Western Digital faces headwinds, shares drop

Shares of Western Digital Corp (NASDAQ:WDC ). experienced a significant decline, dropping as much as 6.9% during the busiest trading period since August 5. This downturn came after company executives forecasted a challenging period ahead at the Barclays (LON:BARC ) 22nd Annual Global Technology Conference. Management highlighted that the technology sector is at a mid-cycle point, with abundant inventories of PCs and smartphones leading to dampened demand.

The current quarter has brought more pricing challenges than anticipated, and these difficulties may persist into the next quarter, according to Western Digital's management. The effect of these projections was also felt by other industry players, with Seagate Technology and Micron Technology (NASDAQ:MU ) shares also falling.

Amit Daryanani, an analyst at Evercore ISI, provided insights into Western Digital's situation, referencing discussions at a competitor conference where CEO David Goeckeler and CFO Wissam Jabre offered updates on intra-quarter trends. Daryanani noted that the company has faced more severe pricing headwinds for flash storage than expected as the quarter progressed. Despite this, Western Digital's performance in the September quarter surpassed the low expectations, especially regarding margins in the NAND business, which deals with flash storage.

Looking ahead, management is optimistic about a recovery in the markets for PCs and smartphones, although this is expected to materialize closer to calendar year 2025. The near-term outlook is more positive for enterprise SSDs, which are anticipated to make up a larger portion of the company's flash bit shipments by fiscal year 2025, driven by demand for high-performance storage for tasks like large language model training.

Western Digital also believes that hard disk drives (HDDs) will continue to be the preferred storage solution for bulk data, especially in hyperscale environments, due to cost advantages. The company is also exploring product innovations and supply chain management to improve HDD margins, which are currently at satisfactory levels.

In summary, while Western Digital is facing pricing challenges, particularly in the flash market, the company is taking steps to manage these issues and remains hopeful for a market recovery in the coming years.

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Source: Investing.com