After Crossing $20 Billion In FY ’18, Why Did Western Digital’s Revenue Drop 20% In FY ’19?

-6.84%
Downside
68.24
Market
63.57
Trefis
WDC: Western Digital logo
WDC
Western Digital

Western Digital’s (NASDAQ: WDC) total revenue has dropped from $20.65 billion in 2018 to $16.57 billion in 2019, on the back of a supply glut in the memory market. Also, a drop in electronics demand has affected client devices revenue, but we expect electronics demand to get back on track going into 2021. A shift toward streaming services and cloud storage has dragged down external storage demand, and we expect client solutions revenue to remain under pressure due to this.
However, a rise in enterprise demand can help support Western Digital’s total revenue, driving it up to $17.66 billion by 2021.

 

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WDC has 3 Operating Segments-

To know more about Western Digital’s operating segments, and what products they offer, you can view our interactive dashboard, Western Digital Revenue: How Does WDC Make Money?

A] Client Devices Revenue to grow by about $220 million by 2021, and make up about 47% of total revenue

  • This segment includes revenue from the sale of internal storage units for PCs, laptops, and other entertainment devices.
  • A drop in demand for PCs and laptops has led to a YoY drop of almost 20% for this segment, with revenue falling to $8.1 billion in 2019.
  • We expect the pressure to continue in 2020, but things should get better by 2021, driving client devices revenue to $8.32 billion.

B] Data Center Solutions Revenue to grow by around $770 million over the next 2 years, with its share of total revenue to be around 33%

  • This segment caters to the memory requirements of enterprises, and also cloud storage memory solutions.
  • Revenue from this segment has dropped almost 17% YoY in 2019, owing to the ongoing memory supply glut that has affected enterprise HDD demand.
  • However, we expect enterprise NAND demand to rise, and since cloud storage services are already in high demand, we expect revenue from this segment to grow to about $5.81 billion by 2021.

C] Client Solutions Revenue to grow by $90 million by 2021, making up the remaining 20% of total revenue

  • This segment includes revenue from the sale of external memory devices, sold under the WDC and SanDisk banners.
  • Revenue from this segment dropped a whopping 23% YoY, on the back of slowing retail demand.
  • Retail demand has been on a steady decline, as more and more people switch to streaming and other cloud storage services.
  • We expect this trend to continue, and see no significant growth in revenue from this segment by 2021.

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