Western Digital Struggles, Local Operation Reports Losses As Sales Fall

Storage Company Western Digital who last month was spruiking new 1Tb drives for the consumer market appears to be struggling with their stock failing to get back to pre-COVID-19 levels, in Australia the Corporation is claiming that they made a loss and only turned over $14.1 million in revenue a fall of nearly two million from the prior year.

Filings at the Australian Securities & Investment Commission show that Wester Digital Technologies reported losses of $487,000 and that in 2019 they spent $691,000 on research and development.

Revenues went from $16M to $14.9 million at the local operation.

Recently Western Digital stock took a hard dive as investors lost confidence in the Company this followed five-quarter streak of year-over-year revenue declines.

Their revenue and earnings tumbled due in part to two major issues, it shipped fewer platter-based hard disk drives (HDDs) to PC makers and data centre customers, and its flash memory business — which sells solid-state drives (SSDs) and memory chips — struggled with cyclically lower memory chip prices.

Another big problem for the US Company is that the Flash drive market has become volatile despite record growth.

In the fourth US quarter they missed revenue estimates by $40 million.

The Company who is due to report on the 28th of October expects its revenue to decline 3%-8% annually, far below expectations of 8% growth.

Analysts believe that the Companies efforts to recover are not working.

On the bright side, its flash revenue surged 49% to $2.24 billion, buoyed by shipments of new SSDs for upcoming game consoles.

In the consumer market buyers are turning to other storage than SanDisk due to the cost of their product in Australia is expensive Vs what the same product is being sold for overseas.

The Company has engaged in little if any consumer marketing.

Those numbers suggest WD’s growing flash business will offset the slower growth of its HDD business, which faces tough competition from Seagate who are outperforming Western Digital on several fronts.

Chief Financial Officer Bob Eulau said Western Digital remained “somewhat challenged in the near term” due to the pandemic and a “global economic contraction.”

He warned that growth will be “more than offset” by declining sales of its client devices — which include drives for PCs, consumer electronics, embedded devices, and wafers — and its data centre storage solutions.

Western Digital also expects its total adjusted gross margin to contract sequentially to 25%-27%, partly due to a “peak” quarter of higher expenses for its new K1 joint venture fab for flash memory chips.

Western Digital has chosen not to offer guidance to the market and have cut dividends despite rival Seagate continuing to pay a dividend of nearly 6% throughout the same downturn.

Local Marketing Manager Jenni Ilagan hung up on ChannelNews when we attempted to question her about the performance of the local subsidiary.

About Post Author

David Richards

David Richards has been writing about technology for more than 30 years. A former Fleet Street journalist, he wrote the Award Winning Series on the Federated Ships Painters + Dockers Union for the Bulletin that led to a Royal Commission. He is also a Logie Winner for Outstanding Contribution To TV Journalism with a story called The Werribee Affair. In 1997, he built the largest Australian technology media company and prior to that the third largest PR company that became the foundation company for Ogilvy PR. Today he writes about technology and the impact on both business and consumers.