10-QPeriod: Q3 FY2013

WESTERN DIGITAL CORP Quarterly Report for Q3 Ended Mar 29, 2013

Filed May 3, 2013For Securities:WDC

Summary

Western Digital Corporation (WDC) reported its third-quarter fiscal year 2013 results, showing a notable increase in revenue driven by the full inclusion of HGST's operations following its acquisition. Net revenue grew 24% year-over-year to $3.8 billion, with total hard drive unit shipments up 36% to 60.2 million units. This growth was primarily attributable to the integration of HGST, though partially offset by a lower average selling price (ASP) for hard drives. Despite revenue growth, gross margin saw a decrease to 28.2% from 32.2% in the prior year period, largely due to increased ASPs in the prior year caused by industry-wide supply constraints from the Thailand floods. Operating expenses also rose, influenced by HGST's inclusion and increased R&D investment. The company generated strong operating cash flow of $727 million in the quarter, ending with a robust $4.1 billion in cash and cash equivalents, indicating a healthy liquidity position.

Financial Highlights

54 data points
Beta

Revenue

$3.76B

28.2% Gross Margin

Net Income

$391.00M

10.4% Net Margin

EPS (Diluted)

$1.60

Total Assets

$13.93B

Cash & Equivalents

$4.06B

Free Cash Flow

$539.00M

Financial Statements
Beta
Revenue$3.76B
Cost of Revenue$2.70B
Gross Profit$1.06B
SG&A Expenses$185.00M
Operating Expenses$644.00M
Operating Income$417.00M
Net Income$391.00M
EPS (Basic)$1.64
EPS (Diluted)$1.60
Shares Outstanding (Basic)239.00M
Shares Outstanding (Diluted)245.00M

Key Highlights

  • 1Consolidated net revenue increased 24% to $3.8 billion, largely due to the full integration of HGST.
  • 2Hard drive unit shipments increased by 36% to 60.2 million units.
  • 3Gross margin decreased to 28.2% from 32.2% year-over-year, impacted by lower ASPs compared to the prior year's flood-related supply constraints.
  • 4Operating income decreased to $417 million, reflecting higher operating expenses including employee termination benefits and increased R&D.
  • 5The company generated $727 million in operating cash flow during the third quarter.
  • 6Cash and cash equivalents stood at $4.1 billion as of the end of the quarter, indicating strong liquidity.
  • 7Non-compute and enterprise markets represented 51% of net revenue, a significant increase from 31% in the prior year period.

Frequently Asked Questions

The primary driver of the revenue increase was the full inclusion of HGST's operations following its acquisition. This contributed significantly to both the increase in net revenue and the rise in hard drive unit shipments.

The gross margin decreased to 28.2% from 32.2% in the prior year. This was mainly because the prior-year period benefited from higher average selling prices (ASPs) due to industry-wide supply constraints caused by the Thailand floods. In the current period, ASPs normalized, leading to a lower gross margin percentage.

Western Digital demonstrated strong liquidity, ending the quarter with $4.1 billion in cash and cash equivalents. The company also generated $727 million in operating cash flow during the third quarter, indicating healthy operational cash generation.

For the upcoming fourth quarter (ending June 28, 2013), the company expects overall hard drive industry shipments to remain flat to slightly down compared to the third quarter. Revenue is anticipated to decrease slightly from the March quarter, reflecting current demand, pricing environment, and seasonal business mix changes.