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Western Digital Stock Falls 14 Percent Following Earnings

“We expect physical store closures will create a headwind in our fiscal fourth quarter,” said new Western Digital CEO David Goeckeler during the company’s third fiscal quarter earnings call.

Western Digital stock fell more than 14 percent Friday morning after the company said it expects hurdles ahead due to physical store closures and weaker hard drive sales caused by the coronavirus pandemic.

“While many retailers shifted to curbside pickup and began pushing sales through their online channels, we expect physical store closures will create a headwind in our fiscal fourth quarter,” said David Goeckeler, Western Digital’s new CEO, during the company’s third fiscal quarter earning call with media and analysts Thursday night.

“With stores not being open, it makes [business] a lot tougher,” Goeckeler said. “As we talked about toward the end of the third quarter, we obviously saw a deterioration as stores were closed, and we also saw the mix shift to lower-margin products as well. … Desktop hard drive revenue was down due to normal seasonality and a shift toward mobile notebook solutions. In addition, smart video hard drive demand was softer than expected as a result of COVID-19.”

[Related: Oracle Bests Cloud Rivals To Win Blockbuster Zoom Deal]

The San Jose, Calif.-based data storage company’s stock fell to $39.58 per share Friday morning, down more than 14 percent from $46.08 Thursday.

For its third quarter, Western Digital reported earnings of 85 cents per share, which was lower than analyst expectations of 93 cents per share.

Western Digital generated a total of $4.2 billion in revenue during its third quarter, up 14 percent year over year. The company’s Data Center Devices and Solutions business jumped 22 percent year over year to $1.83 billion, while Client Devices sales increased 13 percent to more than $1.5 billion.

Robert Eulau, executive vice president and chief financial officer, said both hard drive revenue and hard drive gross margins were impacted by COVID-19.

“Notebook and PC-related hard drive revenue declined and now represents under 20 percent of our total [hard disk drive] revenue. Smart video was a bit weaker than expected, primarily due to COVID-19,” said Eulau during the earnings call.

For its current fourth-quarter guidance, Western Digital is projecting revenue between $4.25 billion and $4.45 billion with non-GAAP earnings between $1 and $1.40 a share.

The quarter marked the first time Goeckeler, who was previously executive vice president and general manager of Cisco’s networking and security business, led Western Digital’s quarterly earnings call.

“I joined Western Digital a little over a month ago because I have strong conviction in the digital transformation that is reshaping every industry, every company and how all of us live our daily lives,” said Goeckeler. ““While I couldn’t have anticipated the unprecedented series of events that have transpired, I’m very proud of how the company has responded to an extremely dynamic environment with dedicated focus both on our employees’ safety as well as delivering our market leading technology to our customers. As the only company in the world to provide a broad array of NAND flash, solid state drives and hard disk drives solutions, I’m confident our innovation will drive significant new value for customers around the world.”

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