Western Digital (WDC) reported second quarter 2010 EPS of $1.85, exceeding the Zacks Consensus Estimate of $1.36.
Revenue
Western Digital reported first quarter 2010 revenue of $2.62 billion, up 43.9% from the prior year and 19.0% on a sequential basis. Revenue from sales of Western Digital branded products was $569.0 million, up 41.0% from the year-ago quarter and up 49.0% sequentially from $382 million in the previous quarter. Demand was strong, with total units coming in at the high end of the company’s anticipated range of 152 to 160 million.
Revenue by sales channel was as follows: 48% from OEM, 30% distribution and 22% branded products, compared to 57%, 21% and 22%, respectively, in the year-ago quarter and 52%, 31% and 17%, respectively in the previous quarter.
Average hard drive selling price was around $52.0 per unit, up $1.0 from the year-ago quarter, but up $3.0 from the previous quarter.
Operating Results
The company’s second quarter gross margin was 26.2% up from 15.9% in the year-ago quarter and 23.3% in the previous quarter. This improvement in gross margin was a result of a low cost focus, a favorable product and segment mix and moderate price declines on input material.
Total R&D and SG&A spending increased to $214.0 million, or 8.2% of revenue, versus $161.0 million, or 8.8% of revenue in the year-ago quarter, and $195.0 million, or 8.8% of revenue in the previous quarter. The company’s spending reflects its future growth expectation as WDC is seeing opportunities in storage. Operating income for the quarter was $473.0 million, or 18.0% of revenue, versus $16.0 million, or 1.0% of revenue in the year-ago quarter, and $319.0 million, or 14.4% of revenue in the previous quarter.
Net Income for the recently concluded quarter was $429.0 million, or $1.85 per share, compared to $14.0 million, or $0.06 per share in the year-ago quarter, and $288.0 million, or $1.25 per share in the previous quarter.
Cash Position
The company generated $557.0 million in cash from operations. Cash and cash equivalents increased by $379.0 million, ending at $2.43 billion. Capital expenditures were $199 million and the quarterly debt-repayment was $19.0 million. This apart, the company reported a cash conversion cycle of negative 3 days.
Guidance
For the third quarter of 2010, the company expects revenue in the range of $2.45 billion to $2.60 billion, total R&D and SG&A of approximately $220 million and earnings per share of $1.45 to $1.55.
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