Western Digital Is Splitting in Two. Why the Stock Is Rising.

“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,” said CEO David Goeckeler in a statement. 

Western Digital has been under pressure to consider splitting its business into two for a prolonged period, with activist Elliott Investment Management calling for the move last year. 

Jason Genrich, senior portfolio manager at Elliott, said Monday that the investor supported the split.

“We believe this next step to create independent HDD [hard disk drive] and Flash businesses will provide Western Digital with strategic flexibility for future value creation,” Genrich said.

The decision looks to have come about after the collapse of a potential merger of the flash-memory business with Japan’s Kioxia Holdings. Nikkei Asia reported last week that Western Digital pulled out of talks with Kioxia. 

“Given current constraints, it has become clearer to the board in recent weeks, that delivering a stand-alone separation is the right next step,” CEO Goeckeler said.

In its fiscal first quarter, Western Digital reported a loss per share of $2.17 on revenue of $2.75 billion. It was expected to report a loss of $1.98 a share on sales of $2.66 billion according to a FactSet consensus.

The company said it expects a second-quarter adjusted loss of between $1.05 and $1.35 a share on revenue of $2.85 billion to $3.05 billion.

Write to Adam Clark at [email protected]