Western Digital (NASDAQ: WDC) announced on June 7 that it is exploring strategic alternatives, including separating its flash and HDD business.
This announcement could possibly be a result of a recent stake Elliot Management, an activist investor firm, disclosed in the company, vowing to push for the separation of businesses for the benefit of the company and its shareholders.
CEO of WDC, David Goeckler, explained the reasoning for pursuing this strategic shift in the company press release.
“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.”
WDC chart and analysis
Meanwhile, shares of the company are down over 12% year-to-date (YTD), while in yesterday’s session, the shares dipped below the 20-day Simple Moving Average (SMA) on increased trading volume. It seems as if the WDC stock found a support line around $54 and resistance around $63, trading in that range for the time being.
On Wall Street, analysts rate the shares as a moderate buy, predicting that the average next 12 months price will be $70.29, which is 21.57% higher than the current trading price of $57.82.
Elliot Management offered $1 billion of incremental equity capital into the flash business at an enterprise value of $17 to $20 billion.
This comes fresh on the heels of Elliot’s statement that WDC peers like Seagate (NASDAQ: SXT) and Micron (NASDAQ: MU) have outperformed WDC.
It remains to be seen whether this change will bring the results Elliot and WDC had hoped for. Throughout the session yesterday, the shares rallied on the news; however, they finished down for the day.
There is a possibility that investors are concerned about the split; nevertheless, they will not be able to assuage their concerns until further information is made public.
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