Western Digital's (NYSE: WDC) fiscal-third-quarter earnings report was marked by decreases in both revenue and profit. Revenue of $2.25 billion was down from $2.45 billion in the previous quarter and $2.64 billion a year ago. Net income of $146 million, or $0.62 per share, marked a decrease from $225 million a quarter ago and $400 million last year. Although the numbers appear fairly poor, there is a silver lining in that the majority of the poor performance is the result of extra costs incurred in the acquisition of Hitachi's (NYSE: HIT) hard-drive business.

Intel's (Nasdaq: INTC) Sandy Bridge recall had an impact on Western Digital's numbers as well. As John Coyne, president and CEO, stated in the earnings call, "The March quarter in the hard-drive industry was impacted by two significant developments: the delayed supply of industry CPUs to PC makers and the tragic events in Japan." He added: "While demand for hard drives in the quarter got off to a slow start, it later picked up as availability of CPUs improved and as fears took hold of component shortages related to the events in Japan. In relation to our planned acquisition of Hitachi GST, we are in the approval process with all required regulatory agencies, our integration planning is well under way, and we have successfully syndicated the loan financing associated with the transaction."

Western Digital shipped 49.8 million units, a decrease of 4.6% from the previous quarter and 2.5% from a year ago. Although those numbers may look unfavorable, keep in mind that the entire market shrank by 4.8% from the previous quarter and 2.3% from a year ago, because of a lack of demand in January and part of February. So Western Digital's downturn was in line with the market's, yet the company was able to maintain its market share, probably because of a quick ramp-up from original design manufacturers in the production of Sandy Bridge-based systems after the recall had passed. This rapid response from the ODMs resulted in a higher demand for Western Digital's hard drives, more so than the company had expected.

Following the situation in Japan and the Sandy Bridge issues, Western Digital has a sunnier, if conservative, outlook for Q4. The company expects approximately the same performance as in previous years but also sees a likelihood that ODMs continue to ramp up as they struggle to fill consumer demand. That would probably push up hard-drive prices and improve Western Digital's bottom line. The stock saw a 1.45% jump after the earnings report, and we expect it to keep moving upward as companies such as JPMorgan Chase (NYSE: JPM) raise their price targets.

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