10-QPeriod: Q3 FY2015

WESTERN DIGITAL CORP Quarterly Report for Q2 Ended Jan 2, 2015

Filed February 10, 2015For Securities:WDC

Summary

Western Digital Corporation's (WDC) Q2 fiscal year 2015 report, ending January 2, 2015, indicates a slight year-over-year revenue decrease to $3.9 billion, primarily due to a dip in hard drive unit shipments. Despite this, total hard drive shipments for the first six months of fiscal 2015 saw a marginal increase. The company maintained its average selling price for hard drives. Operationally, gross margin experienced a slight decline, and R&D expenses increased, signaling continued investment, particularly in the enterprise SSD segment. SG&A expenses decreased due to an insurance recovery. A significant financial event was the payment of $773.4 million to satisfy the arbitration award from Seagate. The company ended the quarter with a robust cash position of $4.9 billion, demonstrating solid liquidity, and continued its capital return program through share repurchases and dividends.

Financial Highlights

53 data points
Beta

Revenue

$3.55B

29.1% Gross Margin

Net Income

$384.00M

10.8% Net Margin

EPS (Diluted)

$1.63

Total Assets

$15.18B

Cash & Equivalents

$4.81B

Free Cash Flow

$534.00M

Financial Statements
Beta
Revenue$3.55B
Cost of Revenue$2.52B
Gross Profit$1.03B
SG&A Expenses$199.00M
Operating Expenses$611.00M
Operating Income$421.00M
Net Income$384.00M
EPS (Basic)$1.66
EPS (Diluted)$1.63
Shares Outstanding (Basic)231.00M
Shares Outstanding (Diluted)236.00M

Key Highlights

  • 1Net revenue for the quarter was $3.9 billion, a 2% decrease year-over-year, driven by a 3% drop in hard drive unit shipments to 61.0 million units.
  • 2Gross margin slightly decreased to 28.5% from 29.1% in the prior year's comparable quarter.
  • 3Research and Development (R&D) expenses increased by $10 million year-over-year, reflecting continued investment in the enterprise SSD business.
  • 4The company paid $773.4 million to settle the arbitration award with Seagate, funded by cash held outside the United States.
  • 5Total cash and cash equivalents stood at a strong $4.9 billion at the end of the quarter, indicating healthy liquidity.
  • 6Western Digital continued its capital return strategy with $532 million in share repurchases and $187 million in dividends paid during the six-month period.

Frequently Asked Questions

Western Digital reported net revenue of $3.9 billion for the quarter ended January 2, 2015, a slight decrease of 2% compared to the prior year. Gross margin saw a marginal decline to 28.5%. The company's operating income was $466 million. A significant outgoing cash flow item was the $773.4 million payment made to settle the Seagate arbitration award.

Hard drive unit shipments decreased by 3% year-over-year to 61.0 million units for the quarter. However, the average selling price (ASP) for hard drives remained stable at $60 per unit for the quarter, indicating consistent pricing power despite lower volumes.

Western Digital maintained a strong liquidity position, ending the quarter with $4.9 billion in cash and cash equivalents. The company continued its capital return program through significant share repurchases, spending $532 million in the six-month period, and dividend payments totaling $187 million in the same period.

The most significant legal event disclosed is the payment of $773.4 million to satisfy the arbitration award from Seagate. The company is also involved in other intellectual property litigation, but these are described as not material to its financial position, results of operations, or cash flows, though it intends to defend itself vigorously.