WD resumes hard drive production after Thailand floods

Western Digital, one of the world’s biggest storage companies, said today that it has resumed hard drive production in Thailand as flood waters recede in that country. But shortages will likely still happen in the current and future quarters.

The Irvine, Calif.-based company said in a statement today that the restoration of the company’s factories in Thailand had progressed  better than expected and that production has resumed this week. One-time charges will be about $225 million to $275 million for the December quarter, and the company is going to make a business insurance claim of $50 million and file an unspecified claim for business interruption as well. But now it believes its upcoming quarterly results will be at the high-end of its previous estimates, which were made in the midst of the flooding.

Specifically, the company said:

It restarted production of hard drives this week in one of its buildings in Bang Pa-in (BPI), Thailand, a week ahead of schedule. This factory had been submerged in six feet of water since Oct. 15. The area was pumped dry on Nov. 17, main power was restored on Nov. 26, and production restarted Nov. 30.

The company has also removed all submerged slider manufacturing equipment from the BPI facilities for assessment, decontamination and refurbishment. It has begun decontamination and restoring of its remaining buildings. WD expects to restart head slider production in BPI in the March 2012 quarter and begin production in a new WD slider factory in Penang, Malaysia at aboutt he same time.

The company’s other Thailand hard drive facilities at Navanakorn remain under approximately two feet of water. The industrial estate is expected to be pumped dry within ten days at which point the work of decontamination and refurbishment will begin.

WD said it expects revenue of $1.8 billion in the December quarter and gross margins at 18 percent to 23 percent. Net cash will likely be about flat in the December quarter compared to the previous quarter.

The company believes that hard drive industry shipments in the December quarter will be limited to approximately 120 million units due to production and supply constraints related to the floods. This number includes units that were in inventory at the beginning of the quarter. The company believes that demand for the December quarter is in the range of 170 million to 180 million units. The company believes that shortages will continue in the March quarter and beyond.