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Western Digital Boosts Forecast On Higher Demand

Western Digital, the world's second-largest computer disk-drive maker, boosted its fiscal first-quarter earnings and revenue forecast on Monday due to improved demand, pricing and product mix.

Western Digital shares rose sharply following the increased guidance.

Western Digital
Western Digital

Western Digital joins larger competitor Seagate Technology as well as computer maker Dell and data network equipment provider Cisco Systems in giving an optimistic outlook for the coming weeks and months.

The forecasts suggest that U.S. technology spending is robust despite broader economic concerns that have hobbled other industries.

Like Seagate, Western Digital said growth was being fueled by consumer gadgets such as digital video recorders and music players that require increasing data storage capacities.

Western Digital said it now expects earnings of 61 cents to 65 cents a share for the quarter ending Sept. 28, excluding the impact of the acquisition of Komag. The company said on July 26 it expected first-quarter earnings before items of 43 cents to 47 cents a share.

Western Digital, based in Lake Forest, California, also increased its first-quarter revenue forecast, excluding the Komag acquisition, to between $1.6 billion to $1.65 billion and its gross profit margin on that basis to about 17.5%.

The figures compared with an earlier revenue forecast of $1.45 billion to $1.5 billion and gross margin of 15.5% to 16%, excluding the Komag purchase, which was completed on Sept. 5.

Western Digital also moved up by one quarter the period when it expects the Komag acquisition to add to earnings. Profit before certain items will benefit from the purchase in the fourth quarter of fiscal 2008, rather than the first quarter of fiscal 2009 as it forecast in June.

Analysts, on average, were expecting Western Digital to report first-quarter earnings before items of 48 cents on revenue of $1.5 billion, according to Reuters Estimates.

The company increased its forecast after Seagate, the world's largest disk-drive maker, significantly raised its fiscal first-quarter earnings and revenue projections last month, also citing stronger-than-expected demand, higher product prices and a better product mix.

Including Komag, Western Digital expects to report first-quarter revenue of $1.63 billion to $1.68 billion and net income of 34 cents to 38 cents a share. It also expects to book a charge of about $50 million in the first quarter for acquired in-process research and development.

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