Western Digital reports big jump in 2nd-quarter profit as sales grow and costs decline

Western Digital posts higher 2Q profit, sales

LAKE FOREST, Calif. — Hard disk drive maker Western Digital Corp. posted a sharp increase in its fiscal second-quarter profit Thursday as sales grew amid a recovery in the technology sector and the company trimmed costs.

The company said it increased its output amid supply constraints for the third quarter in a row. Demand was strongest in the consumer segment, “with some emerging strength in the commercial sector,” Western Digital said.

“A moderate pricing environment, combined with our passionate focus on cost and efficiency, enabled gross margins of 26.2 percent — well above the high end of our model range,” said John Coyne, president and CEO, in a statement.

For the three months ended Jan. 1, Western Digital earned $429 million, or $1.85 per share, up from a profit of $14 million, or 6 cents per share, in the same period a year earlier. Year-ago results were weighed down by $113 million in restructuring charges.

Revenue rose 44 percent to $2.62 billion from $1.82 billion. Meanwhile, operating expenses fell 22 percent to $214 million.

The results easily beat estimates of analysts polled by Thomson Reuters who expected a profit of $1.36 per share on sales of $2.35 billion.

Shares closed up $1.03, or 2.3 percent, at $45.29 before the results were released. They slipped 38 cents after-hours.

Also Thursday, shares of rival hard disk drive maker Seagate Technology surged to their highest level since June 2008 after the company posted better-than-expected results for its fiscal second quarter amid a rebound in the PC market. Seagate’s results also came in well above Wall Street’s expectations, and the company’s outlook for 2010 seemed to reassure investors about the economic recovery.

Wedbush Morgan analyst Kaushik Roy said 2010 will likely be the “year of the hard disk drives” as demand improves and pricing is expected to be “healthy at least for the next couple of quarters.”