Western Digital even boosted its fourth quarter estimates to $4.2-$4.4 billion in revenue and EPS of $2.35-$2.55. The consensus estimates for the fourth quarter called for revenue of $4.05 billion and EPS of $2.30. So what is Western Digital’s stock getting pounded today? And, for that matter, why is Seagate Technology LLC (NASDAQ: STX) taking its lumps today as well?
It seems that there is some concern among analysts that the hard drive industry’s recovery from the Thai floods happened more quickly than most believed it could. That means that production will rise and prices will come under pressure as the drive makers have to find a market for all those drives. That’s the straightforward interpretation. But there’s a more complicated one as well.
Western Digital believes demand will reach 155-160 million units in the fourth quarter, a figure below a Street estimate of 170 million units. Thus sales prices will be soft because demand is lower. But Western Digital’s gross margin guidance for the fourth quarter is 30%-31%, considerably stronger than usual in the drive business.
Shares in Western Digital have fallen -15% today, to $37.49, ikn a 52-week range of $22.64-$44.44. Seagate’s shares are also down -5.2% at $29.46 in a 52-week range of $9.05-$31.39.
Paul Ausick
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