Shares of disk drive maker Western Digital (WDC) are down $2.09, or 7.4%, at $26.25 after the company this morning saidflooding of facilities in Thailand has forced a suspension of all activities at those facilities, and will have “significant impact on the company’s overall operations and its ability to meet customer demand for its products in the December quarter.”
Western will hold a conference call on Wednesday to provide an update, the company said.
In a note this morning, research firm IHS/iSuppli storage analyst Fang Zhang notes that Thailand is the second-largest exporter of hard drives after China. The production in Thailand amounts to 60% of WDC’s total capacity, Zhang estimates. This is the worst flooding in 50 years, Zhang notes, and hard-drive shortages this quarter may extend in Q1 of next year, Zhang thinks.
Daniel Amir with Lazard Capital Markets, who follows controller chip maker Marvell Technology Group (MRVL) offers his thoughts this afternoon on the impact to that company, which derives half its revenue from the drive market. Revenue in the fiscal Q4 that ends in January, currently estimated at $934 million by the Street, could be reduced by $80 million because of the incident, Amir estimates. Hence, he cut his own estimate to $880 million from $960 million. His EPS estimate goes to 32 cents from 39 cents per share.
Nevertheless, Amir reiterates a Buy rating on Marvell and an $18 price target. He sees further opportunity next year as the company’s storage business rises 7% and the company increases its share of Seagate Technology (STX) as a customer.
Correction: A previous version of this post described Amir as maintaining a Buy rating on Western shares when in fact his rating refers to Marvell. My apologies for any confusion caused by the error! .
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