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Technology Stocks : WDC, NAND, NVM, enterprise storage systems, etc.
SNDK 223.15+3.8%12:59 PM EST
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To: storage_savant who wrote (3335)12/8/2017 1:47:54 PM
From: Art Bechhoefer4 Recommendations

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bigchad
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You are precisely correct, in that WDC still has leverage from the terms of the original JV agreement between Toshiba and SanDisk. Some investors have decreased or sold outright their positions in WDC, preferring the future prospects for Micron. The only problem there is that Micron NEVER has achieved anywhere near the gross margins obtained by SanDisk and WDC. In fact, Micron's gross margins seem to remain near 20%, whereas the Toshiba/WDC joint venture routinely achieves double that level.

The main weakness for WDC is its highly leveraged position, which it is correcting, thanks to the strong growth in demand for NAND flash and related memory devices. Although continued strong demand is likely for the sector, especially SSD in enterprise and cloud servers, none of the major companies would be able to show much, if any increase in earnings if economic and political issues interfered. And that's certainly a growing possibility. Thus, the potential downside risk for highly leveraged firms like WDC is greater than for those with little or no debt and sufficient cash flow to survive a sudden downturn.

WDC is having a nice move today, based on something greater than mere conjecture.

Art
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