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Western Digital ups charge figure

The company says it will take larger-than-expected charges ranging from $85 million to $95 million in an attempt to stave off oversupply pricing pressures.

2 min read
Western Digital (WDC) announced today that it will take larger-than-expected charges ranging from $85 million to $95 million in an attempt to "lessen its exposure to sustained oversupply and higher-than-normal pricing pressures" in the hard drive industry's distribution channel.

The company previously had announced plans for a one-time second-quarter charge of between $15 million to $30 million, part of its plans to phase out its thin-film drives (TFI) in favor of hard drives featuring newer magneto-resistive heads.

Western Digital said that its primary reason for increasing the amount of the charge was a further reduction of unit volumes of desktop hard drives with TFI heads. The company also cited its decision to exit the three-inch portable hard drive business.

"We are taking the lead in response to oversupply in the distribution channel and extremely aggressive pricing, principally by Japanese and Korean competitors," Chuck Haggerty, president, chairman, and CEO of Western Digital, said in a statement.

Western Digital said that, as part of its plan to address the industry's sustained oversupply, the company will reduce production of desktop hard drives from previously announced levels, further accelerate its transition to desktop and enterprise hard drives featuring magneto-resistive head technology, exit the three-inch portable hard drive business, and redeploy resources into its desktop storage and enterprise storage business.

The storage sector has seen hard times during recent months, with many companies fighting to keep their edge in a climate of highly competitive pricing pressures. Analysts last month reacted by lowering rating and earnings expectations for the storage maker sector in general.

Deutsche Morgan Grenfell, Needham & Company, and Salomon Brothers lowered their rating on Western Digital last month to "hold" from "accumulate."

Western Digital stock closed at 21-1/8 yesterday, down more than 50 percent from a 52-week high of 54-3/4.