Western Digital's first-quarter forecast disappoints as weak cloud demand weighs
Technology
Cloud companies will take another "couple of quarters" to clear out excess inventory
(Reuters) - Memory chipmaker Western Digital Corp (WDC.O) forecast a bigger-than-expected loss in the first quarter and revenue below Wall Street targets on Monday as weak demand, mainly for its cloud business, forces it to cut production.
The company said it expects its current-quarter loss to include a charge of about $200 million to $220 million for underutilization of its factories, sending its shares down about 2% in extended trading.
Cloud companies will take another "couple of quarters" to clear out excess inventory, finance chief Wissam Jabre said in June.
Cloud revenue fell 53%, to $994 million, in the quarter ended June 30.
Large cloud service providers have been in a "very severe inventory digestion phase and kind of took a pause on buying anything," CEO David Goeckeler said.
Western Digital forecast its adjusted loss per share to be in the range of $2.10 to $1.80, compared to an estimated loss of $1.40 per share. It also forecast revenue for the same period below estimates.
Rival Seagate Technology (STX.O) also forecast downbeat revenue for its first quarter last week, on weakness in major market China and lower tech spending.
Cutting production - something memory chipmakers did in the first half this year as demand slumped - is a sign that companies are trying to restore order to a supply-glut-ridden industry.
While this has caused steep writedowns in the value of unsold stockpiles and hurt profits, it has also helped stabilize the market.
Western Digital said it will "significantly" cut its capital expenditure in fiscal 2024.
"Our two largest end-markets, client and consumer, are returning to growth, inventories are normalizing, content per unit is increasing and price declines have been moderating," Goeckeler said.
His statement mirrored those by memory-chip industry giants like South Korea's Samsung Electronics (005930.KS) and SK Hynix (000660.KS) that the worst was behind the industry.
