Lake Forest-based disk drive maker Western Digital Corp. said demand for hard drives will continue to be weak during the current quarter, according to a recent government filing.
Western Digital anticipated the slowdown, citing seasonal weakness, a glut in supply and pressure to lower prices.
Shares were off nearly 15% the past three months.
“Seasonally, the June quarter is usually one of the hardest,” said Andrew Golomb, an analyst with Morningstar Inc. in Chicago. “It’s being exacerbated right now by excess inventories out there in the supply chain. Western Digital and (competitor) Seagate Technology are seeing a lot of pricing pressure from the desktop PCs.”
Average selling prices of drives this year were about $2 lower than a year ago, according to a company statement.
Industry watchers say the rising popularity of flash storage could steal Western Digital’s thunder.
“We’re concerned product development is not keeping pace with industry trends, which could mean missing out on higher-margin sales opportunities,” Golomb said in a research note.
There might be better news on the way for Western Digital.
PC sales usually pick up at the end of summer, when retailers push back-to-school deals.
And the company is working to diversify from the ultra-competitive market for desktop computers and into the higher-margin consumer electronics, cell phone and dashboard devices.
During the March quarter, about 47% of the company’s $1.4 billion in sales were from drives that go into what the company calls “non-desktop” computers, including notebooks and corporate networks. That’s up from 29% a year earlier.
Western Digital recently rolled out a new line of 1-inch and 2.5-inch disk drives used in laptop PCs that are likely to help it grow its non-desktop sales.
It could take a few quarters for Western Digital to see results, Golomb said.
The company has big plans to ramp up production by investing about $400 million this year to expand and update manufacturing sites.
“It’s a wise thing to do,” Golomb said. “The more they can do in-house, as opposed to outsourcing, the better off they can be,” he said.
Still, Golomb said he’s holding his position on beleaguered hard drive makers.
“Western Digital and Seagate have been highfliers for a while,” he said. “I’ve been sitting on them.”
Mindspeed Hire
Mindspeed Technologies Inc., the Newport Beach maker of chips for wireless networking, said it hired Ron Cates as senior vice president and general manager.
Cates, 50, will head up the company’s wide area networks communications unit and report directly to Chief Executive Raouf Halim.
He’s set to oversee product strategy, engineering, marketing and customer service for Mindspeed’s traffic management products.
Cates was part of the team when Mindspeed spun off from Conexant Systems Inc. in 2003.
He headed the broadband access unit at Conexant until 2001.
Before that, he worked at San Diego-based Brooktree Corp., which Conexant bought before it was spun off in 1999 from what’s now Rockwell Automation Inc.
Cates most recently served as vice president of marketing for Metalink Broadband Inc., a unit of Israel’s Metalink Ltd. Previously, he held a similar position at San Diego’s Peregrine Semiconductor Corp.
Cates replaces Rick Burns, who held the position from one of Mindspeed’s design centers in Boston.
He’s set to oversee about 20 local workers in the wide area networks group, which makes chips for traditional “wired” telecommunications devices.
The group made up about 43% of Mindspeed’s $30 million in sales during the most recent quarter, the company said.
“It’s a big piece of our business but it’s not growing real rapidly because it’s older technology,” said spokesman Tim Stites. “But it’s going to be around for a long time.”
Smith Micro Diversifies
Aliso Viejo-based Smith Micro Software Inc. said it inked a licensing deal with France’s Wavecom SA, a maker of wireless processor and software packages.
Wavecom is set to include Smith Micro’s mobile device management software in its suite of services, the company said. Terms of the deal weren’t disclosed.
Wavecom makes bundled wireless kits, including hardware and software, for the automotive, industrial and mobile markets.
The kits connect toll booths, taxis, rental cars, parking meters and cash machines with a “home office.”
Smith Micro’s software will allow kit users to upgrade Wavecom products on their own.
The deal gives Smith Micro another boost amid a big comeback.
Revenue has doubled and shares have more than tripled in the past two years largely on sales from New York’s Verizon Wireless, part of Verizon Communications Inc.
Smith Micro provides the software for Verizon’s V-Cast service, which lets users download and listen to music on their mobile phones.
Company watchers worried that Smith Micro would become too dependent on Verizon for growth,sales from the kingpin service provider were about 75% of revenue last year.
The Wavecom deal is likely to help Smith Micro gain some diversity among its customers.
