Was Western Digital's $19 Billion For SanDisk A Bad Decision?
Zacks Investment Research | May 18, 2017 04:30AM ET
Hard disk makers Western Digital (NASDAQ:WDC) and Seagate Technologies (NASDAQ:STX) have dominated the market for storage devices forever. But new non-volatile memory (NVM) technologies threatened to shake this position mainly because they could minimize latency and reduce wear and tear. The only thing checking the rapid transition to these technologies is cost and manufacturers have been working on that angle.
For the leading storage vendors to retain their leading positions, they need to be able to offer the most advanced technologies. This is what led to the purchase of SanDisk, which along with JV partner Toshiba, was one of the companies at the leading edge.
You can hardly fault the thinking behind the acquisition, and for the most part, analysts agreed that it placed WDC ahead of STX in the innovation race.
But the story didn’t end there. Toshiba was having problems of its own, mainly from cost overruns and accounting irregularities in its Westinghouse nuclear power business, with the resultant losses forcing it to think about selling its share in the WDC JV. (Read more: Zacks Investment Research
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