Western Digital Reaches Moore's Law Destination

| About: Western Digital (WDC)

Unlimited abundance was always the promise of Moore's Law. Western Digital (NYSE:WDC) has reached that destination, but does that make it a buy?

Barron's thinks so but the call is based on the authorization of a dividend and announcing a share buyback.

That point is important. Tech companies have matured, as investments, to the point of harvest. Sales growth gets harder to achieve in a mature industry, and it then becomes the obligation of management to harvest value and share it with shareholders. It's a point made regularly in comments here, from investors hungry for yield.

What companies like WDC can offer now is truly amazing. A 4 TB hard drive? Even the WDC salesforce was scratching its head at what to do with that bad boy --- how about analyzing surveillance video?

Fact is, with a full-length movie occupying maybe 10 GB of storage, if it's in HD, a 4 TB drive is more room than the hungriest video hoarder really needs - imagine almost 400 movies on a laptop. How long would they take to watch? And let's not get started on how many songs or Bibles that would require - in short we're getting beyond the requirements of the consumer market, which is why WDC is pushing these drives for use in public and private clouds. (Note, however, that by definition clouds are shared resources -- how much time can anyone spend on one?)

For consumers the company is pushing the Passport series of external storage devices. Once seen as backups, they're now pushed as desktop additions to your Ultralight or iPad - a way to keep what used to be a desktop storage capacity of 500 GB close. I usually see these at Costco (NASDAQ:COST) for about $100, on discount, and I'm always amazed - imagine 20 cents a gigabyte. (Oh, look -- Belgian chocolates.)

And want more? WDC is planning "helium-filled" drives next year that are lighter, more rugged, and store more data. (Even more?)

About 15 years ago, marveling at what one could do with the power of a Pentium II (and having watched Intel (NASDAQ:INTC) CEO Andy Grove at E3 flogging them for use in game machines, dressed as one of his company's "clean room dancers") I wrote a bad time travel novel called "The Time Mirror." What else do you do with unlimited power?

You use your imagination. Which is what WDC is depending on for future growth. The time has come to evaluate more tech companies based on yield, not growth, and credit to WDC's board for recognizing that. Their starting point of about 2.5% (figuring a price at dividend of $40/share) sounds about right.

Disclosure: I am long INTC, COST. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.