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Oct. 21, 2015, 9:32 AM
- Along with announcing a $19B deal to acquire SanDisk (SNDK +4.1%), Western Digital (WDC -2%) says it expects to report FQ1 revenue of $3.4B and EPS of $1.56 vs. a consensus of $3.28B and $1.56. Gross margin fell 90 bps Q/Q to 28.9%. With Seagate (STX -0.5%) having warned last week, the revenue outlook appears to confirm analyst suspicions Western gained enterprise hard drive share.
- Of Western's proposed $86.50/share payout to SanDisk, $85.10/share is in cash. The cash portion of the $86.50/share payout drops to $67.50/share if a planned investment in Western by Tsinghua Unigroup subsidiary Unisplendour (for a 15% stake) hasn't closed or is terminated.
- To help finance the deal, Western plans to obtain a whopping $18.4B worth of new debt facilities. It expects to continue paying its dividend, but will suspend its buyback program.
- Cost synergies are expected to reach a $500M/year run rate within 18 months; the deal is expected to be accretive to EPS within 12 months of closing (not surprising given it's mostly in cash). SanDisk's NAND flash manufacturing JV with Toshiba will be maintained.
- By acquiring SanDisk's NAND chip, controller, and SSD IP, and by gaining the ability to source NAND at cost, Western effectively neutralizes the cannibalization threat posed by SSDs/flash storage to its hard drive ops. For now, Seagate continues to rely on 3rd-party flash manufacturers; an alliance with Micron was formed in February.
- SanDisk is trading roughly 10% below Western's offer price.
Oct. 21, 2015, 8:00 AM
- SanDisk (NASDAQ:SNDK) +5.2% premarket after agreeing to be acquired by Western Digital (NASDAQ:WDC) in a cash and stock deal valued at ~$19B, confirming earlier speculation.
- The $86.50/share offer represents a 15% premium to yesterday's closing price for SNDK.
- WDC says the acquisition will double its market and expand its participation in higher-growth segments, and enable it to vertically integrate into NAND; CEO Steve Milligan will continue to serve as CEO of the combined company.
- WDC -3.1% premarket.
- Earlier: SanDisk beats by $0.29, beats on revenue
Oct. 19, 2015, 4:42 PM
- Six days after reporting SanDisk (NASDAQ:SNDK) has talked with Micron (NASDAQ:MU) and Western Digital (NASDAQ:WDC) about a potential sale, Bloomberg reports SanDisk is in advanced sale talks with Western.
- Negotiations are said to have "accelerated" over the weekend. A deal could be reached as soon as this week.
- Western has been viewed by analysts as a smoother fit than Micron, given it's not currently a NAND flash manufacturer - with many thinking Western needs to become one to insure itself against hard drive cannibalization by SSDs - and SanDisk and Micron respectively having NAND alliances with Toshiba and Intel.
- SNDK +8.3% after hours. WDC -3.1%. MU -1.3%. Micron joined SanDisk in rallying last week following Bloomberg's original report, fueled by expectations a deal would improve Micron's NAND scale and IP, and potentially lead to more favorable industry pricing.
- Earlier today: SanDisk gains following Korean site's M&A report
Oct. 19, 2015, 9:18 AM
- More than three years after Western Digital (NASDAQ:WDC) closed its acquisition of Hitachi's hard drive unit (HGST), China's Ministry of Commerce has approved integrating the business with Western Digital proper.
- The company will continue selling products under both the HGST and Western Digital brands, and maintain separate sales teams for two years. However, it plans to start integrating "corporate and other key functions, including [R&D], heads and media operations, engineering and manufacturing."
- HGST president Mike Cordano has been appointed to the newly-created position of COO. Western president Jim Murphy will now run the company's storage devices unit.
- Western is up 3.6% premarket. Archrival Seagate (NASDAQ:STX), hit hard last week by an FQ1 warning that some analysts argued indicates enterprise share loss to Western, is down 1.2%.
