Western Digital Signals Revenue Rise in Second Half on Cloud Computing Demand

Western Digital Corp said on Thursday it expected revenue to improve in the second half and would cut costs, after posting lower-than-expected quarterly results due to waning demand for its data storage devices used in smartphones.

The company's shares reversed course following the comments on a post-earnings call to trade 8 percent higher in extended trading. They fell as much as 5 percent earlier.

Chief Executive Officer Stephen Milligan said on the call that the company expected revenues to improve in the latter part of 2019 as cloud computing customers return to more normal buying patterns and demand from its other businesses improve.

"WDC's expectation for the second half have raised investor hopes," said Kevin Cassidy, an analyst with Stifel Nicolaus and Co.

Western Digital is targeting $800 million (roughly Rs. 5,700 crores) in annualised reductions in non-GAAP cost and expenses, Milligan said on the post-earnings call, adding that the company is accelerating the closure of a plant.

"NAND flash price is close to the bottom in 1Q19 or 1H19. I expect cost reductions to outpace price decline in 2H19," said Summit Insight Group analyst Kinngai Chan.

Investors have been keenly watching Western Digital's results after South Korea's SK Hynix, the world's second-biggest memory chipmaker, flagged a tough first half due to US-China trade frictions and China's slowing economy.

Adding to the gloomy outlook, Intel Corp on Thursday forecast current-quarter revenue and profit below analysts' estimates and missed fourth-quarter sales expectations due to a slowing China.

Western Digital said it expects third-quarter revenue between $3.60 billion and $3.80 billion and earnings of 40 cents to 60 cents per share. Analysts on average were expecting $3.88 billion and earnings of 97 cents per share, according to IBES data from Refinitiv.

For the second quarter, the company reported an adjusted earnings of $1.45 per share. Revenue fell 21 percent to $4.23 billion.

Analysts on average had expected a profit of $1.51 per share and revenue of $4.26 billion, according to IBES data from Refinitiv.

© Thomson Reuters 2019