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Western profits improve 300%

Western Digital posts a 300 percent increase in third-quarter profits, boosted by a hardy demand of high-performance desktop drives and new enterprise storage drives.

2 min read
Western Digital (WDC) today continued to propel itself forward with a 300 percent increase in third-quarter profits, boosted by a hardy demand of high-performance desktop drives and new enterprise storage drives.

Following a robust second quarter, the hard disk drive maker, which reported after the market's close, announced net income of $82.6 million, or $1.76 per share, up from a net income of $19.4 million, or 42 cents a share, for the corresponding quarter a year earlier.

Wall Street had anticipated the company to report $1.45 a share, according to First Call.

Company spokeswoman Brenda Bennett attributed the company's revenue growth to especially strong sales of its 1.6 gigabyte to 2.1 gigabyte desktop drives. The company has also expanded into new markets, and this past quarter was the first time its new enterprise storage group, which produces SCSI drives, has produced revenue.

Western's quarterly revenue, meanwhile, grew to $1.1 billion, a 51 percent increase over $728 million in revenue in the third quarter a year ago.

The company, during the quarter, introduced a new hard drive technology that allows removable media storage peripherals to get better performance. SDX (Storage Data Acceleration) increases the performance of the peripherals, such as CD-ROM drives, when they are connected to the hard drive with SDX technology, said the company.

Analysts are optimistic about the technology and its long-term benefits for the hard drive maker.

"The SDX interface provides value to the end user and to the OEMs providing PCs to the end user. It takes the cost out and enhances performance by lowering the cost of plugging in peripherals. We expect it will help drive demand in the long term (and will likely help to drive PC-related technology advancements such as DVD)," said a recent Salomon Brothers research report.

Analysts also said Western should be able to ride the wave of industry demand.

"The industry still wants more product than it can get," said IDC Research analyst Alexa McCloughan. "Prices have not eroded significantly...and demand still feels very healthy."

She noted 132.5 million drives were shipped in 1996, with roughly 30 million flying out the door in the fourth quarter alone.

All new Western Digital EIDE drives will support SDX starting in the second calendar quarter of 1997 and will be distributed to original equipment manufacturers and systems integrators.

Meanwhile, Western Digital shareholders approved a proposal to increase the number of common shares to 225 million from 95 million at a special stockholder meeting in March.

The company's stock peaked at 77-1/4 in February, a 52-week high, but then shed nearly 17 points by the end of March. Western's stock lost as much as 2-1/2 points prior to the announcement today to close at 65-7/8, down from the previous day's close of 68-3/8.