Western Digital stock gains amid hope formal spin off could follow business reorganization

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Shares of Western Digital Corp. are up 8% in Wednesday afternoon trading after the company announced it would reorganize itself by creating separate units for its flash and hard-disk drive [HDD] businesses. “The business reorganization could be a first step towards a formal split between the two units longer term, which would unlock stock value, relieve the company from heavy capex investments and emerging competition from China, while resulting in a more focused HDD business,” Baird analyst Tristan Gerra wrote in a note to clients, while reiterating an outperform rating and $50 target price on the stock. Others saw less room for big business-model changes but still pointed to possible benefits. “We believe the move is an indication of the new CEO’s goal to better strategically align R&D/product development resources towards growth end markets,” wrote Susquehanna’s Mehdi Hosseini, who has a positive rating on the stock. WDC shares have fallen 9.4% over the past three months as the S&P 500 has gained 5.2%.
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