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Western Digital Raises Sales Forecast as It Recovers From Flood

Dec. 2 (Bloomberg) -- Western Digital Corp., a maker of disk drives and networking products, raised its quarterly revenue forecast after rebounding from a flood in Thailand that devastated factories and constrained supplies.

Revenue will be at least $1.8 billion in the December quarter, the company said in a statement. In October, after early assessments of the damage, Western Digital had predicted sales of $1.05 billion to $1.25 billion. The company resumed hard-drive production in Thailand this week, ahead of schedule.

“The passion, perseverance, ingenuity and execution exhibited by the WD team has been extraordinary and enabled us to make substantial progress in partially restoring our operations in Thailand, well in advance of our earliest expectations when the floods hit,” Chief Executive Officer John Coyne said in the statement. “Much work remains to be done, but we couldn’t be more pleased.”

Western Digital joins rival Seagate Technology Plc in signaling this week that the industry is recovering from the disaster. The floodwaters engulfed much of the industrial heartland north of Bangkok, sidelining production of disk drives and components. Irvine, California-based Western Digital was hit worse than Seagate, whose factories weren’t directly affected.

Western Digital expects its gross margin to be higher than 23 percent this quarter, with operating expenses of about $265 million -- not counting one-time expenses related to the floods, acquisitions and litigation.

Flood Expenses

The floods will cost it $225 million to $275 million in the period, beyond whatever it recovers from insurance.

Western Digital rose 0.6 percent to $29.25 at the close yesterday in New York. The shares have declined 14 percent this year before today.

The company, which counts Hewlett-Packard Co., Dell Inc. and Acer Inc. among its customers, relies on its plants in Thailand for 60 percent of production, according to Wannarat Charnnukul, Thailand’s industry minister.

Western Digital expects to start manufacturing parts known as head sliders in the March quarter, both in Thailand and Malaysia. The company also said the acquisition of Hitachi Global Storage Technologies will be completed during that period, after it satisfies requirements imposed by the European Commission.

Seagate, based in Cupertino, California, saw its shares climb this week after forecasting higher sales than analysts had estimated. The company said it withstood flooding in Thailand better than much of the industry.

To contact the reporters on this story: Nick Turner in San Francisco at nturner7@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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