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Technology Stocks : WDC, NAND, NVM, enterprise storage systems, etc.

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Oct 31 9:30 AM EDT

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From: Sam	5/3/2022 8:39:40 AM
	of 4823

Western Digital soars as activist Elliott calls for separation of flash business May 03, 2022 7:52 AM ET Western Digital Corporation (WDC) MU, STXBy: Joshua Fineman, SA News Editor Western Digital jumped almost 10% in premarket trading after activist Elliott Management disclosed a $1 billion, or 6% stake, and called for the company to separate its hard disk drives and NAND flash memory businesses. By separating the businesses, Elliott believes Western Digital (NASDAQ: WDC) could reach $100+ by the end of 2023, representing 100% upside, according to a statement. In addition to its investment in WDC, Elliott is also offering $1 billion of incremental equity capital into the flash business at an enterprise value of $17 to $20 billion to be used for a spin-off or as equity financing in a sale or merger. "By any objective measure, Western Digital has underperformed—operationally, financially and strategically—as a direct result of the challenges of operating two vastly different businesses as part of the same company," Elliott's Jesse Cohn and Jason Genrich wrote in a letter to WDC's board. "This underperformance is particularly disappointing given the Company's great potential in both businesses," Elliott is calling on Western Digital's ( WDC) board to conduct a full strategic review of the idea of separating the HDD and Flash business. Elliott highlighted that WDC's peers Seagate ( STX), which has remained a "pure play" HDD player, and Micron ( MU) have substantially outperformed WDC since the company acquired SanDisk in 2015. Elliott's 2023 valuation assumes that HDD is worth $17.8 billion (1.9x CY23E revenue), that Flash is worth $18.1 billion (1.6x CY23E revenue) and that Western Digital generates more than $2 billion of free cash flow through the end of 2023, according to the letter. On Friday, Western Digital reported Q1 results and analysts said the stock offered "attractive risk-reward." seekingalpha.com

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