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Western Digital’s Volatile Stock Activity in 2015

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Western Digital stock dropped 19% in June

In June 2015, shares of Western Digital Corporation (WDC) saw a 19% drop, which was driven by overall falls in demand in its global PC (personal computer) segment. In 2Q15, global PC shipments fell by 9.50% to 68.4 million units on a YoY (year-over-year) basis, according to Gartner. Although Lenovo Group (LNVGY) retained its top position in worldwide PC shipments in 2Q15, it suffered a YoY shipment fall for the first time since 3Q13, as seen in the below chart. In 2Q15, the Hewlett-Packard Company (HPQ) held the second position on the top five vendors list, but it also faced declining shipments after five consecutive quarters of PC shipment growth.

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Unisplendour purchases $3.775 billion of WDC’s stock

On September 30, 2015, Western Digital and China-based Unisplendour Corporation announced that a Unisplendour subsidiary is set to purchase $3.77 billion “in newly issued Western Digital Stock” at $92.50 per share, or 15% stake, in the company.  The closing price for Western Digital on September 29, 2015, was $69.37. Unisplendour is thus willing to purchase shares at a 33% premium. After the deal was announced on September 30, Western Digital’s shares soared, rising by 13%.

Western Digital is planning to use the funds to gain financial flexibility and to pursue long-term strategic growth initiatives, thereby strengthening its balance sheet.

Hard disk market important for Western Digital

According to the market research firm TrendForce, demand for SSDs (solid state drives) is expected to increase, driven by the rising adoption of notebook computers and laptops. However, SSDs have not yet captured the market completely, as they are almost twice as expensive as hard disk drives.

PC Magazine stated in February 2015 that “for the same capacity and form factor 1TB internal 2.5-inch drive, you’ll pay about $60 to $75 for an HDD, but as of this writing, an SSD doubles that to $130 to $150.” As the world’s largest HDD manufacturer, Western Digital will look to capitalize on the low price of its product to maintain market share and increase revenues.

Western Digital makes up 0.50% of the Technology Select Sector SPDR ETF (XLK) and 0.35% of the Powershares QQQ ETF (QQQ). In the next part of this series, we’ll take a deeper look at the company’s revenue growth per share in 2015.

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