Might be related to a DATAQUEST research article (very positive) as follows:
Western Digital Prepares for a Big 1996
Abstract:
Western Digital Corporation (WDC) has reported its financial results for the first calendar quarter of 1996,
and if they are indicative of the rest of 1996, WDC should have a good year. On total sales of $728.4
million, the company showed a gross profit of 19.4 percent and a net of 5.0 percent, the highest profits in a
year.
By Phil Devin
Continued Strong Sales and Profits
Disk drive sales were 97 percent of the total, at $710 million, with a gross profit of 12.3 percent. A total of 3.9 million
drives were sold, slightly down from the 4.0 million in December 1995. WDC's channel mix remained the same this
quarter, at 63 percent OEM and 37 percent reseller, still low on the OEM scale. The high for 1995 was 78 percent
OEM in the June quarter. WDC's sales into the healthy upgrade market continue to keep its reseller numbers high. The
company appears to be winning some of the Conner business as OEMs seek a second source to the combined
Seagate/Conner supply, and Dataquest expects WDC's OEM business to increase handsomely in the second calendar
quarter of 1996.
Geographically, WDC's sales in Europe slowed this past quarter, down to 33 percent of its revenue. Domestic U.S. sales
made up the difference, jumping 4 percent to 52 percent of the total. The company's 10 largest customers continue to
purchase 42 percent of the total sales with none taking as much as 10 percent. The average unit price for a WDC drive
was $182, slightly down from the $186 of the previous period, but very consistent with the previous year's results.
Inventories increased by $22 million, and accounts receivable grew from 43 days sales outstanding to 49 days. This total
incremental increase of nearly $60 million, plus the $40 million in stock repurchased, more than made up for the reduction
in cash to $199 million. Disk drive inventories were up to $127 million from $90 million at the end of 1995 with 380,000
drives in finished goods (about five days' sales). At a value of $56 million, this inventory would be held at $147 per drive.
The new 2.1GB and 2.5GB Caviar drives are well received in the market and seem to be the capacities required for
multimedia desktop personal computers for 1996. Still able to utilize low-cost heads and media, WDC and Maxtor
continue to battle it out in that market. Using three platters to reach the 2. 5GB capacity, WDC is the leader in this
technology and should be able to reach the next capacity increment using the same components.
Dataquest Perspective
Western Digital will announce and ship some interesting new products in 1996, all of which will increase the company's
market share and profitability. The 3.0-inch product, using technology licensed from JTS, could be potentially the most
explosive new product in the company's history. Not only will the mobile PC manufacturers be delighted to have a
low-cost 1GB alternative to 2. 5-inch products, but desktop PC makers seem to be excited about the possibility of using
this slim disk drive as a removable product for the home market. Once more, the industry should face the northwest and
thank Iomega for making removable disk drives fashionable.
WDC's new entry into the performance market is due for shipment from the company's Singapore factory in the second
half of the year. The goal was to make a performance product that could be ramped and manufactured like an entry-level
product. We'll soon see how close the Rochester, Minnesota, team came to the specification.
Now that the company is a pure-play disk drive shop, its focus is exclusively on one product line. WDC has continued to
surprise the industry with its strong technology base and its volume manufacturing strategy. With the current and future
strength in the rigid disk market, 1996 should be a banner year for WDC.
Copyright ª 1996 Dataquest
A Gartner Group Company |
