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Western Digital Jumps on Outlook

Shares of Lake Forest’s Western Digital Corp., the world’s top maker of disk drives, jumped on Friday on a better than expected outlook for the current quarter.

Investors sent shares up 9% in afternoon New York trading on a recent market value of $10 billion.

In a call with analysts after the close of trading on Thursday, Western Digital said it’s set to see June quarter sales of $2.48 billion to 2.58 billion, beating analysts’ expectation of $2.45 billion in sales.

The company said it’s looking for profits of $320 million to $343 million, ahead of analysts’ expected $311 million in profits.

“Western Digital posted yet another record quarter last night, showing a flexible business model that can adjust to changes in demand and mix requirements extremely quickly,” Rich Kugele, an analyst at Needham & Co. in Boston, said in a research note.

Kugele boosted his price target on the stock to $68 per share, up from a previous estimate of $59 per share. He has a “strong buy” rating on the stock, which was trading at around $44 per share on Friday.

The better than expected outlook comes on the heels of Western Digital’s results for the three months through March, which also surpassed expectations.

For the three months through April 3, Western Digital reported a profit of $400 million, up from $50 million a year earlier when the company was in the throes of restructuring.

Analysts on average were expecting a profit of $311 million for the recently ended quarter.

Sales for the quarter were up 62% to $2.6 billion and topped the $2.5 billion expected by Wall Street.

The company makes disk drives for servers, desktop and portable computers as well as consumer electronics. It also makes stand-alone drives used for backup data storage.

The company shipped 51.1 million drives in the recently ended quarter, up 62% from a year earlier.

In quarterly shipments, Western Digital edged out key rival Scotts Valley-based Seagate Technology LLC, which shipped 50.3 million drives in the recently ended quarter.

For now, that makes Western Digital the largest drive maker in what’s been a horse race with Seagate for the past year.

Seagate reportedly strong quarterly results earlier this week.

Part of the gains by both companies stem from an improved economy and comparisons to results from a year ago that were depressed by recession and restructuring.

Starting in late 2008, Western Digital cut jobs, pared executive pay, slowed production and slashed costs amid waning demand.

By mid-2009, the moves helped set the stage for stable prices and lean stockpiles in the volatile disk drive business.

The stellar results “support to the growing body of evidence that in the midst of significant economic uncertainty over the last 12 months, the creation, transmission, consumption and storage of digital content has become much more pervasive in our lives than anyone had previously appreciated,” Western Digital Chief Executive John Coyne said in a call with analysts.

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