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Western Digital Beat Analysts’ Estimates in Fiscal 1Q16

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Oct. 30 2015, Published 1:53 p.m. ET

Updates for September 2015 quarter 

It has been a good quarter for Western Digital (WDC)—a storage solutions manufacturer. In contrast, hardware firms F5 Networks (FFIV) and TE Connectivity (TEL) missed analysts’ revenue estimates. All three companies released their earnings for the July to September 2015 quarter on October 28, 2015. This series will analyze the financial performance of each of the three companies.

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Western Digital beat analysts’ estimates

In fiscal 1Q16, Western Digital’s revenue fell 15% YoY (year-over-year) to $3.36 billion. It beat analysts’ estimates of $3.32 billion. The company’s EPS (earnings per share) fell from $2.10 in fiscal 1Q15 to $1.56 in fiscal 1Q16. It met analysts’ estimate of $1.56. The earnings came a few days after the firm announced its plans to acquire SanDisk for $19 billion. It plans to expand in the SSD (solid-state drive) space.

Profitability

Western Digital’s HDD (hard disk drive) shipments fell from 64.7 million in fiscal 1Q15 to 51.7 million in fiscal 1Q16 due to softness in PC shipments. On a GAAP (generally accepted accounting principles) basis, the company’s gross margin fell from 29.1% in fiscal 1Q15 to 28.4% in fiscal 1Q16. Its net income fell 33% YoY to $283 million.

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Cash position

In fiscal 1Q16, the company generated $545 million in cash from operating activities. It spent $115 million in dividend payment and $60 million in share buybacks. As of October 2, 2015, the company’s total cash reserves stood at $5.1 billion.

SanDisk acquisition

Western Digital already dominates the HDD market with a 43% share. The acquisition of SanDisk will make it the second-largest vendor in the SSD space. It will have an 11% share. It will compete with Samsung (SSNLF). Samsung has an ~45% share in the SSD market.

Fiscal 2Q16 guidance

For fiscal 2Q16, Western Digital expects to report EPS in the range of $1.50–$1.60 on revenue of $3.3–$3.4 billion.

You can gain exposure to Western Digital through the SPDR S&P 500 ETF (SPY). It has 0.08% exposure in the company’s stock.

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