Western Digital execs vote to split biz in two: HDD and flash

Latest decision follows failure of Kioxia merger and pressure from activist investor Elliott Management

Western Digital is to split into two separate entities, one formed from the NAND flash memory division and the other from the hard drive unit. The move follows the collapse of WD's proposed merger with memory chipmaker Kioxia.

The veteran US drive maker said today that its board of directors had unanimously approved a plan to carve up operations, creating two new public companies that it believes will better position each business to exploit market opportunities.

"Our HDD and flash businesses are both well positioned to capitalize on the data storage industry's significant market dynamics, and as separate companies, each will have the strategic focus and resources to pursue opportunities in their respective markets," Western Digital CEO David Goeckeler said in a statement.

He claimed WD has already laid the groundwork for the split via the creation of separate flash and HDD product business units and separating operational capabilities over the past several years.

Dividing the company will also "unlock significant value for Western Digital shareholders," Goeckeler claimed, by allowing them to "participate in the upside of two industry leaders with distinct growth and investment profiles."

The separation is targeted for the second half of calendar year 2024.

The bifurcation is pretty much the course of action proposed by activist investor Elliott Management last year, when it complained that Western Digital had not lived up to expectations following the 2016 purchase of SanDisk, a sizable maker of flash memory.

Elliott claimed "the challenges of operating two vastly different businesses" meant WD had "underperformed – operationally, financially and strategically," and a full separation could lead to greater success.

Western Digital said it reached today's decision after fully evaluating "a comprehensive range of alternatives," and that to realize its full value, spinning off its flash business is the "best, executable alternative at this time." Alternative to what, you may ask?

The company was in merger talks with Japan's Kioxia, formerly Toshiba Memory, since January this year, and a deal was reportedly very near to completion.

However, rival memory chipmaker SK hynix, which is a partner in the consortium led by Bain Capital that owns roughly 56 percent of Kioxia, said last week it would not permit the deal to go ahead.

Western Digital abruptly ended the merger talks following news of this, putting paid to a merged entity market that would have had a larger share of the memory market than SK hynix.

Confirmation of WD's split coincided with today's publication of the corporation's financial results for Q1 of fiscal 2024, ended September 29. WD reported revenue of $2.75 billion, down 26 percent year-on-year but up 3 percent sequentially.

"We are now emerging from a historic cyclical downturn in storage," Goeckeler said.

"Moving forward, as we progress through fiscal year 2024, we see an improving market environment in both businesses, and we will remain open to strategic opportunities that unlock further value in both our HDD and Flash investments and assets."

It's almost like the SanDisk acquisition never happened. ®

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