- Update (10:39AM ET): Western has given back its early gains. Seagate is down 2%.
Oct. 15, 2015, 7:08 PM
- "Based on the Pre-announcement and implied 117.5M [total addressable market], we believe Seagate (NASDAQ:STX) lost share on the Enterprise side of the business to Western Digital (NASDAQ:WDC)," writes RBC's Amit Daryanani after taking in Seagate's FQ1 warning, which was blamed on weak nearline enterprise hard drive sales. "ASPs declined materially where Enterprise units (40% gross margins) are in the $100+/unit range while PC/gaming units are in the $55-$65/unit range."
- Likewise, Brean's Ananda Baruah thinks both slightly higher-than-expected industry shipments and Seagate's enterprise issues "suggest a net-positive impact" for Western through at least calendar Q4. However, he argues Seagate's issues are temporary. "We maintain conviction that STX’s normalized EPS remains at least $5.00 (a key level for us). Bottom line is that STX has issued a significant response to the softer PC environment by reducing its Opex $s 20% from the Mar ’15 Q and Mar Q ’16 ... Our $65 [target] (30% appreciation) is 12x our estimated FY17 EPS of $5.30 and 13x our CY16 EPS of $5.00."
- Seagate fell 13.3% in regular trading to new two-year lows. Western fell 2.5%.
Oct. 15, 2015, 9:17 AM
- Seagate (NASDAQ:STX) now expects to report FQ1 revenue of $2.9B vs. prior guidance of $2.9B-$3.1B and a $3.03B consensus. Unit shipments are expected to total 47M - up from FQ4's 45.3M but down from 59.5M a year ago - with Seagate maintaining a 40% share (implies a total market of 117.5M).
- Gross margin (non-GAAP) is now expected to be at 24%, below prior guidance of 27% and down from 27.2% in FQ4 and 28.1% a year ago. Seagate blames lower-than-expected demand for 4TB and 6TB nearline hard drives. An 8TB product was recently announced.
- FQ1 op. cash flow is expected to total $800M. 20M shares were repurchased.
- CEO Steve Luczo: "While Seagate had strong operating cash flows and made significant progress in cost containment in the September quarter, we are disappointed we did not execute a product portfolio that fully addressed the demand in the nearline market. Looking ahead, we are confident that our nearline product portfolio will be fully competitive by our fiscal third quarter."
- Full FQ1 results arrive on the morning of Oct. 30. Western Digital (NASDAQ:WDC), recently rumored to have held buyout talks with SanDisk, is following Seagate lower. Seagate also issued an FQ4 warning in July.
Oct. 13, 2015, 5:07 PM
- Sources tell Bloomberg SanDisk (NASDAQ:SNDK) is in talks with Micron (NASDAQ:MU) and Western Digital (NASDAQ:WDC) about a possible acquisition. No decision has been made.
- Acquiring SanDisk, which partners closely with Toshiba (OTCPK:TOSBF) on NAND flash manufacturing, would turn Micron (NAND partnership with Intel) into a heavyweight within the NAND market - Samsung and SanDisk/Toshiba are currently the market's biggest players. Micron received 32% of its August quarter revenue from flash, and 60% from DRAM. The company has been betting on 3D NAND and 3D XPoint to strengthen its flash position.
- Western has made several smaller flash-related acquisitions, as it tries to offset the gradual encroachment of SSDs/flash storage on hard drives. However, none of the buyout targets were comparable in scale to SanDisk, and Western still depends on 3rd-party NAND suppliers who also compete with the company in the SSD market.
- SanDisk +11.5% after hours to $68.90. Micron +2.6% to $18.65. Western +0.8% to $85.00.
- Earlier: SanDisk jumps on reported sale effort
Oct. 8, 2015, 5:23 PM
- IDC estimates global PC shipments fell 10.8% Y/Y in Q3 to nearly 71M units, a drop nearly as large as Q2's 11.8% and above a 9.2% projection. Gartner estimates shipments fell 7.7% to 73.7M.
