Western Digital announces CEO succession plan, signals lean second-quarter

(Reuters) – Hard-drive maker Western Digital Corp (O:) said on Wednesday its second-quarter profit would come in sharply below analysts’ expectations and that its chief executive officer would retire soon, sending its shares down 10%.

The San Jose-based company expects its second-quarter adjusted profit to come in between 45 cents and 65 cents per share, compared with analysts’ forecasts of 75 cents per share, according to IBES data from Refinitiv.

The company’s gloomy outlook overshadowed its estimate-beating first-quarter numbers, setting its shares for the worst session in a year if losses hold.

After the closing bell of trading on Wednesday, Western Digital posted a revenue of $4.04 billion and adjusted profit of 34 cents per share for first quarter ended Oct. 4, beating analysts’ expectations of $3.93 billion and 30 cents per share.

However, Western Digital forecast its second-quarter operating expenses to be between $750 million and $770 million on an adjusted basis, compared with analysts’ expectations of $741.8 million.

“When you move into the first half of the year, one of the things that we have to keep in mind is that we will see atypical seasonal decline in terms of some demand perspective. Supply is relatively linear,” Chief Executive Officer Steve Milligan said in a post earnings call with analysts.

“And so we will have to, just like we do every — largely every year in terms of the calendar cyclicality, we’ll have to manage through that.”

In a separate note, the company said Milligan would retire soon but will continue to serve as CEO until the board appoints a successor. He will also remain with the company in an advisory role until September 2020.

Milligan, who took the helm in 2013 and has been with the company for 17 years, will also remain a board director for a transition period after his successor is appointed, the company said.

The hard-drive manufacturer also forecast its second-quarter revenue in the range of $4.1 billion to $4.3 billion, compared with analysts’ expectations of $4.22 billion.

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