Western Digital Separates Flash And Hard Disk Units

Western Digital Corp. has aligned its $16.7 billion worth of storage portfolio and in turn, formed two separate business units for its Flash and Hard Disk Drive (HDD) technology assets.

The hard-disk drive manufacturer Western Digital (WDC) said that the strategy “leverages company’s go-to-market synergies to address broad customer storage needs from edge devices to cloud infrastructure.”

Last month, the company reported 4Q adjusted EPS of $1.23, topping analysts’ expectations by a penny. Earnings significantly improved from the year-ago quarter’s earnings of $0.17. Its revenues of $4.29 billion rose 18% year-over-year but lagged the Street consensus of $4.34 billion. (See WDC stock analysis on TipRanks)

Following the separation decision, Susquehanna analyst Mehdi Hosseini said that he expects the new alignment to generate synergies in the long term via increased ROIC [Return on invested capital], while he doesn’t see any “short-term implications on the business model, with opex [operating expenditure] unchanged.” He added that “the move is an indication of the new CEO’s goal to better strategically align R&D/product development resources towards growth end markets: Flash, Capacity Enterprise, and Surveillance.”

Currently, the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 14 Buys, 5 Holds, and 1 Sell. The average price target of $50.46 implies upside potential of 38.4% to current levels. That’s after shares declined by 42.5% year-to-date.

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