- IDC: "Across many regions, the channel remained focused on clearing Windows 8 inventory before a more complete portfolio of models incorporating Windows 10 (NASDAQ:MSFT) and Intel (NASDAQ:INTC) Skylake processors comes on the scene ... Though easing a bit, currency devaluation continued to inhibit PC shipments in the third quarter. While Windows 10 has generally received favorable reviews and raised consumer interest in PCs, many users opted to upgrade existing PCs rather than purchase new hardware."
- Nonetheless, IDC is "optimistic" about a demand pickup. "While PC shipments will be hampered in the short run by the availability of a free upgrade to Windows 10, the improved PC experience across user segments should drive longer-term demand for new PC hardware..."
- Likewise, Gartner expects "more stable market conditions" in 2016. It's also pleased the U.S. notebook and "premium ultramobile" segments saw positive growth. Various analysts have reported seeing signs of stabilizing PC demand.
- With tablet sales also under pressure, tablet cannibalization is less of an issue than before. The ability of older PCs to handle mainstream computing tasks without trouble (including on Windows 10) may be a bigger problem. Many in the industry are hoping 4K video and/or virtual reality will fuel upgrades.
- The market's four biggest players all grabbed share from smaller firms with less scale. IDC estimates market leader Lenovo's (OTCPK:LNVGY) unit share rose 130 bps Y/Y to 21%, #2 HP's (NYSE:HPQ) 110 bps to 19.6%, and #3 Dell's 120 bps 14.3%.
- Apple (NASDAQ:AAPL), aided by 1H15 MacBook refreshes, came in at #4 with a 7.5% share, up 60 bps (revenue share is likely closer to 15%). A 4K 21.5" iMac is reportedly launching next week.
- Acer (OTC:ASIYF) rounded out the top-5 with a 7% share, down 150 bps. Everyone else collectively fell 270 bps to 30.6%.
- Related tickers: AMD, NVDA, STX, WDC, HTCH
Sep. 30, 2015, 12:43 PM
Sep. 30, 2015, 9:13 AM
Sep. 30, 2015, 7:23 AM
- China's Unis will pay $92.50 per share for a block of newly-issued Western Digital (NASDAQ:WDC) stock, and will own 15% of the company after the deal closes. Unis will also gain the right to put one of its people on the board.
- There's a five-year lock-up on the shares and Unis loses the board seat if its ownership stake falls below 10%.
- Shares +5.2% to $73.
Sep. 28, 2015, 12:31 PM
- The Nasdaq is down 2.3%, but Intel (INTC +0.3%) remains up slightly. Possibly helping: Pac Crest's Mike McConnell (Overweight rating, $35 target) reports September notebook shipments appear set to top expectations by 5%-10%, that desktop motherboard makers are seeing improved demand from OEMs, and that server-related chip demand from cloud service providers is rebounding strongly following a recent slowdown.
- Citi and Wells Fargo argued PC demand is stabilizing earlier this month, while citing healthy August sales data from Taiwanese contract manufacturers. Windows 10 launched on July 29, and Intel began a large-scale rollout of its 14nm Skylake CPUs 4 weeks ago.
- PC sales expectations have been depressed: IDC estimates shipments fell 11.8% Y/Y in Q2 and 6.7% in Q1, and has forecast they'll drop 8.7% over the whole of 2015 to 281.6M.
- In other Intel news, Digitimes reports Intel, which has been looking to narrow its heavy mobile chip losses, plans to end price discounts (reportedly ~$4 for Windows tablets and ~$8 for Android tablets) for its 22nm Bay Trail Atom CPUs in October. Bay Trail CPUs are said to carry a list price of $12, and 14nm Cherry Trail Atom CPUs (discounted by $2-$3) a list price of $15.
