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Technology Stocks : Western Digital (WDC) -- Ignore unavailable to you. Want to Upgrade?

To: Sam Citron who wrote (10939)	7/19/2004 8:40:47 AM
From: Alastair McIntosh	Read Replies (1) \| Respond to of 11057

Outlook for WDC: Western Digital - Outperform - $12 PT 4Q04 Results. We believe WD will exceed our estimates for revenues of $710 million (+4% y/y) and 11.8 million units (+11% y/y), which could translate to upside to our $0.15 EPS estimate, although pricing in the desktop channel was aggressive, which likely offset some of this potential upside. Color on the Quarter. We believe WD's channel inventories were below 6 weeks as it exited the quarter. On the demand side, the company likely benefited to a small extent from Maxtor's share loss at Dell along with the continued growth in SATA drives in the enterprise. Forecast. Heading into the seasonally strong September quarter, the Street is expecting a strong sequential performance with an EPS estimate of $0.20 vs expectations of $0.15 for the June quarter. This hurdle is even more difficult to cross given WD just completed a 14-week quarter in June. We believe the company can achieve our estimate of $0.18, but $0.20 might be a stretch, and would likely require strong seasonal growth in the September quarter. Outlook. WD will once again deliver the strongest financial performance of its competitors owing to its low cost operating model and its lack of a presence in enterprise drives, the most aggressive segment in the hard drive marketplace. Even if the company is forced to pair back its September quarter guidance by a few pennies, we believe the stock will outperform the group and the overall market in the second half of the year as both demand and financial performance improve. WD currently trades at 10x CY04 EPS and 0.6x CY04 sales, a significant discount to STX's 1.1x CY04 sales multiple and a premium to MXO's 0.6x multiple.