Western Digital Earnings Cheat Sheet: Increased Costs Strain Margins as Profit Drops

S&P 500 (NYSE:SPY) component Western Digital Corporation (NYSE:WDC) reported its results for the fourth quarter. Western Digital Corporation designs, develops, manufactures and sells hard drives.

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Western Digital Earnings Cheat Sheet for the Fourth Quarter

Results: Net income for the data storage devices company fell to $158 million (67 cents per share) vs. $264 million ($1.11 per share) a year earlier. This is a decline of 40.2% from the year earlier quarter.

Revenue: Rose 0.8% to $2.4 billion from the year earlier quarter.

Actual vs. Wall St. Expectations: WDC reported adjusted earnings of 81 cents per share. By that measure, it beat mean analyst estimate of 67 cents per share. It beat the average revenue estimate of $2.26 billion.

Quoting Management: “In the June quarter, we were able to meet stronger than anticipated demand, especially from our OEM customers,” said John Coyne, president and chief executive officer. “We believe the stronger demand was driven by increased use of sea freight in advance of the second half of the calendar year as well as supply continuity concerns in the aftermath of the Japan earthquake. “In a challenging HDD market environment in fiscal 2011, the industry saw unit volume growth of four percent while WD achieved growth of six percent as customers demonstrated a continued preference for the WD value proposition.”

Key Stats:

The company has now seen net income fall in each of the last four quarters. In the third quarter, net income fell 63.5% while the figure fell 47.6% in the second quarter and 31.6% in the first quarter.

Gross margin shrank three percentage points to 19.4%. The contraction appeared to be driven by increased costs, which rose 4.7% from the year earlier quarter while revenue rose 0.8%.

The company fell in line with estimates last quarter after topping expectations in the previous two quarters. In the third quarter, it topped the mark by one cent, and in the second quarter, it was ahead by 38 cents.

A year-over-year revenue increase last quarter snaps a streak of two consecutive quarters of revenue declines. Revenue fell 14.7% in the third quarter and fell 5.5% in the second quarter.

Competitors to Watch: Seagate Technology PLC (NASDAQ:STX), EMC Corporation (NYSE:EMC), STEC, Inc. (NASDAQ:STEC), SanDisk Corporation (NASDAQ:SNDK), Dot Hill Systems Corp. (NASDAQ:HILL), Overland Storage, Inc. (NASDAQ:OVRL), Hutchinson Technology Inc. (NASDAQ:HTCH), Quantum Corporation (NYSE:QTM), ADPT Corporation (ADPT), and OCZ Technology Group Inc. (NASDAQ:OCZ).

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(Source: Xignite Financials)