Western Digital Corp.’s plan to replace outgoing Chief Executive John Coyne with industry and company veteran Steve Milligan is winning over Wall Street.
Milligan currently serves as president of the Irvine-based disk drive maker, which is the second-largest publicly traded company based in Orange County, by revenue. He is set to take the helm in January following the retirement of Coyne, a 30-year company veteran who held the top post for five years.
Milligan was chief financial officer of Western Digital from 2004 to 2007. His track record for operations and leadership has drawn strong initial reviews from industry analysts. Also in his favor is his more recent performance as chief executive of Hitachi Global Storage Technologies Ltd., which Western Digital acquired in March for $4.3 billion.
Milligan also has worked in various financial and accounting roles at Round Rock, Texas-based computer maker Dell Inc. and what is now PricewaterhouseCoopers LLP in New York.
His tenure at Hitachi GST, which he joined as chief financial officer before rising to the chief executive post three years ago, brought him credit for reshaping an unprofitable, mismanaged unit of Japanese parent Hitachi Ltd. into a thriving global competitor and spinoff candidate.
“Steve came in and changed that” company, said Jayson Noland, senior analyst in the San Francisco office of Milwaukee-based Robert W. Baird & Co. “In our opinion he was cleaning the company up for an IPO.”
Milligan will have some big shoes to fill taking over for Coyne. The last year alone saw Coyne lead Western Digital’s buy of GST—its priciest acquisition to date—as he oversaw recovery efforts in the wake of devastating floods that crippled key operations in Thailand for months.
“It’s been an impressive tenure,” Noland said.
It appears that Western Digital’s management and board had eyed HGST’s executive leadership as well as the company’s position in disk drives for corporate networks—a high-margin segment of an industry largely known for commodity products.
Coyne laid the ground work for the ongoing recovery, restoring operations in Thailand a few months after record floods damaged equipment and forced the closure of the company’s two plants in Bangkok.
Milligan will take the baton armed with experience aligning operations to the typically erratic disk drive market, where demand can swing significantly from quarter to quarter. He’s expected to benefit from his knowledge of HGST’s operations.
“It’s a signal to everyone the combined entity is serious about integrating the new business,” said Rajesh Ghai, an analyst who covers data center and infrastructure markets for San Francisco-based ThinkEquity LLC.
Customers, Market Share
Western Digital will gain customers and a firm lead in disk drive market share with the addition of HGST, which will go under the name of its holding company, Viviti Technologies Ltd., and continue selling brands and products under that moniker. Another expected benefit is new strength in the solid state and external drive segments.
Hard-disk drives store and allow access to data. Western Digital’s disk drives go into computers, external storage devices, corporate networks and consumer electronics such as DVR players.
• Headquarters: Irvine
• Business: Disk drives
• Founded: 1970
• Ticker symbol: WDC (Nasdaq)
• Annual revenue: $12.48 billion
• Recent earnings: $745 million for June quarter
• Market value: About $10.4 billion
• Notable: Named President Steven Milligan as successor to Chief Executive Officer John Coyne, who plans to retire in January
Solid state drives use chips instead of spinning disks to store data.
The HGST buy had positioned Western Digital to become the leader in both hard drive unit sales and revenue as it opened up new inroads in the server and data center market. Lost production caused the company to lose its title as the top seller of disk drive units in the December quarter to Cupertino-based rival Seagate Technologies LLC.
A faster-than-expected recovery from the disruptions in Thailand, and sales added from the HGST integration, helped Western Digital recapture the crown and post record earnings in the June quarter, the end of its fiscal year.
It recorded an adjusted profit of $1.61 billion for the year, more than doubling its $726 million profit a year earlier.
Revenue topped $12.48 billion, up 31%.
An early assessment indicates Wall Street analysts seem to be in agreement on Milligan’s strengths and Western Digital’s decision to promote him to the top post.
“Favorable View”
“We have a favorable view on the management succession plan, as Mr. Milligan has a strong track record,” Mark Moskowitz, an analyst in the San Francisco office of New York-based JPMorgan Chase & Co., wrote in an investor note last week. “Within his prior tenures at both HGST and WD, he helped lead the charge on cost-optimized platforms and operating consistency.”
JPMorgan placed a “neutral” rating on Western Digital’s stock after the announcement.
“He proved himself as a CEO,” said W. Baird & Co.’s Noland. “I think this will be a well-executed transition.”
Analysts and investors got a better feel for Milligan’s management and personal style late last week during an investor day at Western Digital’s headquarters.
