Disk drive maker Western Digital Corp. is set to receive some financial assistance from Thailand as it copes with production shortages in the wake of the worst flooding to hit the region in decades.
The Thai government said last week it would waive import fees on some products to help companies operating in the country affected by widespread flooding and related damage. The fee waiver and later news that Western Digital had resumed production at one of its plants in Thailand boosted the company’s shares by more than 20% last week, to a market value of about $7.5 billion.
The measure, announced by Thailand Deputy Prime Minister and Commerce Minister Kittiratt Na-Ranong, includes waving import duties for some machinery, spare parts and finished goods through next June. That’s some consolation for Western Digi-tal, which had closed all its production plants in Thailand and will likely lose its title as the world’s largest disk drive maker this quarter to Cupertino-based rival Seagate Technolo-gies LLC.
Seagate’s factories in the country haven’t been affected, unlike other companies with operations in or near heavily flooded areas north of the Thai capital of Bangkok. That has led Seagate to up the price of hard drives 20% to customers that sign one- to three-year contracts, Chief Executive Steve Luczo said last month.
Retail Prices
Retail prices have risen more drastically. Online comparison site idealo.co.uk, part of Berlin-based Idealo Internet GmbH, estimates the price of disk drives on a retail basis shot up 150% from Oct. 1 to Nov. 14.
Thailand is the world’s second-largest producer of disk drives, behind China, and also a major supplier of hard drive components. Western Digital ships about 60% of its disk drives from Thailand, where it employs some 37,000 people.
The company’s flooded buildings there house assembly and testing operations along with a “substantial majority” of the company’s slider fabrication, which accounts for a key component in disk drives, Chief Operating Officer Tim Leyden said in the recent conference call.
Western Digital is working to shift some of those operations to its facility in Malaysia.
The company’s recent guidance on the current quarter shed light on a grim situation in Thailand, which is struggling with flooding caused by a heavier-than-usual monsoon
season punctuated by typhoons. Western Digital expects to ship between 22 million and 26 million hard drives in the December quarter, down nearly 59% from the prior period.
The company has held the market share lead over Seagate for nearly two years. It could slip to No. 3 or No. 4 worldwide, according to El Segundo-based market tracker iSuppli Corp., a unit of IHS Inc.
Seagate is projected to ship 43 million disk drives in the current quarter—nearly doubling Western Digital estimates.
• Headquarters: Irvine
• Business: disk drives
• Founded: 1970
• Ticker symbol: WDC (NYSE)
• Market value: about $7.5 billion
• Notable: shares got boost last week after Thai government waived import fees and company re-opened one production plant in hard-hit country
Shares
Seagate saw its shares rise last week after executives provided a revenue target of $2.8 billion in the December quarter, higher than Wall Street estimates.
Western Digital projects revenue in the December quarter of about $1.8 billion, compared with $2.47 billion a year earlier.
In the last two months Seagate shares have jumped more than 64% to a market value of nearly $7 billion.
Western Digital’s disk drives go into computers, external storage devices, corporate networks and consumer electronics.
The company has been the global leader by number of drives shipped in recent years but second in revenue to Seagate, which leads on sales of the more-expensive corporate drives.
Western Digital is set to acquire San Jose-based Hitachi Global Storage Technologies Ltd. in a $4.3 billion deal that was set to make it the undisputed leader in drives—although recent troubles have cast doubt on that likelihood.
The move prompted Seagate in April to offer $1.4 billion for Samsung Electronics Co.’s disk drive business.
The rivalry took a different turn late last month when Western Digital was slapped with a $525 million ruling by arbitrators for “misappropriation of confidential information and trade secrets.”
The claims were pressed by Seagate and involve a former employee, according to a filing with the Securities and Exchange Commission.
Western Digital Corp. plans to challenge the decision.
