Three months ago, Western Digital
Or maybe not.
Last night's second-quarter report destroyed Wall Street's earnings and revenue targets. Sure, sales fell 19% year over year to just $2 billion, but the sudden shortage of hard drives drove up unit prices dramatically. Given the never-ending quest for lower production costs, gross profits jumped 36%.
If you back out the $199 million charge to handle flood damages, you'd actually get 52% higher net income. The repairs are surely a one-time item, but then again, so is the shortage-driven pricing windfall. Let's just call this math exercise a little thought experiment.
That said, it will take another three quarters to get the factories back to ship-shape. In that span, Seagate gets to enjoy an operational advantage by selling drives at shortage-boosted prices but also in high volume. Western Digital's products sold at nearly 50% higher prices, both year over year and compared with the previous quarter.
Elsewhere, inflated hard-drive prices present an opportunity for solid-state drives to gain market share. A huge price difference is often seen as the main thing holding back a full-on revolution here. The price difference remains huge, even under these conditions, but every change makes a difference. Look for confirmation (or rebuttal) of this theory when STEC
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Fool contributor Anders Bylund holds no position in any of the companies mentioned. The Motley Fool owns shares of Western Digital. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinion, but we all believe that considering a diverse range of insights makes us better investors. Check out Anders' holdings and bio, or follow him on Twitter and Google+. We have a disclosure policy.