67 per share on
revenue in the range of $830 million to $864 million. The Company expects
the operating loss for the June quarter to exceed $100 million, before
recording certain costs associated with the implementation of its
previously-announced component supply and licensing relationship with
IBM Corporation.
Over the last several quarters, Western Digital has substantially reduced
production in the face of the industry's excess inventories, and in the next
two months it will implement shorter work weeks in its manufacturing
plants in Singapore and Malaysia. This month, it curtailed production in its
Santa Clara, California media facility. By the end of the June quarter, WD's
workforce will have been reduced 22% since November 1997 to
approximately 13,000 employees through attrition and layoffs. The
Company indicated that it will continue to review its operations in light of
its business model and business conditions.
The size of the Company's expected fourth quarter net loss will result,
unless cured, in a technical default under the Company's bank credit line at
the end of the quarter. The total available credit under the bank agreement
is $250 million, of which $50 million is outstanding in the form of a term
loan. The Company's borrowing capacity will be subject to the successful
re- negotiation of the terms of the credit line agreement. The Company is
currently in discussions with its lenders about these matters.
Chuck Haggerty, chairman, president and chief executive officer of
Western Digital, said: "Despite the reductions in finished goods inventory
that we saw among industry leaders last quarter, there remain too many
drives in the distribution channel. This has caused a further acceleration of
desktop pricing pressure in the channel and at OEM customers in the June
quarter."
The Company also reported that major OEM customer acceptance of its
first and second generation MR head products and of its future product
roadmap for both desktop and enterprise drives was very strong. "The
plan is in place, and progress is being made, to return Western Digital to
time-to-market leadership in the desktop business," Haggerty said. "Our
initial MR head programs are establishing a strong base of performance
with our strategic OEM customers as we head into the new fiscal year. In
the meantime, our Enterprise storage business continues to perform
profitably."
The Company will report its financial results for the June quarter on July
29, 1998.
This release contains forward-looking statements based on current
management expectations, including statements related to current and
anticipated industry pricing trends, future possible charges, and projected
operating results. The forward looking statements are based on current
management expectations, and actual results may differ materially as a
result of several factors, including: pricing trends and other competitive
factors; final approval of the agreement with IBM; the outcome of
discussions concerning the Company's bank credit line; continued success
in the ramp of volume production of magnetoresistive-head drives;
continued successful qualification of such drives with key OEM
customers; business conditions and growth in the personal and enterprise
computing industry; changes in customer order patterns, successful
reductions in future costs and expenses, and other factors discussed in our
form 10-K for the year ended June 28, 1997, our recent form 10-Qs, and our
other SEC filings. Western Digital undertakes no obligation to update
forward-looking statements to reflect events or circumstances occurring
after the date of such statements.
SOURCE Western Digital Corporation |
