Western Digital Corp. (NYSE: WDC) has reported revenues of US$ 1.1 billion on shipments of approximately 18.1 million units, and net income of US$ 104.3 million, or US$ .47 per share for its second fiscal quarter ended December 30, 2005, including US$ 4.2 million of expenses for stock options.
Excluding stock option expenses, net income on a non-GAAP basis was US$ 108.4 million, or US$ .49 per share. Gross margin for the December quarter was 20.4 per cent. During the December quarter, the company also recorded a US$ 7.0 million charge to expense related to the write-off of capitalized software, which is included in both the GAAP and non-GAAP results.
The company’s excellent growth in revenues is a result of the impressive financial performance of WD’s key markets, including the Middle East. Moreover, the industry fundamentals were strong with demand and pricing reflecting favourable seasonal trends.
Hafeez Khawaja, Senior Regional Director, Middle East, Africa and South Asia, Western Digital, said, “The revenues for the second quarter are a reflection of WD’s commitment to innovation and quality. Our efforts to provide customers with products that best match their requirements have paid rich dividends, as is evident from the financial results. The Middle East region in particular has performed exceedingly well, which has helped in boosting the overall performance of the company.”
WD’s results represented strong year-over-year performance, including 12 per cent unit growth, 17 per cent growth in revenue versus US$ 955 million in the year-ago period and 86 per cent growth in net income over the US$ 56.0 million reported last year. A year ago, the company reported earnings of US$ .26 per share in the fiscal second quarter, shipped 16.2 million units, and posted gross margin of 15.7 per cent.
In the second fiscal quarter, the company showed steady growth in two of the industry's fastest growing market segments-hard drives for notebook computers and for consumer electronics (CE) applications. It shipped approximately 1.4 million of its 2.5-inch WD Scorpio mobile hard drives and approximately 1.5 million of its 3.5-inch drives to the DVR market, compared with over 1 million and 1.3 million in the first quarter, respectively.
Continuing to reflect the broadening of its business, WD derived 26 per cent of its Q2 revenue from non-desktop PC sources including notebook PCs, CE, enterprise applications, and retail sales. Seventy-four per cent of the company's second quarter revenue came from hard drives configured into desktop PCs, a market that remains strong. This compares with a mix in the year-ago quarter of 19 per cent non-desktop PC revenue and 81 per cent desktop PC revenue.
From a balance sheet perspective, the company generated US$ 117 million in cash from operations during the December quarter, ending with total cash and short-term investments of US$ 645 million. During the quarter, the company repurchased 1.0 million shares of its common stock for approximately US$ 12 million. Since the inception of the share repurchase program in May 2004, the company has repurchased 8.8 million shares for approximately US$ 87 million.
"We are pleased with our financial performance in the December quarter as we executed well on the significant opportunities provided by our customers in multiple markets," said Arif Shakeel, President and Chief Executive Officer of Western Digital. “Our continued focus on quality, cost reductions, and maximizing our product mix were important factors in Q2 and will remain priorities going forward. In calendar 2006, we will also be advancing our technologies as we refresh our product line so that we may continue to deliver value to our customers and shareholders."
About Western Digital (WD):
WD, one of the storage industry’s pioneers and long-time leaders, provides products and services for people and organizations that collect, manage and use digital information. The company’s core business produces reliable, high-performance hard drives that keep users’ data close-at-hand and secure from loss.
WD was founded in 1970. The company’s storage products are marketed to leading systems manufacturers and selected resellers under the Western Digital and WD brand names. Visit the Investor section of the company’s website (www.westerndigital.com) to access a variety of financial and investor information.
