Western Digital Announces Splitting of Disk-Drive and Flash Memory Businesses

Western Digital (ticker: WDC) saw a significant surge in stock on Monday as it announced plans to divide its disk-drive and flash memory businesses into two separate entities. This move aims to unlock substantial value for shareholders and provide opportunities for growth in distinct sectors.

The company intends to carry out the separation in the second half of 2024. CEO David Goeckeler expressed his confidence in this decision, stating, "Separating these franchises will unlock significant value for Western Digital shareholders, allowing them to participate in the upside of two industry leaders with distinct growth and investment profiles."

There has been ongoing pressure on Western Digital to consider splitting its business, with activist Elliott Investment Management advocating for the move last year. However, it appears that the decision was solidified following the collapse of potential merger talks between Western Digital's flash-memory business and Japan's Kioxia Holdings.

During the first quarter, Western Digital reported a quarterly loss per share of $2.17 on revenue of $2.75 billion, slightly worse than the FactSet consensus of a loss of $1.98 per share on sales of $2.66 billion.

This strategic separation will allow Western Digital to focus on enhancing its market position and maximizing opportunities within both disk-drive and flash memory sectors.