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Western Digital open to spinning out flash, hard disk businesses

Messrs Elliott strike again

Western Digital has confirmed the board is considering "strategic alternatives" for the storage supplier, including spinning out its flash and hard disk businesses.

This follows calls last month by activist investor Elliott Management, which has amassed a $1 billion investment in WD equating to a six percent share stake, for a "full separation" based on those product lines.

In a statement, CEO David Goeckeler said: "The board is aligned in the belief that maximizing value creation warrants a comprehensive assessment of strategic alternatives focused on structural options for the company's Flash and HDD businesses.

"Through this process, we are actively engaging in a broad range of strategic and financial alternatives that will help further optimize the value of Western Digital, including Elliott's offer to invest incremental equity in our flash business." In its May open letter to WD, Elliott Management pledged to provide $1 billion-plus of "incremental equity capital" in the flash operation that it took on when it bought SanDisk for $19 billion nearly six years ago.

In response to this week's developments, Jesse Cohn, managing partner and senior portfolio manager at Elliott Management, said: "We're encouraged by the positive direction of our discussions so far, and by Western Digital's openness to considering a full separation of its flash business.

"We are pleased that Western Digital's board is conducting this review, and Elliott is prepared to provide strategic resources and additional capital to help the company realize the full value of both of its businesses."

The announcement came as WD execs courted investors at the Goldman Sachs Global Semiconductor conference. Goeckeler talked of the improvements he made since joining the organisation in 2020, including separating the HDD and flash business units, the Kioxia joint venture, the rise of the share price from $3 to $8 during his tenure, and product innovation – a word he mentioned 28 times during the meeting.

Sister publication Blocks & Files previously looked at how Goeckeler had helped to turn WD's fortunes around since his arrival at the company.

So it looks like Elliott Management and WD's board are playing nicely, at least for the time being, which is likely a better alternative to fractious relations with its second biggest investor. Vanguard Group owns an 11 percent shareholding in WD so comes in at number one. ®

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