Shares of Western Digital Corp., the Lake Forest-based maker of disk drives, slumped Wednesday on signs that its top rival, Scotts Valley-based Seagate Technology LLC, is struggling.
Western Digital’s stock closed down more than 5% on a recent market value of about $7 billion.
Seagate’s stock was hammered by investors a day after the company posted a steep drop in profits and gave an outlook for the current quarter that came in below analysts’ expectations.
For the June quarter, Seagate reported $160 million in profits, down 70% from $541 million a year earlier.
Sales came in at $3 billion, up 6% from the same period a year ago and in line with analysts’ expectations.
The company cited “product execution” issues for certain lines of disk drives and slimmer profits due to falling prices.
It also took some big restructuring charges related to the closing of a plant in Milpitas.
Seagate’s shares were off 16% at the close of New York trading Wednesday and had a recent market value of about $7 billion.
For the current quarter, Seagate is looking for profits of $107 million to $126 million on sales of $3.15 billion to $3.3 billion.
Needham & Co. analyst Richard Kugele lowered his estimates for Seagate on Wednesday.
“Seagate continues to frustrate and confound Wall Street (and apparently itself),” he said in a research note to clients. “On paper, the company should be executing better.”
Kugele is looking for September quarter sales of $3.15 billion, down from his previous estimate of $3.2 billion.
He’s looking for profits of $107 million, down from an earlier estimate of $257 million.
In contrast to Seagate, Western Digital’s stock has been holding up pretty well.
Before today, shares were up roughly 10% for the year.
The two rivals, which typically trade in tandem, had been on diverging paths with Western Digital on a bullish run.
Western Digital was benefiting from stable supplies and prices and market share gains in drives sold at stores and used in laptops.
Its runup was helped along by a few analyst upgrades in the last month or so.
For the June quarter, Wall Street is expecting Western Digital to post $179 million in profits on sales of $1.9 billion.
It’s set to report June quarter results on July 24.
