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Western Digital Corporation (WDC) stock soared in the after-hours trading session: here’s why

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Western Digital Corporation (WDC) stock recently traded at $66.75 which is a 1.97% upward movement. The WDC stock previously closed at $65.46. WDC stock also soared in the after-hours trading session by 7.12% at the time of writing.

This pattern of positive movement of the WDC stock in the recent trading session comes adjacent to the news that Western Digital Corporation (WDC) is looking to make a deal with Japanese chip maker Kioxia.

What is Western Digital’s operational portfolio?

Western Digital (WDC) is a hardware manufacturer that specifically focuses on computer hard disk drive as well as data storage. WDC has an expansive portfolio of systems and solutions for businesses as well as individuals. They design and manufacture data storage-based technology products, data center systems, and online cloud storage systems.

It has three brands under which it sells its diverse portfolio and Western Digital Capital is the investment subsidiary of WD that provides funding for data technology companies like Elastifile.

The first is Western Digital (WD brand) under which it sells external hard drives and includes SSD based HD. SSD ranged products include My Passport, My Book and WD Elements.

SanDisk brand focuses on offering mobile based storage products. These mobile storage products consist of USB flash drives, cards and readers, SSD and MP3 players. The microSD card storage would work with android phones that had a memory slot.

G-Technology is last but not the least brand under WDC stock is the company that outsources the data storage and system designs for professionals and institutions. The partnerships in the past include Apple, Intel and Atomos.

WDC seeking acquisition with Kioxia may start a bidding war

Currently, Western Digital Corp is exploring a potential deal for Kioxia Holdings Corp which is a semiconductor firm. But there could be a potential bidding war because another manufacturer of computer memory, Micron Technology Inc. is eying the same company for acquisition. The deal is reported by the WSJ to be estimated around $30 billion, citing people familiar with the matter.

The global chip shortage is the main reason behind this deal

The possible reasoning behind this acquisition attention towards Kioxia Holdings is because acquiring the world’s second largest maker of flash memory chips will allow both companies to tackle their own chip shortage amidst the global chip shortage.

The global chip shortage has a whole complex of demand and supply problems. The gist of the global chip shortage problem is that although chip productions have reached normal levels as lockdown eased a new surge of chip demand has arisen. This surge is due to change in business and market behavior adapting to the change in a pandemic.

Kioxia Holdings Corp. which had previously spun off from Toshiba had plans to list on the Tokyo Stock Exchange on Oct 6, 2020 and had 334.3 billion yens to offers as share. However, it had to shelve this plans amidst the US-China trade wars. The trade-wars was uniquely focused on controlling and blocking the supplies of chip-producing companies as both countries want to have the upper hand on the semiconductor position over the other.

How poised are both companies for this deal?

The structure of the deal and news around the deal is still not guaranteed but WSJ predicts that it could be finalized this spring.

Both companies are poised in a position to expand into the semi-conductor manufacturing and supply production. WDC stock has been beating earnings estimates for the last two quarters and has solid fundamentals to maintain the trend. While Micron has recently shut-down its 3D XPoint memory facility and is aggressively looking for an acquisition. It has also reported better than expected results for the fiscal second quarter amid the global shortage of chips.

If the deal however fails to take place for WDC stock and Micron, then Kioxia can still look back again to an Initial Public Offering for later this year.

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