Western Digital’s first-quarter forecast disappoints as weak cloud demand weighs

MEMORY chipmaker Western Digital forecast a bigger-than-expected loss in the first quarter and revenue below Wall Street targets on Monday (Jul 31) as weak demand, mainly for its cloud business, forces it to cut production.

The company said it expects its current-quarter loss to include a charge of about US$200 million to US$220 million for underutilisation of its factories, sending its shares down about 2 per cent in extended trading.

Cloud companies will take another “couple of quarters” to clear out excess inventory, finance chief Wissam Jabre said in June.

Cloud revenue fell 53 per cent, to US$994 million, in the quarter ended Jun 30.

Large cloud service providers have been in a “very severe inventory digestion phase and kind of took a pause on buying anything”, CEO David Goeckeler said.

Western Digital forecast its adjusted loss per share to be in the range of US$2.10 to US$1.80, compared to an estimated loss of US$1.40 per share. It also forecast revenue for the same period below estimates.

Rival Seagate Technology also forecast downbeat revenue for its first quarter last week, on weakness in major market China and lower tech spending.

Cutting production – something memory chipmakers did in the first half this year as demand slumped – is a sign that companies are trying to restore order to a supply-glut-ridden industry.

While this has caused steep writedowns in the value of unsold stockpiles and hurt profits, it has also helped stabilise the market.

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Western Digital said it will “significantly” cut its capital expenditure in fiscal 2024.

“Our two largest end-markets, client and consumer, are returning to growth, inventories are normalising, content per unit is increasing and price declines have been moderating,” Goeckeler said.

His statement mirrored those by memory-chip industry giants such as South Korea’s Samsung Electronics and SK Hynix that the worst was behind the industry. REUTERS