10-QPeriod: Q2 FY2010

WESTERN DIGITAL CORP Quarterly Report for Q1 Ended Oct 2, 2009

Filed October 29, 2009For Securities:WDC

Summary

Western Digital Corporation (WDC) reported strong financial performance for the first quarter of fiscal year 2010, with net revenue increasing by 5% year-over-year to $2.2 billion. This growth was driven by robust demand for hard drives, exceeding company expectations and leading to historically low industry inventory levels. The company saw a significant increase in hard drive unit shipments, up 12% to 44.1 million units, with a notable rise in 2.5-inch drive shipments. Profitability also improved, with gross margin expanding to 23.3% from 20.1% in the prior year, attributed to better factory utilization, supply chain efficiency, and a favorable product mix. Operating income surged by 36% to $319 million. The company ended the quarter with a strong liquidity position, holding $2.1 billion in cash and cash equivalents and generating $434 million in cash flow from operations, indicating financial stability and operational efficiency.

Financial Highlights

48 data points
Beta

Revenue

$2.62B

26.2% Gross Margin

Net Income

$429.00M

16.4% Net Margin

EPS (Diluted)

$1.85

Total Assets

$6.58B

Cash & Equivalents

$2.44B

Free Cash Flow

$358.00M

Financial Statements
Beta
Revenue$2.62B
Cost of Revenue$1.93B
Gross Profit$687.00M
Operating Expenses$214.00M
Operating Income$473.00M
Net Income$429.00M
EPS (Basic)$1.89
EPS (Diluted)$1.85
Shares Outstanding (Basic)227.00M
Shares Outstanding (Diluted)232.00M

Key Highlights

  • 1Net revenue increased 5% to $2.2 billion, driven by stronger-than-expected demand for hard drives.
  • 2Hard drive unit shipments grew 12% to 44.1 million units, with 2.5-inch drives showing significant gains.
  • 3Gross margin improved to 23.3% from 20.1% due to operational efficiencies and product mix.
  • 4Operating income increased by 36% to $319 million, reflecting improved profitability.
  • 5The company generated $434 million in cash flow from operations.
  • 6Western Digital ended the quarter with $2.1 billion in cash and cash equivalents.
  • 7Non-desktop hard drive revenue represented 64% of total hard drive revenue, up from 61% in the prior year, indicating a strategic shift towards higher-growth markets.

Frequently Asked Questions

Revenue and profitability were driven by stronger-than-anticipated demand for hard drives, exceeding prior-year levels. This demand, particularly from consumers and in mobile/desktop PCs, enterprise storage, and branded products, led to improved factory and supply chain utilization, a favorable product mix, and moderate pricing, all contributing to higher gross margins and operating income.

Western Digital reported a robust cash position of $2.1 billion at the end of the quarter, supported by $434 million in cash flow from operations. The company believes its current cash and cash equivalents, along with operational cash generation, are sufficient to meet foreseeable working capital needs. They also maintain a $750 million credit facility, with $250 million available for future borrowings as of the reporting date.

For the upcoming December quarter, Western Digital expects revenue to slightly increase, and gross margin percentage to remain consistent with the September quarter. Operating expenses are projected to increase slightly due to continued investment in new products and technology, despite the historical seasonality of strong consumer spending during the holiday season.

Yes, the filing indicates that during the quarter ended October 2, 2009, Dell Inc. and Hewlett-Packard Company each accounted for 10% or more of Western Digital's revenue, highlighting a significant dependence on these major OEM customers.