Western Digital: Second to None in the Data Storage Industry

Western Digital Corporation (WDC) has always been considered to be behind the curve when it comes to data storage - or is that just what the so-called analysts want you to believe? I understand that Seagate (STX) has more than double the market share of WDC; however WDC has kept pace with or exceeded the industry leader as far as technology.

Both companies continue to surpass the boundaries of digital storage and have branched out into PDA, Navigation System and DVR digital storage. WDC continues to innovate; you can hold 250 GB in the palm of your hand with WDC's latest Passport product. Their latest portable external hard drives can store up to 1.5 TB. Although the USB drive market has come to fruition, STX and WDC have proven that hard drives continue to thrive with an increase in notebook sales industry wide. Seagate will generate over $11 billion in revenue for 08, has more debt than cash and garners a PE of 34+. WDC will generate over $5 billion in revenue for 08, has minimal debt, $875 million in cash and a PE under 10.

This should tell any savvy investor that WDC is a bit undervalued while STX is a bit overvalued. So my mundane math abilities tell me that WDC, which has been stuck in the $17 to $21 range far too long, is long overdue for a breakout. WDC continues to see year-over-year improvements in revenue and profit. The March quarter included revenue growth of 25% from the prior year and a 10% increase in profit. If growth starts to slow, which is inevitable, they have the cash on hand to either develop new storage technologies or perhaps buy a company or two.

I have held positions with WDC since 1997 and I still fail to understand why analysts do not like this company, which is, in my opinion, second to none in the difficult data storage industry. You may want to watch this one when some of these so-called analysts come to their senses.

Disclosure: Author has a long position in WDC

WDC 1-yr chart