Western Digital Corp, the giant Californian hard disk drive maker, is continuing to struggle with the industry-wide over stocking problems which have lead to cut throat pricing and aggressive sales tactics. After running into heavy losses in the quarter to December, Western Digital has turned in further losses of $45m in the three months to March, down from profits a year ago of $83m with revenues falling 24% to $831m. And the trouble isn’t over yet. All across the industry, big players like Seagate Technology Inc and Quantum Corp have seen profit margins slashed by competitive pricing strategies, aimed exclusively at reducing inventory levels. The price take down was much more aggressive than we planned for, said Chuck Haggerty, Western Digital’s president and CEO. Haggerty said he was encouraged by demand within the PC industry, his company’s biggest market, but said that inventory levels were still way too high across the board for any chance of a quick turnaround. Dealing with aggressive pricing and excess channel inventory will be the biggest challenge facing the industry in the next few quarters, he said, and Western Digital can only recover if the industry recovers. The company has faced criticism in the past for its slow take up of magneto-resistive head technology, but Haggerty claims to be on target for 80% MR-based shipments for the June quarter, moving to over 90% by September. Haggerty admitted to being disappointed by the figures, but said his company had made good progress in managing its assets. Inventory levels have indeed fallen by a quarter since the end of 1997 to $217m, but stocks of hardware are still vastly higher than at this time last year, just before the troubles began. Western Digital’s share price is still languishing close to its 52 week low, along with that of other players in this sector. A turnaround seems likely, but as to exactly when it will come is anybody’s guess.
