Western Digital Corp., the data-storage device company, witnessed a oscillation in shares between slight losses and gains during the extended session on Monday. This was a result of better than expected outcomes but weak forecasts. The shares wavered between a 2% loss and a 2% gain after hours, following an increase in the regular session by 2.2% to close at $34.18.
The company reported a third-quarter loss of $572 million or $1.82 a share, contrasting with the net income of $25 million or 8 cents a share during the same period the previous year. Western Digital’s adjusted loss, which excludes stock-based compensation expenses, stood at $1.37 a share. This was compared to earnings per share of $1.65 in the previous year, weighed down by the recent shifts in trade tariffs and a decline in demand for NAND chips.
Wall Street analysts had forecast losses of $1.50 a share, with revenue expectations estimated at $3.71 billion. Western Digital’s revenue fell to $3.67 billion from $4.93 billion in the previous year, just missing those expectations.
Falling prices of NAND chips, which are widely used in smartphones and data storage devices, have pressured Western Digital’s fourth-quarter forecast. This comes amidst declining demand from high-end markets for memory chips and ongoing US-China trade tensions, despite the company having restructured its business, manufacturing and distribution strategies over the past year.
For the next quarter, the company predicts adjusted losses to range from $1.30 to $1.60 a share. Analysts have estimated losses of $1.22 a share on revenue of $3.76 billion. Western Digital has also forecast its revenue to range from $3.6 to $3.8 billion, with predictions of NAND pricing pressure maintaining for at least the first half of the calendar year, despite expectations for a robust NAND flash memory market.
As a market leader in both hard disk drives (HDD) and NAND memory storage, Western Digital has been adversely affected by the decreasing sales of personal computers and laptops that use HDD technology, alongside the recent decline in NAND flash memory demand. The company has been working on restructuring in response to these global changes in the storage market; Western Digital is closing one of its three HDD assembly plants in Kuching, Malaysia, in a reaction to the lack of HDD demand caused by growing use of solid-state drives (SSD) and flash storage in computing devices. The restructuring plan will include workforce reduction in the thousands, mergers, withdrawal from unprofitable business units and portfolio optimization to improve gross margins.
Notably, the decline in NAND flash memory demand has affected the entire tech industry. Mobile phone companies and data storage firms are suffering due to the oversupply of NAND memory chips and falling demand in these areas, including Samsung, who reported a 60% drop in profits from the first quarter.
The company is optimistic about the trends in the storage and data markets and has suggested a shift to higher capacity NAND chips while focusing on operational efficiency, new technology and scaling of operations to minimize costs. For example, the internet of things (IoT) market is expected to drive NAND memory storage, as processors, sensors and other components become increasingly integrated. Further potential applications of NAND memory in other areas such as the self-driving automotive industry and the adoption of 5G towers are also expected to contribute to a growth in demand.
With regard to NAND technology, Western Digital is doubling down on biCS4/3D NAND technology for mainstream products and increasing its proficiency in the development of next-generation 112-layer NAND, based on the company’s unique memory stack design. The combination of an expansive portfolio of NAND and HDD products, a strong financial position and a long-standing customer base, alongside the investments in research and development of advanced storage technologies, has allowed Western Digital to be open to emerging market trends and innovation opportunities.
