Three months ago, Western Digital (NYSE: WDC) was getting swept away by the floodwaters in Bangkok. The company took much more damage from that disaster than archrival Seagate Technology (Nasdaq: STX). Surely the financial damage would be equally horrific.

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 (Nasdaq: STEC) reports earnings in February and SanDisk (Nasdaq: SNDK) on Wednesday.

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