- Related tickers: MSFT, AMD, NVDA, HPQ, MU, STX, WDC, HTCH
Sep. 23, 2015, 9:29 AM
- The first day of fall warrants a look at which stocks tend to perform nicely during the season. A scan by USA Today, relying on data from S&P Capital IQ, finds nine stocks beat the S&P 500 each of the last five falls. The group averaged over a 16% gain during the period.
- Fall winners: Seagate Technology (NASDAQ:STX), Royal Caribbean Cruises (NYSE:RCL), Western Digital (NASDAQ:WDC), Ameriprise Financial (NYSE:AMP), Tesoro (NYSE:TSO), Signet Jewelers (NYSE:SIG), Robert Half International (NYSE:RHI), Wyndham Worldwide (NYSE:WYN), FedEx (NYSE:FDX).
Sep. 18, 2015, 11:48 AM
- Longbow Research thinks hard drive shipments have trailed PC shipments in 2015, making a positive inventory corrective possible. The firm considers expectations for a Q3 addressable market (TAM) of 115M units achievable - Western Digital previously estimated (.pdf) a Q2 TAM of 111M, down sharply from 138M a year earlier - and sees potential upside to 120M.
- Seagate (STX -1.9%) and Western Digital (WDC -3.3%) are nonetheless selling off on a day the Nasdaq is down 0.5%. Seagate is 8 days removed from announcing it's cutting 1,050 jobs in response to "the current macroeconomic business environment."
- Related ticker: HTCH
- Last week: Citi, Wells Fargo report seeing stabilizing PC demand
Sep. 11, 2015, 7:09 PM
- "Taiwan notebook ODM shipments increased 16% MoM in August, above our Citi Asia Hardware Analyst William Yang’s estimate of up 10% MoM and above the three year average of up 6% MoM," writes Citi's Chris Danely, arguing PC demand is improving after a very rough Q1 and Q2.
- Danely adds Intel (NASDAQ:INTC) has "indicated PC demand appears to have bottomed, and PC OEMs have started to replenish inventory driven by the Skylake processor ramp," and that Micron (NASDAQ:MU) has "stated DRAM spot prices have started to stabilize, which the company believes is a sign of a bottom in the PC market." IT distributor Ingram Micro (NYSE:IM) is also said to be seeing stabilizing demand.
- Wells Fargo's David Wong sings a similar tune. "There have been signs of a seasonal pickup in PC builds. Month of August sales data reported by Taiwanese notebook and motherboard/computer makers shows a clear month-over-month lift in PC builds in August, and solid growth in the first two months of the September quarter compared to the first two months of the June quarter."
- Likely helping: Windows 10 (free upgrade to Windows 7/8 users) launched in late July to decent reviews, and Intel has since gradually rolled out its 14nm Skylake CPU line. After starting off by launching the gamer/enthusiast-focused Core i7-6700K and Core i5-6600K desktop CPUs, Intel has rolled out the Skylake Y-series (meant for tablets and compute sticks), U-series (ultrabooks/convertibles), H-series (notebooks), and S-series (desktops). Sizable power/efficiency and GPU performance gains are generally promised relative to comparable 14nm Broadwell CPUs.
- Related tickers: MSFT, AMD, NVDA, STX, WDC, HTCH
- Two months ago: IDC estimates PC shipments fell 11.8% Y/Y in Q2
Aug. 12, 2015, 4:42 PM
- In compliance with the company's mandatory retirement-age policy for directors, Tom Pardun, 71, is stepping down from Western Digital's (NASDAQ:WDC) board following its November annual meeting. Pardun has been chairman for 10 years of Western's history, via two separate terms.
- Former chairman/CEO Matt Massengill, 54, will replace Pardun. In addition, Len Leuer, the CEO printer maker Memjet, will become lead independent director.
Western Digital Corp is a developer, manufacturer and provider of data storage solutions that enable consumers, businesses, governments & other organizations to create, manage, experience & preserve digital content. Its products include HDDs and SSDs.
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