Year in review: Western Digital started 2006 with talk of price cuts by rival Seagate Technology of Scotts Valley to gain back market share grabbed by Western Digital.
Then Seagate bought another rival, Maxtor Corp. of Milpitas, making Western Digital a clear, albeit distant, No. 2 in disk drives to Seagate.
The deal proved good for Western Digital, which picked up customers worried about being too reliant on a larger Seagate.
But the consolidation also sparked more wondering about Western Digital, and whether an Asian electronics maker looking to boost its drive business could acquire it. South Korea’s Samsung Electronics Co. was a speculated suitor a year ago.
In the fall, Western Digital started looking at the dating of stock options and later came up with a restatement bill of about $20 million, mild compared to other technology companies.
In October, reports out of Thailand said Western Digital is looking to invest $940 million in the country in the next eight years, including for a new drive plant.
Western Digital already makes drives and parts at a pair of Thai plants.
The company also has a plant in neighboring Malaysia.
Near year’s end, Western Digital got word of its second new boss in as many years when former chief executive Arif Shakeel said he was stepping down to make way for John Coyne, the company’s president and chief operating officer. Coyne took over earlier this year.
The speed of the move was a little surprising since Shakeel only had taken over from longtime predecessor Matt Massengill a year earlier.
What’s ahead: Expect more of the same this year: market share battles, price cuts and speculation.
One analyst recently gave a first-quarter nod to Seagate in its running battle with Western Digital.
Both are expected to benefit from a growing market this year. Western Digital is pushing into bigger drives.
The company and others face a threat from drives made from flash memory rather than disks, though price remains on the side of conventional disk drive makers.
Takeover speculation continues.
Hitachi Ltd. recently detailed plans to close a parts factory in Mexico and cut 4,500 jobs as it struggles to turn a profit on its drives. The company could be at a turning point: get out of the business or buy another player for economies of scale. That brought eyes to Western Digital again.
Earlier this year, Western Digital came out with a line of storage devices dubbed My Book World Edition II, targeting everyday computer users.
The move is part of an ongoing push into consumer drives. In the December quarter, 17% of the company’s $1.4 billion in sales came My Book World and other products sold in stores. That’s up from 5% a year earlier.
Wall Street’s take: Analysts are nervous about more falling prices,and profits. Shares of Western Digital have slumped this year, falling nearly 20%. They’re off about 10% in the past 12 months. Stockpiles of drives have increased. A challenge by flash memory also is a concern. Western Digital has said gross margins likely will remain flat and projected profits are off from the Wall Street consensus. One analyst recently downgraded Western Digital and Seagate on weak near-term demand and stepped up competition in coming months.
,Dan Anderson
WHO’S IN CHARGE
JOHN COYNE
Chief executive, president, Western Digital
Joined company: 1983
Education: mechanical engineering degree from University College Dublin
Career: Before taking over as president a year ago and as chief executive in January, Coyne started Western Digital’s operations in his native Ireland, then shepherded consolidation of disk drive manufacturing in Asia for several years.
Notable: Native of Dublin. Uses the title datuk, an honorary Malaysian term he got while working for Western Digital’s operations in Southeast Asia.
Headquarters: 20511 Lake Forest Drive, Lake Forest
Employees: 27,000; 950 in OC
Business: disk drive maker
Market value, as of April 2: $3.7 billion
2006 revenue: $4.9 billion, up 26%
2006 net income: $452.5 million, up 59%
