Hard disk manufacturer Western Digital (NYSE: WDC) has faced difficulties due to the recent flooding in Thailand, leading to a decline in revenue in the second quarter. However, company shares jumped 6% on Tuesday, as Western Digital stated that operations would return to normal by September 2012.  

Here's the lowdown of what's working and what's not for the company.

Facing hard times
Although the management seemed happy as earnings were above expectations, it does not hide the fact that revenue declined by 19% from the comparable year-ago quarter, to $2 billion. Net income fell even more, 36% to $145 million due to higher expenses incurred in restoring its manufacturing facility affected by the floods.

While Western Digital was busy fixing its manufacturing and component facilities, its rival Seagate (Nasdaq: STX) took advantage of the situation as the latter's units stayed relatively intact during the floods. Seagate not only secured higher prices on its hard drives, but also signed up long-term supply contracts with customers.

But that was not the end of Western Digital's woes. In March 2011, when it announced plans to acquire Hitachi's (NYSE: HIT) hard-drive business -- Hitachi Global Storage Technologies (HGST) -- for $4.3 billion, the Chinese regulators saw red. They cited that the acquisition could impact competition. Western Digital has a 31% market share compared to Seagate's slightly lower 29%. The HGST acquisition would have taken the market share to almost 50%.  While Western Digital still hopes the acquisition will come through, it may be waiting a while.

The way ahead
On the bright side, revenue and profits are expected to get a facelift in later half of 2012 when Western Digital claims that it would revive production capacity. Since demand continues to outstrip supply for hard drives, the company should benefit from high prices translating into higher profits.  

Western Digital is preparing itself well this time around. Learning from its previous mistakes, the company is in the process of diversifying its operations geographically so it can reduce risks from natural calamities in future.

The Foolish bottom line
At this juncture, it's important for Western Digital to maintain customer loyalty and rebuild its manufacturing facility. Also, since it's yet to acquire HGST, which would ensure dominance over Seagate, I prefer to wait and watch how things pan out for this hard-disk manufacturer.

I've kept my eyes on Western Digital, and you can do that too by adding it to your Watchlist. It's free, and lets you stay on top of the latest news and analysis for your favorite companies.