Western Digital Posts Loss of $20.4 Million : Earnings: The second-quarter net reflects the recession and the computer industry slump. A fourth-quarter profit is a possibility, the chairman says.
Hobbled by the dual effects of the recession and a computer industry slump, Western Digital Corp. posted a second-quarter net loss of $20.4 million.
Western Digital’s loss for the quarter ended Dec. 28 would have been larger except for a one-time gain of $15.8 million from the sale of assets. The Irvine firm reported a loss from operations of $30.5 million.
Still, the hefty second-quarter loss was an improvement over the huge net loss of $98.5 million recorded in the corresponding quarter of fiscal 1990.
“There is no way that our continuing losses can be called acceptable,” Western Digital Chairman Roger W. Johnson said in a statement Tuesday. But the chief executive of Orange County’s largest computer products manufacturer also saw a glimmer of hope in the results.
Even with a flat economy, Johnson said he believes the company might post a profit for its fourth quarter ending June 30. Citing “substantial improvement” in the company’s disk-drive business, he asserted that the company’s “recovery plan is right on track.”
Western Digital stock closed Tuesday at $3.75 a share, down 25 cents in New York Stock Exchange trading.
“They’re not out of the woods yet,” said Todd Bakar, an analyst at Hambrecht & Quist, a San Francisco investment bank.
“They have only $34.9 million in cash and a significant amount of debt. While the overall disk-drive industry is in a recovery surge, they can make progress. But it’s another story if there is a downturn.”
James Stone, an analyst at the New York investment firm Ladenburg, Thalmann & Co., said Western Digital is “still at risk,” but noted that the company’s financial recovery is “the strongest in the disk-drive industry so far.”
Western Digital’s loss in the quarter, equal to 70 cents a share, contrasted with a loss of $98.5 million, or $3.37 a share, in the 1990 quarter.
Revenue for the quarter dropped 6% to $216.3 million from $229.9 million a year earlier.
The second-quarter loss, which was expected, included a gain of $15.8 million from the sale of the company’s business that made circuit boards used in computer networks.
The prior year’s results included a $66-million charge against earnings to cover the costs of plant closings, layoffs and a sweeping restructuring program.
Faced with record losses during the computer industry slump, Western Digital has sold assets and laid off more than 1,550 employees in the past 18 months, including 50 layoffs at its Irvine headquarters last week.
The red ink pushed the company to the financial edge, but it got some relief in November after reaching an agreement with its lenders for a more lenient repayment schedule on $205.8 million in bank debt and accounts receivable borrowings.
Johnson has said the company is seeking a partner that would help put the company on a sounder financial footing for the long term.
He said the company’s recovery will probably be slow because of the weak economy and slumping computer sales. But Western Digital plans to introduce new generations of products during the year that could speed its recovery despite the recession, he said.
