Sandisk Acquisition Likely Led To Western Digital Guidance Raise

Western Digital Corp WDC raised its fiscal fourth quarter guidance and announced that its chief strategy office would be assuming the role of CFO in September 2016.

Argus’ Jim Kelleher reiterated a Buy rating on the company, with a price target of $60.

Guidance Raised

“Western Digital has raised its fiscal fourth-quarter guidance, likely reflecting better NAND trends at the recently acquired SanDisk as well as a cyclical bump in the structurally declining HDD industry,” Kelleher mentioned.

The company announced its preliminary revenue for fiscal 4Q16 at $3.46 billion, above the high end of the guidance that had been issued after the closing on the SanDisk Corporation SNDK acquisition.

Western Digital also expects its non-GAAP EPS for the quarter to come in above the high end of the earlier guidance range.

In addition, chief strategy office, Mark Long, is to assume the role of CFO, since Western Digital’s finance and strategy arms work in close cooperation.

“CEO Steve Milligan noted that WDC is going through a strategic and organizational transformation as the company integrates its two HDD businesses, WD and HGST, and the recently acquired SanDisk business,” according to the Argus report.

Impact Of The SanDisk Acquisition

Kellher believes that with the SanDisk acquisition, Western Digital has created a more sustainable business model.

Along with the continued robust cash flows from Western Digital’s legacy HDD business, the analyst believes that the company is “now positioned to participate in growth markets from data center to cloud host to mobility.”

Since the HDD business is faced with various cyclical and structural challenges, the SanDisk acquisition is likely to offer a clear path forward for Western Digital as an integrated supplier of memory solutions.